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8/2/2019 Enterprise Performance Management Financial Excellence and Beyond Tecreferer=Http Whitepapers.technologyeval

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ENTERPRISE PERFORMANCE MANAGEMENT

FINANCIAL EXCELLENCE AND BEYOND

HOW CFOs BECOME STRATEGIC ADVISORS ANDHELP OPTIMIZE OVERALL OPERATIONS

SAP Thought LeadershipEnterprise Performance Managemen


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CONTENT

4 Executive Summary

5 The Changing Face of Business6 The CFOs Role in Transition7 Making the Transition8 Enterprise Performance

Management8 Shortcomings of the Typical

Approach9 Making It All Work

10 SAP BusinessObjects EnterprisePerformance ManagementSolutions

CONTENT

4 Executive Summary

5 The Changing Face of Business6 The CFOs Role in Transition7 Making the Transition8 Enterprise Performance

Management8 Shortcomings of the Typical

Approach9 Making It All Work

10 SAP BusinessObjects EnterprisePerformance ManagementSolutions


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Given the complexity and global natureof todays business world, organiza-tions are looking for ways to deal withintricate new realities and turn themto their advantage. CEOs and othermembers of the executive team mustrespond to immense pressure comingfrom a variety of sources, ranging fromthe board of directors and activiststockholders to regulatory authoritiesand customers. They deal with anynumber of global financial conditions,including fluctuating exchange rates,

rapidly changing economies and inter-est rates, and compliance with a variety

of regulations such as Basel II in bank-ing and government mandates such asthe Sarbanes-Oxley Act of 2002.

As a result, they are looking to theirCFOs to provide the solutions theyneed to cope with these many challeng-es. In the process, your job as CFO isshifting from the traditional financialrole dealing with standardized businessprocesses and systems to that ofchange agent and strategic advisor tothe CEO, who bears the responsibility

for ensuring the integrity of the compa-nys overall financial performance.

In this new role, you can take advan-tage of the latest advances in enter-prise performance managementsolutions to help your organizationcapitalize on the value of corporatedata, become more agile, and achievethe organizational alignment and visibili-ty needed to drive performance excel-

lence. In addition, these solutions cangive you and other senior executivesconfidence in the accuracy of yourcorporate performance data and thereports that you provide to regulatorybodies as part of your compliancerequirements.

This paper explores how enterpriseperformance management softwarecan help you maximize profitability,immunize your company against non-compliance, and optimize operational

efficiency by ensuring delivery of infor-mation when its needed, in context.The premise is that the best solutionsare integrated and adaptable to rapidbusiness change, are easy to use foroptimal productivity, and can predictfuture financial performance.

EXECUTIVE SUMMARY

4 SAP Thought Leadership Enterprise Performance Management Financial Excellence and Beyond


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As a CFO functioning in this new roleyou can take advantage of the latestadvances in enterprise performancemanagement solutions, by doing thefollowing: Helping to ensure that the compan

is executing toward strategic goals Acting as strategic advisor to busi-

ness management by providing analytical support and helping to optimoverall business operations and meregulatory requirements

Reporting on results of core financactivities and investor and share-holder relations

Personally attesting to the approprateness, fairness, and accuracy ofcompany financial reports, and thusminimizing risk of noncompliance

Your role in financial performance ma

agement typically includes working inconcert with other members of theorganization, such as the CIO and buness users. CIOs are usually responble for the integrity of the informationdelivered to the CFO and for the viabty and security of the IT infrastructurthat drives value to all aspects of thebusiness, including finance.

Todays business executives must copewith extraordinary complexity. Rapidtechnological change, complicated reg-ulatory and compliance requirements,and demand from customers contributefurther to this turbulent environment. Infact, one of the more unexpected andpositive trends that is transforming

business is the shift of power to thecustomer. Indeed, the customers grow-ing influence on the design and deliveryof products and services, thanks to theInternet and e-commerce, allows busi-nesses to more effectively meet theneeds of their market.

A worldwide marketplace means thatCEOs and CFOs are dealing withgrowth that extends beyond their coun-trys borders; in todays volatile stockmarket, international growth is often

essential for profitability. Also, withdeveloping nations taking center stageas the main drivers of global GNPgrowth, multinational corporations arelocalizing products and services tobuild their market share.

Another trend is a record level of merg-ers and acquisitions (M&As). Accordingto CFO.com, Globally, 2006s world-

wide M&A value worth $3.8 trillion beat 2000s numbers and was 38 per-cent higher than 2005s total. Inaddition, the value of deals in Europe isalso showing strong growth. The same

report states that the value of thesedeals is higher, in fact, than in the U.S.Last year, European deals increased 39percent to $1.4 trillion, compared tothe 36 percent growth that the U.S.experienced. Western Europe, China,and Canada were predicted to see themajority of activity.1

All of these factors are putting increas-ing pressures on CEOs, and indeed theentire executive team, to boost perfor-mance and cut costs while dealing with

a myriad of governance, risk, and com-pliance (GRC) issues. They need new

ways to maximize profitability whichrequires greater visibility into and con-trol over the drivers of their organiza-tions finances and operations. Natural-ly, the CEO looks to the CFO to helpsolve these problems.

1 Sarah Johnson, M&A Surge to Continue in 07, CFO.com, www.cfo.com/article.cfm/8514186.

THE CHANGING FACE OF BUSINESS

SAP Thought Leadership Enterprise Performance Management Financial Excellence and Beyond


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The CFOs Role in Transition

Over the past several years, the newpressures and challenges faced by thefinance organization are causing execu-tives to make significant shifts in theirfocus and priorities. CFOs are transi-tioning rapidly from a somewhat limited

financial role that deals with standard-ized business processes and systemsand the people needed to supportthose systems, to the role of strategicadvisor.

This new role includes ensuring thecompanys financial integrity and mak-ing informed and calculated businesschoices to meet the companys growthstrategy in accordance with overallcompany objectives. These objectivesmight include, for example, improving

financial and operational performance,growing revenue and earnings, increas-ing return on investment, and buildingshareholder value. But in any case, theCFO must ensure lean, compliant finan-cial operations; provide financial andbusiness leadership; and rapidly delivernew financial services that keep pacewith and accelerate the growth of thebusiness.As shown in Figure 1, the shift in aCFOs responsibilities is an evolving

process. The first step is the transitionfrom focusing primarily on transactionprocessing to include the managementof information flow as well. This laysthe groundwork for the CFO to beginaddressing global market concerns,working with other C-level executives

and line-of-business managers to devel-op a vision for the companys financialfuture, and ultimately playing a key roleas strategic advisor and chief planningofficer. This evolution is not a series of

well-defined steps, but rather a continu-ous process that varies in time andscope depending on the size andrequirements of each company. It iscumulative in nature; each step buildson the foundation of the previous

steps.

Several major tasks are associatedwith this new role, including: Implementing enterprise-wide, effec-

tive change management to set thefoundation for performancemeasurement

Enabling strategic direction to bedefined and monitored on an ongoingbasis

Optimizing strategic planning execu-tion and profitability management

Promoting collaboration across theorganization on initiatives, plans, bud-gets, and intelligently managingresources while focusing on initia-tives critical to corporate strategy

Working with the CIO and business

managers to achieve operationalexcellence

ProcessingTransactions

AddressingGlobal MarketConcerns

Developing a

Vision for theFuture

Becoming aStrategic Advisor

for the Business

Figure 1: TheEvolving Role ofthe CFO



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Making the Transition

The key to this transition is to focuson the demands of the present whilesimultaneously working to predictfuture financial performance. For exam-ple, you may need to pay close atten-tion to driving customer revenuegrowth to increase total net revenues,adjusting the product and service mixto improve gross margins and gross

profits, or reducing operating costs toincrease net income. In some cases, aspecific asset category, such as inven-tory, property, or equipment, might bereduced to improve cash flow andincrease total assets.

A myopic focus on the future aloneputs current financial performance atrisk; an exclusive concentration on thepresent sacrifices incipient opportuni-ties. Finding a balance between thesetwo potentially conflicting views is oneof your major challenges.

As described above, your role as CFOinvolves the day-to-day business ofmanaging risk; efficient, integrated

financial planning; and confident statu-tory reporting. But making the transi-tion also means adapting to the future,

with the following:

Strategic agility Todays businesenvironment has become increasinunforgiving. A single misstep or dein executing a strategy or followingup on an opportunity can have sevconsequences. CEOs and CFOsmust be alert to emerging threatsand opportunities and be able to

adapt their strategies quickly to dewith the new situation. For the CFOthis also means being able to delivenew financial services that keep pa

with the business as it changes inresponse to marketplace and regultory pressures.

Business model innovation Exective leadership is required not only develop and launch innovative products and services, but to implemeninnovative processes and businessmodels as well. In addition, execu-

tives are required to enforce performance management throughout theorganization while acting as agentsfor change.

This means close collaboration withthe CIO, key lines of business such asales and manufacturing, and IT functions that support and ensure the intrity of the CFO-driven business pro-cesses that span the organization. Oof the major enablers that the CFO aIT organization can take advantage o

the discipline commonly referred to aenterprise performance management



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Data dispersal At many compa-nies, the required data is scatteredacross multiple applications runningon a mix of legacy systems. To workeffectively, the application must haveaccess to all pertinent data (includingMicrosoft Word documents andother unstructured data) to ensureaccuracy and timeliness. This dataaccess also compresses processing

time.Long budget cycles Because the

applications typically are not collabor-ative or streamlined, the budgetingprocess breaks down. People on thefront lines have little or no input intobudget deliberations, then are hand-ed a budget and told to live with it.

Need for even more collaboration,communication, and processes Most enterprise performance man-agement applications lack sufficientsupport for standard business pro-cesses, teamwork, and fluid sharingof information so that everyone canbe on the same page and do theright thing.

Accountability gaps Performance

management only works when initia-tives are linked to tasks that are welldefined and people are held account-able. Most applications do not incor-porate mechanisms that allow allstakeholders to agree on ownershipof a performance management strat-egy, track its progress, and makesure it aligns with overall corporatestrategy, initiatives, and plans.

Enterprise PerformanceManagement

All areas of an organization need todefine strategies and plans, set bud-gets, analyze performance, and gener-ate financial and performance-related reports. These and other

financially relevant activities must thenbe rolled up into a larger corporateoverview.

At SAP, we view enterprise perfor-mance management as the entirescope of performance management inall areas, from HR and marketing tomanufacturing and distribution (see Fig-ure 2). Enterprise performance man-agement helps companies streamlineand optimize activities across all areasfor greater control over operational and

financial performance.

Shortcomings of the Typical ApproachBeleaguered CFOs need to managefinancial performance in a complexcorporate environment, but many oftodays software applications still havea long way to go to support theirneeds. Some of the issues with enter-prise performance management appli-cations include the following:Usability The applications can be

inflexible and hard to use, and main-

taining them can require much ITsupport.

Business Analytics Software

Performance Management Tools and Applications

Financial Performanceand Strategy

ManagementApplications

Budgeting, planning con-

solidations, profitabilitymgmt/activity-basedcosting scorecards

CRM AnalyticApplications

Sales, customer service,contact center,

marketing, Web site

analytics, priceoptimization

Business IntelligenceTools

Supply Chain andServices Operations

Supply chain (inc. plan-ning), services,

operations, analyticapplications

Workforce AnalyticApplications

$26.13 Billion

Query, Reporting,

Analysis

(includes dashboards)

Advanced Analytics

(includes data miningand statistics)

Analytical SpatialInformation

Management Tools

$8.31 Billion

$1.99 Billion$2.34 Billion

$150 Million$4.39 Billion

Data Warehouse Platform(Data warehouse management and

generation)

$8.09 Billion

Figure 2: EnterprisePerformance Manage-ment Within the Contextof Business AnalyticsSoftware (2009)

Source: WorldwideBusiness Analytics

Software 20082012

Forecast and 2007

Vendor Shares, IDC#214904, November2008.

Figures in U.S. dollars

$854 Million



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Disconnected spreadsheets Spreadsheets are the most common-ly used tool for planning and strategy,and individually these are highly pro-ductive tools. But thats not the case

when information needs to be sharedand collectively updated. People arenot operating from a common data

store that delivers one version of thetruth. The inability to certify and tracesubmission to the various spread-sheets breeds a lack of confidence inthe information being presented. As aresult, people spend more timedebating the information than deci-sively taking action on it.

The performance gap Performancemanagement needs to be treated asa baseline and iterative process thathelps define overall corporate strate-gy as well as the CFOs strategic ini-

tiatives, not something that is tackedon as an afterthought. Performanceexecution often breaks downbecause of planning defects, corpo-rate culture, or lack of managementcommitment. In fact, the right tech-nology solution can go a long waytoward fixing these problems.

Making It All Work

What is needed is a new set of enter-prise performance management appli-cations that meet your current andfuture needs, helping you and othersenior executives meet the followingkey goals:

Maximize business profitability toincrease market and shareholdervalue

Optimize operational efficiency toreduce operational costs and free upresources for innovation

Minimize risk to the business byensuring that decisions are based onaccurate data, and that statutoryreports provided to regulatory author-ities are in compliance that is, thatthey are appropriate, accurate, andfair



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SAP BusinessObjects enterpriseperformance management solutionsenable organizations to manage bothfinancial and operational performanceand capitalize on the value of theircorporate data. Businesses usingenterprise performance managementsoftware can become more agile in

driving transformation and controllingperformance. The applications canbe deployed separately or together toform a comprehensive solution. Whendeployed together, they support thecomplete enterprise performancemanagement life cycle, empoweringthe CFO to: Measure assets, profitability, costs,

and capacity at a granular level Align strategies with goals, initiatives,

metrics, and people Enable efficient planning, budgeting

and forecasting, and management ofthe triple bottom line

Achieve greater confidence in man-agement and compliance reportingthrough fast, accurate close process-es and self-service reporting

Provide frontline business users withtrusted information delivered throughnative integration with familiarMicrosoft Office productivity tools

in concert with an intuitive Web 2.0interface

With the solutions, you are better ableto meet the unique requirements oftodays global, fast-paced businessenvironment and can assume the newand demanding role of strategic advisorto the organization. To learn moreabout the full breadth of SAP solutionsfor enterprise performance manage-ment, call your SAP representativetoday or visit us on the Web at

www.sap.com/sapbusinessobjects/epm.

SAP BUSINESSOBJECTS ENTERPRISE

PERFORMANCE MANAGEMENT

SOLUTIONS

Figure 3:EnterprisePerformanceManagement

Applicationsat Work

Intelligence Platform

Enterprise Resource Planning

Governance, Risk, and Compliance

Enterprise Performance Management

Report andMonitor

Optimize

Modeland

Strategize

and Prioritize Plan andExecute

FinancialConsolida-

tion

PlanningStrategyMgmt.

Profitabil-

ity & CostMgmt.

http://www.sap.com/sapbusinessobjects/epmhttp://www.sap.com/sapbusinessobjects/epmhttp://www.sap.com/sapbusinessobjects/epmhttp://www.sap.com/sapbusinessobjects/epmhttp://www.sap.com/sapbusinessobjects/epm


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