Upgrade your ERP with confidence using an EPM platform

When we are talking to prospective customers about the value of implementing an Enterprise Performance Management (EPM) solution we are very often hit with the same statement …. ‘we need to implement a new or upgrade our existing ERP system (or some other operational system) before we can consider it‘’. It happened again just the other day and it prompted me to write this blog.

So the question really is, if your company is considering modernising their financial systems, what should they should do first? Should they upgrade their ERP/Accounting and/or other operational systems, or should they implement an EPM solution?  It’s just like the old chicken and the egg question, and in this instance it often depends on many factors.

In a recent research publication from Gartner, they stated that “In the current environment (as impacted by COVID-19), organisations are more likely to opt for projects with significantly less change management risk and that offer a quick time-to-value approach without the significant change management requirements associated with migrating to the latest generation cloud core financial management suites.”

Before you can determine which to do first, it’s important to understand the differences between them.  Below we summarise the roles of ERP and other operational systems play compared to those of EPM solutions, and some things you ought to consider when planning your upgrade strategy.

ERP Systems – businesses operations

The simplest way to describe the function of an ERP system is they help organisations run their operations and related processes. So why the somewhat obscure name?  Well the precursor to ERP systems were Manufacturing Resource Planning (MRP) systems, which as the name suggests were specific to manufacturing businesses.  In the 1990s the term ERP first came into use to extend the capabilities of MRP system beyond just manufacturing businesses.

ERP is generally referred to as a category of business software. These platforms and systems are most commonly a suite of integrated application which businesses use to collect and store their business activity data. Examples of the business activities ERP systems help automate and track include:

• Finance and Accounting
• Project Management
• Manufacturing
• Supply Chain Management
• Order Processing

The objective of modern day ERP systems is to help automate and integrate as many processes as possible across the enterprise, with the ultimate aim of improving efficiency in their daily transaction processing and operations, and providing increased accuracy.

EPM systems – business management

Enterprise Performance Management or EPM systems (also known as Corporate Performance Management CPM) are focused improving the management processes within businesses.  These platforms allow organisations of all shapes and size to link their strategic plans with execution and actual results. Through their ability to collect, integrate, and aggregate data from many disparate  systems across the businesses (think ERP, CRM, HCM, IMS), the processes of planning, monitoring and management of performance are more secure, robust, accurate and efficient. Examples of the key processes EPM/CPM systems help automate include:

• Strategic Planning
• Rolling Budgeting, Planning and Forecasting – Financial and Operational
• Month End/Financial Close and Consolidation
• Financial and Management Reporting
• Analytics and Scenario Modeling

The most common budgeting tool still in use would have to be Microsoft Excel.  Many small business starts out using Excel, but not all progress from this, some just make their budget models more complex which in a solution like Excel invites more risk. Other businesses will move towards a basic CPM software solution for their budgeting, planning, and management reporting needs.  As they continue to grow they may find these solution no longer meets their needs. As their business increases in complexity, with more transactions, across and between multiple entities, in multiple currencies, and all with different ownership structures, they may find they need to upgrade to an enterprise level EPM solution.  This provides them with a more robust and efficient financial consolidation and reporting process, and greatly improved planning, forecasting and analytical capabilities.

So is it ERP or EPM first?

Well, it depends on where your business is, and what it currently has, and if modernising means upgrading or implementing. For a business that already has both an ERP and EPM solution, it comes down to whether their ERP solution is still workable, or if it’s hindering operations.  Obviously, if it’s hindering operations then it should rightly take priority, with an EPM upgrade following shortly after.

However, ERP upgrades are generally not quick or cheap, and the larger your organisation the more time and deeper pockets you will need.

One strategy that we at bi5 believe in is to put in place an EPM solution first, and then leveraging this solution to make for an easier ERP upgrade.

Below are our main arguments for implementing EPM first:

• Ensure data continuity– A new EPM solution can serve as a “bridge to the future”, to ensure your data is continuous. By implementing an EPM solution first, it can be built to integrate data from your old ERP system (or other systems).  As your new ERP system (or other systems) are implemented, the EPM solution can integrate data from the new ERP with it’s existing data already integrated from of the existing ERP.  Through integrating both your existing and new ERP data you won’t loose any historical data, which is often the case with batch loading historical data into your new ERP.  This will provide you with a consistent and continuous set of data from which you can do your financial consolidation, reporting, planning, budgeting, forecasting, analysis, and all the other functionality provided with an EPM solution.
• Improved validation of new ERP implementation – Whilst ideally the current financial reporting is accurate and valid even if it took a lot of time and effort to produce, our EPM implementations have shown that is not always the case. With the additional detail and drilldown on financial consolidation and reporting provided by an EPM solution, you can more easily see any data issue in your existing ERP before migration.  In addition, the ease with which reporting can be structure in a modern EPM solution allows you to easily compare the reported numbers from both your existing and new ERP systems like for like, no longer constrained by their inbuilt reporting formats. This provides a platform or benchmark for testing and validation of the upgrade or new ERP.
• Greater Flexibility – generally speaking EPM platforms provide a great deal more flexibility in their reporting and analysis than do ERP systems. Taking advantage of of multi-dimensional data storage, EPM applications support multiple and alternate hierarchies and relationships, along with rollup structures for reporting and analyzing results from different points of view – e.g. management structure, legal entity structure, tax structure, and others.  And all of these can be within the same platform, driven by the same, or different, General Ledgers and CoAs. EPM platforms also ensure your reporting structures and formats can easily be amended as your business is re-organised and acquisitions are made. These changes can be made to future and historical data, ensuring you get the best of both worlds as you transition.  An EPM solution can also ensure your reporting structures don’t need to change with your new ERP solution, ensuring the confidence that currently exists in your reports is maintained.
• Faster time to Value– well-scoped and planned EPM projects can take as little as a couple of months to go-live.  It is this fast development time that allows your EPM solution to be implemented while you’re still settling on your ERP upgrade process. If the focus is on financial close and consolidation, or budgeting/planning/forecasting system design, configuration, testing and go-live can be accomplished quickly and at a much lower cost than an ERP upgrade.

Even if you’ve already started down the ERP upgrade path, with the fast time to delivery and lower cost it’s not to late to consider if now is the ideal time to implement an EPM solution.  Not only will it provide all the benefits of an EPM solution into the future, such as budgeting, forecasting, financial consolidation, financial close, reporting and analytics, as outlined above it can also help to ensure a successful ERP implementation  or upgrade.