Just because you can make software perform a task, does not mean you should!  As a result, we often see software as a solution rather than simply a tool.  And, we desire as few different technologies as possible, making each do as much as possible.  Too narrow a focus regarding software can lead us to only have a hammer and see everything as a nail.  But what are the ERP and CPM differences?

ERP

ERP (enterprise resource planning) systems are about automating transactional flow to ensure accuracy and consistency across multiple business functions.  At its core it is about operational efficiency.  ERP systems do this incredibly well!  The most recent versions have gone beyond the transactional process and begun to focus on the user experience as well.  The systems leverage transactional information to directly influence the actions of system users.  As a result, it places transactions needing attention right in front of the user – effectively making users an extension of the system.  This further enhances the overall efficiency of the systems.  And some even have begun to enable visualization to push metrics and performances measures out to users.  Read about the ERP journey.

CPM

CPM (corporate performance management) systems are about automating reporting and analytical flows to ensure accuracy and consistency at the management level.  A CPM tool enables faster, better decisions at the top levels of an organization with the overall goal of improving the effectiveness of the corporate level structure.  Management effectiveness is ultimately measured by results.  Goals such as increasing market share, improving customer satisfaction ratings and achieving desired revenue levels come under the heading of management effectiveness.  This is how you measure whether management decisions are improving your business performance.[i]  Businesses with very low organizational complexity do not necessarily need a CPM, but as soon as you have operations in multiple regions or geographies, data and organizational complexity begin to impact the flow of data and thereby the ability of management to make decisions.  At this point, having a CPM tool to assist managerial effectiveness becomes more and more critical.

Capabilities

A few ERP systems will claim they deliver CPM capabilities.  I would seriously challenge this claim.  Where do ERP vendors invest their R&D dollars? What are the core strengths of the software?  Do they have a record providing CPM capabilities to other customers not running their ERP?  My guess is just these few questions will help convince you that ERP providers do not have strong offerings in regards to a CPM.

When deciding which to implement first start with these questions:

  • How long is your ERP journey?
  • How many deployments will you have and how long will each one take?
  • Will you be acquiring new business that will need to be integrated into the ERP system?
  • How committed are you to remaining current with your ERP software?
  • Do you plan on upgrading routinely are generally once implemented will stay on a version until it is no longer supported?

In general, most ERP programs are multiple years (3+), acquisitions are always a possibility and upgrades are generally deferred as long as possible due to the time, effort and cost associated with them.  And recall, even with an end date in mind, your ERP journey is never done.  If this sounds like you, you need to make sure to get your ERP design correct the first time.

ERP Design Components

There are two key components to an ERP design:

  1. Business process. Current methodologies tend to take the pre-packaged solutions and ask internal experts, “why won’t this work for you?” versus building from the ground up.  This significantly shortens the time spent in design, but that shortened time frame often means less attention spent in the details with the assumption being “it’s in there”.
  2. Almost every company underestimates the time needed for data preparation or harmonization.  This can come in the form of finding, cleansing, creation, and modification of data.  This is a time consuming and perhaps the most critical part of the design & build process.  Therefore, if you miss critical pieces or design hierarchies specifically focused on a pilot location, you may make it very difficult to adapt the data design to different requirements later.

Up next, the CPM journey. Stay tuned!

EBOOK: WHICH COMES FIRST – ERP OR CPM?

Jeff Nadeau

Jeff Nadeau has been in Finance and Technology roles for almost two decades. Most recently he has been focused on helping large complex manufacturing organizations transform the finance function thru improved financial processes and the implementation of modern technologies covering external reporting, accounting, financial planning, tax and treasury.

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