Systems of Record and ERP

  1. INTRODUCTION

An enterprise in the twenty-first century is profoundly disposed to the utilisation of information technology systems to execute its business.  This execution is classified into three layers, viz (Pettey, Christy; Goasduff, Laurence, 2012):

  1. Systems of record—support the core of business transactions and manage critical master data with a slow rate of change, common functions between organisations and often subject to regulatory changes.
  2. Systems of differentiation—applications utilising unique company processes or industry specific capabilities, with medium-cycle change requiring frequent reconfiguration to accommodate changing business practices or customer requirements.
  3. Systems of innovation—new applications build adhoc to address new business requirements or opportunities, with a short life-cycle using departmental or outside resources and consumer-grade technologies.

These layers correspond to the notion of business leaders having common ideas, different ideas, and new ideas, as a means of classifying the supporting systems.  Systems of record (SSoR) are applications in support of the core business, while systems of differentiation create a competitive advantage in terms of process efficiency and effectiveness, and systems of innovation support strategic processes that enable and support business transformation.

Yvonne Genovese of Gartner says: “There is a gap developing between the business users of enterprise applications and the IT professionals charged with providing these applications.”  This mainly because Information Technology resources are working hard to standardise application suites for the least amount of integration issues, maximum security, and reduced expenditure while business users want modern, easy, and flexible applications that are quickly deployed to solve specific problems in response to a market opportunity.

In recommendation, Gartner suggests that in order to overcome this predicament, innovation must be accelerated by adopting a pace-layered application strategy, also referred to as shearing layers (WikiPedia, 2013).  Each stratum’s pace is defined by a specific application classification and enterprise differentiation.  Gartner’s Pace-Layered Application Strategy is a new methodology for categorising applications and developing a differentiated management and governance process that reflects how they are used and their rate of change, viz. Systems of record, Systems of differentiation, and Systems of innovation.

It is important to note that the strategy for selecting, deploying, and managing applications between these strata are different, because applications (based on how they are used by the organisation) are fundamentally dissimilar.  The pace layers can be used to build a business application strategy that delivers faster response and better return on investment without sacrificing integration, integrity, and/ or governance.

The enterprise must establish a new strategy for business applications that responds to the use of technology to establish sustainable differentiation and drive innovative new processes, while providing a secure and cost-effective environment to support core business processes.

This paper examines the positioning of systems in support of core business processes, i.e. Systems of Record, as classified by the Gartner pace-layered application strategy and how these should be thought of.

Many enterprises are presently disposed to utilising a variety of systems to perform its support services vested in the Systems of Record layer, e.g. Finance, Human Resources, Information and Communication Technology, Procurement, etc. some hosted in the company’s data centre while others are cloud services.  Each individual business process and functions should be matched to an application and classified according to the pace-layer application classification to allow for an elegant reference ability.

For example, financial accounting, order entry, and collaborative demand planning are often part of a single Enterprise Resource and Planning (ERP[1]) package, but are separate application modules that belong in three different layers in the Pace-Layered Application Strategy.  This approach should also be used to classify individually packaged or custom-developed applications.  This allows the organisation to apply the appropriate governance, funding, and data models, based on the characteristics of each application to the different applications to manage them optimally.

Inefficiencies in the current enterprise systems, mostly because of their heterogeneous nature, i.e. different vendor applications with disparate integration standards, result in elevated cost of ownership (through multi-vendor management), support resources (diverse architecture), and none or sub-standard integration that diminishes the availability of useful information, representative of the enterprise, as analytic information that can be used for decision support.

Ineffective integration isolates functions and renders silos of data that are not uniformly accessible for enterprise reporting and communications and requires extensive efforts to converge and present data as one enterprise information source.  Consequently business intelligence is not easily transformable for corporate performance support and management, i.e. in decision making processes.

Business performance (part of financial management and control) has three main activities:

  • Goal selection
  • Consolidation of measurement information relevant to the organisation’s progress against its goals
  • Interventions made by management in light of the information in order to improve performance against goals

Performance management, through organisational activities, requires the collation and reporting of volumes of data, using business intelligence tools that explicitly suggests software being a definitive component of the approach.  Decision making is based on the information from these corporate systems and rely on the accuracy and time-relevance of the information.

Although corporate solutions have been automated progressively, the collation of data remain a challenge due to the lack of infrastructure for data exchange or due to incompatibilities between support systems, or simply the lack of proper data integration between various systems.

Corporate performance management (CPM) builds on a foundation of business intelligence, according to key performance indicators such as revenue, return on investment, overhead, and operational costs and is the crucial capability by which to monitor and manage an organisation’s performance.  According to Gartner: “CPM is an umbrella term that describes the methodologies, metrics, processes and systems used to monitor and manage the business performance of an enterprise.  Applications that enable CPM translate strategically focused information to operational plans and send aggregated results.  CPM must be supported by a suite of analytic applications that provide the functionality to support the business processes, methodologies and metrics.” (Gartner, 2015)  A corporate performance system should include forecasting, budgeting and planning, graphical score cards and dashboards to display and deliver corporate information (Rose, Margaret;, 2011).  An enterprise wide corporate performance management cannot be had without business intelligence (Dresner, 2014).

If business intelligence is the key to corporate performance management, i.e. giving it context and it is a program that causes a shift in organisational culture, processes, and technology, it reaches all levels of the organisation and requires a revolution in organisational thinking.  Without a proper CPM strategy it would be impossible to monitor and manage the company’s performance and make it extremely difficult to know if the corporate strategy and goals have been attained.

This document proposes that CPM be formalised and complemented by an Enterprise Resource and Planning (ERP) system for system of record applications, classified according the Gartner Pace-layers System Architecture (Gartner, 2015), with a strong and efficiently implemented analytic and reporting ability for these providing business intelligence in real-time via dashboards and other data visualisation tools to the relevant decision makers in the company to empower them to make business decisions in order to attain to strategic goals.  These strategic goals could be come of the floowing:

  • Innovative Products and Services,
  • Rigorous Cost Understanding and Focus,
  • Technology Delivery,
  • Market and Client Intelligence,
  • Regulatory and Market Credibility,
  • Integrated, Customer-focused,
  • Collaborative Culture, and
  • A Diversified, Capable, Respected Workforce.

[1] Enterprise Resource and Planning (ERP): Integrated Application Suite on Best-practice Functionality.

1.1.                        Objectives

The objective of this article is to provide a motivation in support of a company CPM methodology, related business intelligence capability, an application classification structure for application governance, and a system of record utility suite for meeting the commoditised (mainly financial management) business processes requirements by utilising computing software that are deployed in the most optimal, modern, and cost effective manner.

1.1.                        Assumptions, Considerations, and Exclusions

Many organisations recognise that their culture is not innovative, its business processes are deficient, and many are executed manually in instances, and that its technology architecture is not optimally integrated for commoditised system of record applications.  Its work force may not be the adequately diversified, capable, and respected and that technology delivery is not optimal in many cases, most notably in the differentiation and innovative classification of the pace-layered system view of applications.  This status-quo causes arduous business processing, cumbersome technology changes, and problematic and error prone implementations and upgrades of software, errors in reporting and billing, and tedious and strenuous interactions with customers.  This erodes the company’s ability to adapt to changing market conditions and provide products and services that maximise profit and customer service.

Where a business intelligence strategy has been tendered and accepted by the executive committee, allowing for divisional key performance indicators (KPI) to be identified, this has to be employed before an Enterprise Resource and Planning (ERP) system and Corporate Performance Management (CPM) methodology are possible, both of which should bear on the defined KPIs.  A CPM strategy has strong dependence on a stable and analytical system of record suite of applications, e.g. an ERP system, to produce accurate data on which analysis is possible.  Then, to monitor performance indicators and controls that monitor the achievement of the company’s strategy, scorecards, vision, mission, and goals, as well as policies and business processes, to ensure that the correct state of the company is known at all times and that remedial action can be taken in time to align the business operations with achieving its goals.

1.1.                     Scope

The scope of this paper is to present the case for an ERP suite of applications with a strong analytic capability, and a complementary CPM requirement for the commoditised stratum of system of record applications required by the organisation.

A classification strategy, proposed by Gartner, i.e. the pace-layered classification of systems, for all the classification of applications in the company and to subsequently be applied to the selection of ERP components, especially in the postmodern view of ERP and its hosting options.

This paper does not recommend and ERP system, neither does it discuss any implementation pitfalls, but it proposes that an ERP system is the best solution for system of record applications.  It looks at the various problems with ERP and how that is being addressed in the postmodern ERP era.  The move to The Cloud is punted as the future for these system types and this paper explores the different options in overview.

A strong reliance on analysis, integration, and application governance relate ERP systems with business intelligence and corporate governance with financial management as the fulcrum.

1.  Document Specifics

1.1.                        Conventions

This document makes use of references to external sources of information and collates them in a citations addendum with intra-document references.  Any strongly typed words are for emphasis and quotations are in parenthesis with paraphrases in italics, both with cited references.  Lists are bulleted and steps or finite elements are numbered.

1.2.                        Audience and Reading Suggestions

The suggested audience is the Chief Executive Officer (CEO), the Chief financial officer (CFO), the Chief Information Officer (CIO), and Enterprise Business Architects (EBA).  This paper should be read as a strategy consideration to spark off a broader debate from which to obtain the business and technology drivers for a strategy and technology road-map that realise the corporate strategic objectives pertaining to the managing of Systems of Record, i.e. utility applications, specifically Enterprise Resource and Planning (ERP) application with business intelligence and corporate governance.

1.3.                        Definitions

The table (below) contains working Terms/ Acronyms and Definitions for any term used by this document that the reader audience may understand.  These include specific terms, abbreviations, and acronyms.

Term Definition
ERP Enterprise Resource and Planning (ERP): Integrated Application Suite on Best-practice Functionality
CPM Corporate Performance Management
BI Business Intelligence, i.e. a set of tools and techniques for transforming data into meaningful and useful information for business analysis purposes.
BAM Business Application Management
COTS Custom Off The Shelf
KPI A key performance indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organisations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes in departments such as sales, marketing, or a customer services centre (What is a KPI?, 2014).
PMF Performance Management Framework
Systems of Record (SSoR) The general use of the term means authoritative data sources otherwise known as databases, but also understood as ERP-type systems companies rely on to run the business, e.g. financials, manufacturing, customer relationship management (CRM), and human resources (HR). These have to be integrated and intact (from a data perspective) to be consistent.
Systems of Engagement (SoE) These perform corporate functions such as email, collaboration, social networking and learning to engage employees, especially from a human resources perspective. ERP systems like SAP have a facility called “Employee Central” and Oracle has “Fusion” with Microsoft (Richards, 2013) providing a host of applications in their Dynamics ERP suite through which employees are engaged in what is called “talent management” systems (McCann, David;, 2012)
SaaS Software as a Service is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, i.e. the Internet.
IaaS Infrastructure as a Service is a Cloud service comprised of highly automated offerings of computing resources, complemented by storage and network to customers on-demand (Mitchell, David;, 2012).
PaaS Platform as a Service is an offering between the SaaS layer above and IaaS layer below comprised of a broad collection of application infrastructure (middleware) services, including application platform, integration, business process management and database services.
BPaaS Business Process as a Service is the delivery of business process outsourcing services that are sourced from the cloud and constructed for multitenancy.
Multitenancy Refers to a principle in software architecture where a single instance of the software executes on a server, serving multiples tenants, i.e. a group of users sharing the same view on the software they use.

1.  Executive Summary

A financial management & control service is a key function in the organisation to control business from a financial and operational perspective.  It relies on many aspects, e.g. business processes, controls, performance indicators, available and relevant data, and information technology systems.  Financial management functions are commoditised and should be standard practice across industries globally, with slight regional nuances.  Consequently the company should view such functions as common and utilise standardised applications, or a suite of applications, such as ERP, and augment it with a strong business intelligence capability, in fulfillment of a corporate governance methodology to monitor and manage the company’s performance and alignment to strategic goals and objectives.

Making corporate performance management a successful endeavour will optimise the opportunity for the company to attain to a competitive, cost optimised, and agile to change organisation; but this requires a methodology and systems.

Simply looking at finance in isolation would be short-sighted because with the advent of enterprise resource and planning systems (ERP) more and more business functions have been assimilated into this fabric and the postmodern ERP landscape has enabled a plethora of different suite compositions and deployment options.  Not only that, but internal ERP processes have been automated; and different vendor ERP components provide seamless ERP integration via APIs, making inter-component integration effortless and part of the solution, but loosens the dependency on the mega-vendor paradigm of ERP.

ERP systems remove a great deal of effort and error from systems of record applications and recently with the postmodern ERP concept allow for much more flexible deployment options in the cloud, hybrids, and multi-vendor components.  However, to be effective in the management of corporate performance, an ERP system is not the panacea to all performance measurements and controls, but requires the ERP to have a strong business intelligence capability for the data stored in the ERP system, in real-time, in a relevant context, visually and dynamically presented across the enterprise by which to make agile business decisions.

Organisational strategies and scorecards are part of corporate performance and have to be empowered by the ERP system in combination and as a result of the BI capability, to fulfill corporate performance and allow the performance, overhead, and operational costs of the company to always be known at any instance in time.

Therefore, the elements towards a lean organisation, capable of delivering relevant and contextual decisions, operating model changes (in order to adapt to market conditions) in an economic and timely fashion are:

  • Business intelligence strategy implemented
  • Relevant and functional key performance indicators
  • Relevant and functional business processes and policies
  • Enterprise resource and planning solution that is integrated with a complementary business intelligence solution
  • A defined corporate governance methodology making use of the business intelligence of the company

1.  Gartner Pace-Layered System Architecture

Gartner produced the concept of the Paced-layer view of applications (Figure 1) used for categorising applications (Figure 5 ) and developing a differentiated management and governance process that reflects how these are used and what their rate of change (Figure 6) is.  This strategy addresses the problem that most organisations have, i.e. a heterogeneous portfolio of business applications of different technologies, different purposes, some as simple as spreadsheets, compounded by the fact that the proliferation of this is getting worse and not better.  The efforts to converge technologies and solidify processes and move towards a better release cycle are not appreciated (understood) by the business (Syx, 2011).  These layers are used to build a business application strategy that delivers a faster response and better return on investment without sacrificing integration, integrity, and/ or governance, but actually promote it.  This paper regards the Systems of Record (Figure 4), i.e. those utility type common industry applications (in support of the core business) in separation but in support of the other classifications, viz. Systems of Differentiation and Systems of Innovation.  The pace-layered approach is not static, applications will move up and down over time, but they must be classified at all times to allow proper and appropriate governance.

Gartner Pace-layered view of Applications

Figure 1–Gartner Pace-layered view of Applications

To obtain a pace-layered classification, application portfolios are decomposed into individual applications and the business processes that are in support of each.  The characteristics of these determine the stratum of the pace-layer model to which the application and process belong.  Applications belonging to the Financial Management application suite are part of the systems of record and together with connective tissue[1] (refer to SAP’s View of Gartner’s Pace-layered view of Applications [Figure 2] on page 17) form the foundation, usually a suite of core financial applications, e.g. general ledger (GL), accounts payable (AP), accounts receivable (AR) and fixed assets(FA) of the enterprise application architecture.  It is necessary to ensure a strong foundation for systems of record be in place, with a ten year degree of comfort that these will be able to support current and projected business activities (Rayner, Nigel; van Decker, John E;, 2011).

[1] Connective Tissue such as master data management and process integration

Systems of Record are comprised of a commoditised and stable, integrated, application suite, as a functional core with infrequent changes, a long life-span that is a functionally well-defined and known across organisations, with high data integrity and shared across the enterprise as a utility (Table 2).  Applications may migrate between pace-layers and systems of record may have elements of differentiation as part of the suite/ configuration as they become commoditised and common in function within the industry.

Characteristic Record Differentiation Innovation
Strategic Focus Improve execution Competitive differentiation Business transformation
Lifespan 10-20 years 3-5 years 12 months to 3 years
Pace of Change Infrequent and incremental More frequent, configurability is key Rapid deployment of new capabilities
Business Process Understood and stablel Understood and dynamic Ambiguous and dynamic
Data Integrity High High Moderate
Support Requirements 75% technical, 25% business 50% technical, 50% business 25% technical, 75% business
Sourcing Integrated applications suite Best-of-breed or suite vendor extension Specialist niche vendor, possibly larger vendors
Budget Shared-service/ IT Mix of line of business and IT Line of Business
Investment Capital Capital and/ or expense Capital and/ or expense

Connective technologies and governance (Figure 2) address an overarching (common) base of elements that span the different layers. The connective tissue allows for interaction between applications (Colbert, 2011) in their layers, through master data management, process and data integration, business service repository (SOA), integrated composition technology (Syx, 2011), a common security architecture that is flexible enough to meet the requirements of all the layers, integrated monitoring and management, and external connectivity. This connective tissue should have definite standards. Governance across layers suggests that there is no one solution for all and requires a governance model for each layer. Realistic process and data integrity rules should exist across the layers by categorising the existing portfolio in to individual applications and associate each with a grouping and process (by a panel of users and IT application experts) and then assign the application to the correct layer based on its characteristics, e.g. the rate of change and finally establish connective technologies to facilitate interoperability. Governance is adapted to suit each layer accordingly.

SAP View of PACE

Figure 2–SAP View of PACE

Gartner provides a guide for the classification of applications according to the pace-layer view of applications (Figure 3) classifying a few commoditised functions as system of record applications.

PACE with Application Types

Figure 3–PACE with Application Types

To understand an example of classification consider the financial accounting process (at a high level) for the supplier invoice to payment process, that it is a non-differentiating process well supported by an ERP system.  However, at a more granular level sub-processes and activities, within invoice to payment, offer opportunities for differentiation, even innovation, such as e-invoicing that removes paper from the process altogether.  By using the pace-layered approach, organisations can move away from standard ERP functionality by soliciting specialist vendors that provide e-invoice capabilities on-top of the ERP system (Rayner, Nigel;, 2012).  Similarly the paced-layered approach assists in the classification of ERP functionality in such a manner that governance pertaining to the strata is custom for the stratum.  This helps the management of the ERP life-cycle by being responsive to demands for differentiation and innovation and the different rates of change in the application portfolio as opposed to treating the application portfolio as a singular entity.  Systems of record should be managed on a seven year cycle and planning horizon.

PACE System of Record View

Figure 4–PACE System of Record View

System of Record applications (of which financial applications are vital) have a strong affinity to ERP systems (Figure 3) because of the industry common (non-differentiated) functions provided. Gartner says that the world is finding itself in the “third era of enterprise IT” (Gartner, 2014) or in relation to ERP a post-modern ERP era. The movement saw the industry moving from IT craftsmanship (with sporadic automation and innovation) to IT industrialisation (services and solutions efficiency and effectiveness) to standing on the precipice of moving into Digitalisation with digital business innovation and new types of value. Classic computer application systems provided a classic set of best-of-breed applications, driven by market and user immaturity, resulting in fairly happy users but with integration and analytic problems. The ERP paradigm sought to resolve this by centralising IT, driven by vendors, leaving users increasingly frustrated with integration trumping agility and fit to requirements. Postmodern ERP is set to deconstruct the ERP suite into multi-vendor units handing back the control to the users and to provide new integration and analysis for this fabric with modern connectivity (mobile and the like) with social platform integration (Figure 5).

PACE View of Application Strata and Types

Figure 5–PACE View of Application Strata and Types

No single strategy or governance model can be appropriate for all applications and the problem worsens with cloud and SaaS (software as a service) options are utilised. The greatest benefits from System of Record systems come when they are implemented using out-of-the box functionality to drive greater efficiency from transaction processing. These provide a stable core for recording and managing all financial activity of the organisation. An integrated suite of financial applications typically make up system of record applications for finance. Sub-ledgers should only be deployed if these are classed as systems of differentiation. Such financial systems should be scoped to last for ten years or need to be stabilised that they do and that they support regulatory changes that may come during that time. Vendor upgrades must be anticipated by viewing their road-map for the ERP product and also how it impacts the company’s current release level. Define a clear strategy for finance systems of record as documented and agreed by the organisation and only review if there is a significant and unanticipated change in business conditions or the scope of the organisation’s business activities. Standardise on business processes for systems of record across the organisation and support them with industry standards and best practice. Because the rate of change is slow for systems of record, a long term investment in applications is possible. Where business processes are required to be dynamic to support the business strategy, these are likely systems of differentiation or innovation and not system of record processes and should be properly classified in the pace-layered scheme. Where the ERP system of record components interact with other (extra) system components, the interaction must be properly defined.
The characteristics of the pace-layered view of systems as depicted in Table 2 is also graphically displayed in Figure 6 and indicate a few other dimensions such as Development practice, business engagement, and architecture.
Systems of record are typically the more stable, standard (commoditised), non-volatile, and utility type applications that does not differentiate one company from another.

PACE Governance View of Applications

Figure 6–PACE Governance View of Applications

5. CORPORATE PERFORMANCE MANAGEMENT
Corporate performance management (CPM) should not be viewed as synonymous with financial performance management (FPM) or Financial Management and Control. CPM is an internal organisational revolution and it provides context to business intelligence (BI).
CPM should provide and organisation, its employees, and customers with corporate performance dashboards, intelligent payslips or invoices that reflect elements of the vision, strategy, goals and objectives and how these are being reached. It should provide managers with the ability to make fact-based decisions faster and with a higher degree of confidence. A company may opt to use a CPM system coupled with an ERP system or stick with spreadsheet and manual data extraction processes. Both options can perform the requirement, but to provide the capabilities along with flexibility, advanced analysis, higher accuracy, faster, and with a better decision making, requires specifically integrated components that work together as one.
“CPM is an umbrella term that describes the methodologies, metrics, processes, and systems used to monitor and manage the business performance of an enterprise. Applications that enable CPM translate strategically focuses information to operational plans and send aggregated results. These applications are also integrated into many elements of the planning and control cycle, or they address business application management (BAM) or customer relationship optimisation needs. CPM must be supported by a suite of analysis applications that provide the functionality to support these processes, methodologies, and metrics.” (Gartner, 2014).
Finance is the source of enterprise key performance indicators such as revenue, return on investment, overheads, and operational costs (Rouse, 2014) that are used in determining business/ enterprise performance through corporate performance management. CPM processes typically are (Tagetik, 2014):

  • Budgeting, Planning and Forecasting
  • Cash flow Planning
  • Production cost, Planning Control
  • Statutory and Management Consolidation
  • Cost Allocation and Profitability Analysis
  • Financial Close and Fast Closing
  • Dash-boarding

Corporate Performance Management should be able to link operational activities with the business strategy without requiring complex integration. It should use pervasive and detailed budgeting, planning and forecasting processes, across the enterprise. Communications and collaboration across multiple finance processes should be facilitated. Link activities and task links to the budget objectives and actual performance. Improve control and workflow or activities and processes across the enterprise and unify and consolidate, reporting, budgeting, and forecasting processes. Adapt new business needs quickly and without much effort and manage external compliance, disclosure, and financial reporting from a single source. Reduce cycle times and iterations of financial processes to enable finance to take on more.
5.1. Measuring Performance
Many organisations produce corporate performance information from the finance department using:

  • Combinations of spreadsheets, custom applications (in combinations with other COTS products) to manage the budgeting process, consolidate results or provide rudimentary analysis
  • Spend great amounts of time developing, copying, and formulating data into spreadsheets
  • Scramble to provide information, often switching between a number of different applications, with reports lacking consistency and accuracy
  • Struggle to respond quickly to new regulatory or statutory requirements

The only viable and effective manner in which to measure performance is through the corporate financial and operational planning processes whereby any number of users can consume and contribute information without adding complexity, by identifying areas where increased collaboration can improve business analysis and manage performance more effectively and to plan at the required level of detail, no matter how granular or frequent. The world is moving towards an increasingly more data-driven culture, with an ever expanding participation and a more sophisticated data analysis requirement for providing more useful business insight for increasing the organisation’s abilities.
Financial management applications manage finance processes. These are the primary responsibility of the CFO and the office of finance, but others such as Corporate Performance Management (CPM) suites have a wider application in an organisation. Gartner provides the main application segments as follows:

  • Core financial applications—part of the ERP market including visualisation applications that provide insight into the enterprise financial positions through automation and process support for any financial activity, e.g. general ledger, accounts receivable, and project accounting. These also provide financial reporting data as needed by local and international regulations.
  • Corporate Performance Management (CPM) suites—processes used to manage corporate performance, like strategy formulation and budgeting, planning and forecasting, as well as the methodologies in support of these processes, like balanced score-card, or value-based management, and the metrics used to measure performance against strategic and operational performance goals. It’s also made up of analysis applications, e.g. reporting solutions targeted at the CFO and the finance team, senior executives and corporate-level decision makers.
  • Financial governance applications—focused on improving financial processes and controls, particularly prior to disclosure, i.e. close management and disclosure management.
  • Financial value chain (FVC) applications—internal cash management, supplier-facing and client-facing applications. Specialist solutions boost core ERP functions in this discipline, e.g. accounts payable invoice automation, collection management, and corporate treasury.

Corporate performance management has three main activities (WikiPedia, 2014):

  1. Selection of goals
  2. Consolidation of measurement information relevant to the organisation’s progress against said goals
  3. Interventions made by managers in light of this information with the view of improving future performance against goals

Measuring the corporate’s performance is partially vested in the Finance Management and Control function (Figure 7), comprised of the functions Internal Audit, Management Accounting, Financial Processes, and Financial Applications.

Financial Management & Control Business Functions

Figure 7–Financial Management & Control Business Functions

PWC Corporate Performance Framework

Figure 8–PWC Corporate Performance Framework

5.1.1. Internal Audit
The Internal Audit business function may involve a range of activities, however the essential element is ensuring that controls operate as designed and intended. All finance and organisational activities are subject to internal auditing. It is consequently not essentially a finance function but a financially inclined counterpart. However, the internal audit function requires a significant amount of depth and understanding of the company’s strategy and operations.
Internal Audit comprises the examination, monitoring and analysis of activities related to a company operation, including its business structure, employee behaviour and information systems. An internal audit is designed to review what the company is doing in order to identify potential threats to its health and profitability, and to make suggestions for mitigating the risk associated with those threats in order to minimise costs.
This ties in with the company’s risk management because an internal audit helps the company identify issues before they are substantial problems. An internal auditor has to challenge current practice, champion best proactive and be a catalyst for improvement with the objective of ensuring that the company holistically can achieve its objectives. Internal audit advises management (via audit committee) by providing assurance that the company is able to meets its objectives, its governance, risks and controls and serves as an input back into the strategic planning, market analysis, compliance, change management and the use of information technology.
Internal auditing is responsible for:

  • Evaluating controls and advising managers at all levels
  • Evaluating risks, e.g. not only control based but proactively
  • Analysing operations and confirming information, e.g. aligning operations with strategy in view of performance monitoring from financial controls
  • Review compliance, e.g. laws, regulations, policies, guiding principles

5.1.2. Management Accounting
The Management Accounting business function is a catch net comprised of a wide range of techniques designed to obtain decision orientated information, remedy certain business conundrums, and to use these techniques for making organisational management decisions, based on financial information, to provide expertise in financial reporting and control to assist management in the formulation and implementation of an organisation’s strategy. Management accounting also assists in the formulation of policies and in the planning and control of the operations of the company. Management accounting is therefore much more concerned with forward looking decision making that affect the future of the company. The key difference between management accounting and financial accounting is that the former uses financial information and aids managers in proactive decision making, while the latter reports financial information.
Management accounting is broken into three applications:

  1. Strategic management
  2. Performance management (business decision making and monitoring of controls)
  3. Risk management (report risks to the achievement of objectives)

5.1.3. Financial Processes
The Financial Processes business function is a Financial Management and Control function and these processes include the development, production, and analysis of information used for management and control purposes.
Both financial and non-financial information are used. Financial information used is planning, forecasting, budgeting, target setting, analysis and reporting. Actual data analysis against futuristic analysis provide a basis for action and the next cycle of forward looking planning. The content and scope are depended on organisationally defined aggregations and analysis of financial data and transactions, covering both the past and the future. A link is found between the underlying organisation activities and the financial information in support. Non-financial information relates to information such as customer feedback (mood analysis) and aspects of the business score card. Such information may be combined with financial information to provide guidance to financial management and control.
5.1.4. Financial Applications
The Financial Applications business function (not IT applications) relate to how information is used for management and control, i.e. how information is aggregated and analysed (profit- or cost-based) with the following principle applications:

  • General management and control of operational activities, generally with an implicit focus on profitability or value of money goals.
  • Cash management and treasury has two aspects. Firstly, as a key performance dimension through company valuations based on the net present value of projected future cash flow. Secondly, as an asset class to be managed through treasury activities.
  • Investment appraisals seek to assess the merits of investment options, potentially using both cash approaches, e.g. net present value and internal rate of return and profit-based appraisals, e.g. return on investment.
  • Tax management involves the consideration of a range of factors such as decisions on transfer pricing, legal entity structures, operating locations and financing structures. The focus is prudentially minimising tax liabilities.

5.1.5. Business Performance Framework
5.1.5.1. THE OBJECTIVE OF A FRAMEWORK
The balanced score card is often used as the basis for business performance management activity within organisations. The corporate strategies are diffused into actionable metrics and analysis are used to expose the cause-and-effect relationships that could provide insight into decision-making. It is but one framework employed implementing a business performance management system, but the most widely used. Others are Six Sigma, Activity-Based Costing, Total Quality management, Economic Value-Add, Integrated Strategic Measurement, and Theory of Constraints (WikiPedia, 2014).
The identification and definition of key performance indicators (KPIs) is the first to establish for attaining to a CPM system. “A KPI is a set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as Key Success Indicators (KSI).” (Investopedia, 2014).
A performance management framework (PMF) endeavours to initiate, implement, and sustain performance management through sequential performance management cycles taking principles into practice for all stakeholders converting experience into a capacity for learning and improving to create accountability and produce better results for the company shareholders and employees.
Simply superimposing a performance management process onto a traditionally managed company may sound good, but practically won’t make any difference. A real improvement for the company would also see the company culture being addressed. A performance management paradigm should be implemented as an ongoing, systematic approach to improving results through evidence (outcome) based decision making, continuous organisational learning, and focus on accountability for performance. It must be integrated into all aspects of the company’s management and policy making processes, transforming the company’s practices so it is focused on achieving improves results for its customers, shareholders, and employees.
A delineating separation between performance measurement and management must be made. Performance management systematically uses measurement and data analysis as well as other tools to facilitate learning and improving and strengthen a focus on outcomes. The company is required to move from measuring and reporting to managing and improving results.
Accurate and timely data must be shared by everyone at the same time, according to agreed times. To accelerate learning (knowing the environment’s performance and have to ability to commend remedial actions) regular meetings should be conducted to reflect on the performance information. A problem-solving model that works for the company must be established as standard approaches to work effectively within the culture and outcomes measured against benchmarks. A basic performance evaluation includes the following phases:

  • Defining the question
  • Establishing a data collection strategy
  • Collecting the data
  • Analysing and reporting conclusions

Evaluation must be a component of performance management because understanding the relationship between the activities the company carries out and the results it achieves is necessary of learning, improvement, and accountability.
Two examples, from industry specialists (Figure 8 & Figure 9), are provided for a quick reference about how a business performance framework should look like.
5.1.5.2. TYPES OF EVALUATION
Evaluation distinguishes approaches that focus on improvement and accountability, and distinguishes between formative and summative evaluations. A formative evaluation provides a feedback loop to individuals on how much a program execution differs between individuals and has the goal of making appropriate adjustments. Summative evaluation focuses on whether or not a program is successful and the intention is about whether to terminate the program or modify it. The data collection between these is different.
There are also distinctions made between evaluations aimed at accountability and those intended for learning and improvement. Accountability evaluations are usually referred to as audits and learning and improvement evaluations provide the how and why information. Knowing what decisions to make requires knowledge on which program is being evaluated.
A measurement (control) is a practice used to develop, collect, store, analyse, and understand performance, including indicators of workload or activity, effectiveness, efficiency, and actual results or improvements. Reporting communicates performance measurement information to audiences including internal staff (employees), management, and executives, along with other organisations and interest groups and rating agencies and the public. Performance measures provide factual information used in decision making for the planning, budgeting, management, and evaluation of company services. Measures can inform decision makers on a wide variety of topics. A control must track a useful measurement.
5.1.5.3. PRINCIPLES OF PERFORMANCE MANAGEMENT
The framework is established on seven principles that help transform and unite the company processes, e.g. planning, budgeting and forecasting, management, and evaluation. This condensed into a single system, well aligned and integrated, for improving results. These principles are:

  1. A results focus permeates strategy, processes, organisational culture, and decisions
  2. Information, measures, goals, priorities, and activities are relevant to priorities and the well-being of the company
  3. Goals, programs, activities, and resources are aligned with priorities and desired results
  4. Decisions and processes are driven by timely, accurate, and meaningful data
  5. Practices are sustainable over time and across organisational changes
  6. Performance management transforms the organisation, its management, and the policy making process

5.1.5.4. IMPLEMENTATION STEPS
It is not a momentary action that will bring about the corporate performance management framework in a standard manner for business conduct. However a few key initial aspects can accomplish great inroads towards the holistic strategy, viz. performance driven planning, changing the budgeting process, and training managers and employees on using data to improve programs and services.
Consequently the following steps are representative in the establishment of a CPM framework:

  • Expose the case for CPM to appropriate decision makers for support, authorisation, and to secure resources
  • Identify key purposes and objectives of initiating performance management
  • Define the performance management process

5.1.5.5. ELEMENTS OF THE PERFORMANCE MANAGEMENT FRAMEWORK
A CPM system should be comprised of a cascading alignment to align objectives, strategies, and measurable controls to the needs of the members, shareholders, and employees, followed by programs and services, and lastly individual outcomes (Rose, Jerry R;, 2014).
The following elements are typically included:

  • Planning process that defines the organisational mission, and priorities that drive performance
  • A process for engaging customers and shareholders to identify needs
  • A budget that allocates resources according to priorities
  • A measurement process that supports the entire performance management system
  • Accountability mechanisms
  • A mechanism for collecting, validating, organising, and storing data
  • A process for analysing and reporting performance data
  • A process for using performance information to drive improvement
PWC Corporate Performance Framework

Figure 8–PWC Corporate Performance Framework

Accenture Enterprise Performance Management Framework

Figure 9–Accenture Enterprise Performance Management Framework

6. ENTERPRISE RESOURCE AND PLANNING
The primary achievement for Enterprise Resource and Planning (ERP) systems is integrated processes. The integration characteristic yields great integration benefits and good integration brings homogeneity in the representation and handling of enterprise data. Business performance management (BPM) relies on business intelligence, without which it is impossible and without BPM and enterprise cannot be competitive and its product and service offerings are average and slow to change with market variations.
“In many respects, companies have been facing a nasty storm when it comes to their standalone (un-integrated) enterprise systems: Many companies are over-softwared right now, and there’s been a substantial backlash and pleas for real-world, usable innovation. With analytics, in particular, surveys have shown that 40% of executives still trusted their gut in decision making and many more are frustrated with CIOs and IT for failing to give the business what it needs and deserves with analytic and decision-making tools. In the Aberdeen report, the analysts preach an integration mind-set when it comes to a more perfect ERP and BI union. A good first step: Form cross-functional teams for both ERP and BI projects. When left entirely to IT, the success of projects is often measured by cost and speed of implementation, write Jutras and Hatch. These are important factors but using them as the exclusive measure of success loses sight of the original business goals of the project.” (Wailgum, Thomas;, 2009).
ERP consequently is a software solution that addresses the enterprise needs, taking a process view of the overall organisation to meet the goals, by tightly integrating all functions under a common software platform. It achieves a transparency of information using a single data source across the organisation while rendering software that is modular, flexible, and easy to add functions and provide a growth path. Coupled with business intelligence, getting the right information to the right decision makers at the right time, the ERP system provides an enterprise wide platform that supports reporting, analysis and decision making for fact based decision making and a single version of the truth including reporting and analytics. It remedies the data everywhere but information nowhere situation, experienced with non-integrated systems. It relates the ERP (with its core CRM system) to the BI capability, where the majority of the data lies in the ERP system and when the ERP solution integrates business intelligence (as opposed to simply having a reporting function) managers can benefit from deeper business insights. From customisable dashboards and graphical charts, business intelligence reports gather, compare, share, and analyse real-time data. BI applications drive business process improvement across an enterprise. ERP systems, since 2012 (Carr, 2014) have become more and more business intelligence proficient by doing strategy management, interactive dashboards, scorecards, comparing current to historic business activities and future plans to deliver contextual information to keep performance on track. Essentially, the goal is to use ERP data to take action, which is only possible if the relevant data gets in the hands of those able to make improved business decisions as information. The most important moment in a piece of data’s lifetime is the moment it is created and the moment it is used. If either or both of these moments happen outside of IT, i.e. some system, the event is not accessible for the purpose of opinion or business intelligence. To harvest value from data and control its quality, IT systems have to control those movements, but IT cannot fix a substandard business process, all it can do is perform data fixes at a very high cost (Redman, 2012).
For an ERP system (both its IT infrastructure and applications and the business processes) to work efficiently and provide that optimal yield of the power of integration a variety of management has to be unified. Different kinds of assets, people, capital, technology, and data demand different kinds of management. The responsibility of data must be moved out of IT and into business and leave IT to run the systems in which the data, according to business processes, are to be captured and used (Redman, 2012). However, an ERP system by itself won’t provide better access to data. That is reliant on a business intelligence strategy. The ERP system may hold the data and provide the software tools and reports, but not the strategy. A BI strategy must be in place prior to acquiring an ERP solution.
An ERP system cannot be used to examine BI needs, but instead the BI strategy must be assessed first and through that improve access to information related to the ERP system.
However, once a BI strategy is in place and support business processes and key performance indicators are known, an ERP system (with its superior integration) covers the data capture and delivery paradigm in an automated fashion without which the BI capability would suffer detrimentally in answering in making data available in real-time for relevant and effective business decisions.
One of the biggest criticisms leveled at ERP systems is that they are inflexible and do not support business change. According to Gartner (Rayner, Nigel;, 2012) in most cases the perceive inflexibility of the ERP suite is attributable more to how the ERP applications have been purchased and deployed than to any inherent flaws in the technology. The Gartner pace-layering model application to ERP systems has a positive impact in building a balanced application portfolio of integrated suite applications sourced from a strategic\ specialist ERP vendor.

PACE for ERP

Figure 10–PACE for ERP

Most companies find themselves within an application environment that had grown over time as a series of incremental projects making the technical architecture more complex without yielding obvious strategic benefits. This paves the notion to “go ERP” without clear goals. The application strategy is often then dictated by the ERP vendor and not by the organisation’s business strategy. ERP systems are primarily Systems of record (Figure 11) from a macro viewpoint and deliver standard processes and create data and process foundation for most other business activities (Rayner, Nigel;, 2012).
The Gartner Pace-layered approach to application strategy suggests that ERP is only a part of the answer to business requirements for systems of differentiation or innovation, but ideal for systems of record. ERP systems are only effective once common processes have become established across an industry or industries. The main aspect of any ERP strategy is to define a business process and functionality scope to delineate a boundary for the ERP system using the pace-layered approach.
ERP applications should be governed by a ten to fifteen year planning horizon, meaning that companies should have a clear long-term capital funding plan, including funding for upgrades that are likely within that period. ERP should be managed as a foundation systems and replacement should only be considered when there is a business strategy change in the original decision factors in support of the ERP system.
Most organisations will have systems of differentiation or innovation on the ERP boundary and any elements of the ERP that fall outside of the systems of record should be managed differently. An ERP system that spans pace layers require a more nuanced approach to life-cycle management.
A primary argument for suite-based solutions (ERP) is that they provide the necessary integration, especially for maintaining the consistency of financial data. The audit-ability of financial record-keeping is a fundamental principle of a well-managed finance operation. Integrated solutions maintain both process and data integrity.

Systems of Record in PACE

Figure 11–Systems of Record in PACE

The ERP landscape is a fast changing one even for Systems of Record. Gartner terms this move into the digitised era of computing as the postmodern era for ERP systems. This mainly bears on technologies moving into the cloud and assuming a more service orientated architecture with business process integration between components through open API standards.
One of the main perks of an ERP system is the financial management capabilities (Tagetik, 2014) and should improve financial management as follows:

  • Compliance—provide tracking and audit trails
  • Accurate financial positioning—dashboards and key performance indicators provide a running overview of the financial standing of the company in real-time allowing informed decisions
  • Reduce accounting overhead—automated system processes for daily accounting tasks and third party software integration

1.1.                   Post-modern ERP

Post-modern ERP came about in the late 2000’s where mega-vendors are no longer dominant and in control and the users of ERP are seeking more control amidst new integration and reporting challenges (Guay, Mike;, 2014).  In our consideration of ERP for System of record applications, we have to acknowledge the positioning of ERP in our era.

In a post-modern ERP view (Figure 12) the mega-suite ERP has been overwhelmed by equivalent cloud specialist vendors who only develop a subset of the former megalithic ERP suite and do so really well.  Cloud specialists build these offerings at speeds that no other conventional vendors are able to match.  Loosely coupled ERP suites are emerging in the cloud, based on developed and acquired products plus Platform as a Service (PaaS) offerings.  Integration complexity between these products are hidden in the cloud by cloud product vendors.  Consequently post-modern ERP systems can be viewed as loosely coupled, federated, increasingly cloud-based, rented facilities.

Ultimately most ERP functions are likely to be consumed through the cloud from Business Process Outsourcing (BPO) providers or as cloud services.  However, because 70% of transformation projects fail, any post-modern ERP option will disappoint if organisations don’t get a lot better at changing.

ERP value can only be measured positively if there is a measurable improvement in business performance.  Value can only be delivered if the company is able to embrace change (culture and politics) and adopt design agility and flexibility and link changes to business value.

For an ERP success the business must have a deep and broad understanding of the strategy and business priorities, interconnections, develop (or acquire) change management expertise, match business and IT agility, and change to focus and efforts to produce value.  It takes time to partner with business stakeholders and over-arching goals should be defined to achieve success together, i.e. working together is the key to success.

Post-modern ERP HOOF Model

Figure 12–Post-modern ERP HOOF Model

ERP systems are no longer a single product but provide a nexus of offerings ranging Information, Cloud, Social and Mobile components. These systems are comprised of public could applications for people, customers, finances, suppliers, and business with other partner and internet service provider applications, complemented by databases, infrastructure, and platforms for analysis, e-commerce, and self-service portals (Gartner, 2014). It is essential of the companyto recognise a plan for the total lifetime cost of ERP solutions rather than focus on short-term tactical costs. Social technology integrations into traditional applications are taking place slower than anticipated and procurement decisions for applications are moving away from IT and into business (Ganly, Kyte, Rayner, & Hardcastle, 2013). ERP implementations benefit organisations more about substantial changes to business processes and changing working practices than the actual benefits of ERP and many organisations had spent ten times more on customisation than on licensing costs. Inflexibility in systems prove to be the biggest bane of ERP in the enterprise and according to Gartner, any system that is not sufficiently flexible to meet changing business needs is a legacy system.
The two most common flavours of cloud ERP being offered are:

  • Hosted with application management services—Internet based, limited elasticity; logging for active users only; dedicated hardware or some level of virtualisation; traditional features-based ERP implementation with extensive configuration; perpetual license or subscription based on a fixed number of users and modules; some infrastructure services; fixed location of data; limited support of migration off the solution; and full control over upgrade cycles and software changes by the end user’s organisation.
  • Multitenant Saas ERP—Internet based access; level of elasticity can be chosen, but typically with some limitations; flexible payments within pre-set boundaries or minimum fee if not used; fully shared application logic; product features prevalent, but subscription of software services; underlying solution fully managed by provider; floating location of data, but mostly between pre-set data centres; limited support of migration off; limited influence on upgrade cycles; and software changes fully controlled by provider or limited possibility to postpone software changes by provider. This is the combination that most SaaS ERP vendors in the market offer.

1.1.1.                Software as a Service (SaaS)

Software as a Service (SaaS) is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet and is what is commonly referred to as The Cloud.

Many ERP vendors like Netsuite, SAP ByDesign, Intacct, SalesForce.com, Workday, and Sugar CRM are typical SaaS providers in the cloud.

Presently, ERP application leaders are struggling to respond to fast changing business and line-of-business users are increasingly bypassing an IT-led ERP strategy by licensing SaaS applications from specialist vendors to overcome this obstacle.  This however, creates a new generation of silo SaaS applications with fragmented data and processes.  Applications like procure-to-pay, talent management, and travel expense management is disrupting ERP suites.  This has the potential to create silo applications with an integration nightmare similar to the classic best-of-breed environment applications before ERP.  Consequently, ERP and other application leaders are starting to manage a portfolio of on-premise and SaaS applications rather that a single ERP suite, i.e. postmodern ERP.  For such hybrids (on premise and SaaS combination) it is important to balance between integrated suites and specialist SaaS applications and apply best practices to best support a hybrid ERP environment.

The ERP vendor SAP (being the market leader according to Gartner in 2013) says that it has the most comprehensive cloud computing portfolio on the market with 35 million users (Wilson, 2014).  Gartner also redefines highly customised ERP systems as legacy by 2016 (Meyer, 2014) because it is not sufficiently flexible to meet changing business needs.  This results in the notion that over the next ten years most organisations will transition their legacy ERP systems to postmodern ERP systems, i.e. into the cloud by 2018.  In the interim the hybrid model is the most expedient as SaaS providers enhance the ERP cloud functionality, however Gartner says that by 2017, 70% of organisations that had adopted a hybrid model will fail to improve the cost-benefit outcomes unless cloud applications provide differentiating functionality and even predict that a hybrid model may increase costs.

The development of sophisticated cloud-based best-of-breed point solutions with strong integration capabilities, combined with very strong growth in business process outsourcing, will provide ample opportunities for organisations labouring under inflexible and expensive ERP modules to seek alternative means of supporting their business processes.  However, any System of Record Application should require little to no customisation, while differentiating processes and innovative activities will use alternative delivery models that are integrated to the ERP system of record capabilities (Ganly, Kyte, Rayner, & Hardcastle, 2013).  Gartner suggests that companies with a revenue base of less than $1 billion should review their ERP strategy to see if there is an opportunity to leverage cloud ERP to reduce the costs of managing, maintaining, and upgrading ERP while at the same time delivering equivalent or improved functionality.

1.1.2.                Infrastructure as a Service (IaaS)

Infrastructure as a Service provides resources, assets, IT equipment and computing on demand, as a substitute for on-premises infrastructure hardware and IT expertise, software, and manpower, but outsources and hosted in the cloud.

1.1.3.                Platform as a Service (PaaS)

Platform as a Service features a web-based platform (hosted on a secure cloud) to allow for the development of applications of all sorts.  Cloud computing vendors host all the necessary resources and tools for application development.

1.1.4.                Business Process as a Service (BPaaS)

Business Process as a Service and cloud application (ERP) solutions, provide greater scale-ability, agility, and cost savings for business by delivering any type of horizontal or vertical business process via a cloud services model.  Because of the service-orientated nature of services these require integration in accordance with the company’s business processes ensuring that a more consistent process exists across the organisation.  Business processes can consequently be interlinked between the cloud components (applications) or between the cloud and on premise applications in the data centre, for example managing email, shipping a package, or managing customer credit.  BPaaS is designed to be service-orientated with well-defined interfaces, standardised for use by multiple organisations and can therefore be much more automated and standardised to deliver the service in a repeatable fashion.  BPaaS is situated on top of Saas, PaaS, and IaaS and is configured based on the process being designed and require well-defined APIs for integration with other components and related services with the ability to scale over massive architectures for a huge user base by utilising the cloud base for elasticity and scaling.

1.  Business Analysis and Intelligence

Business intelligence (BI) helps businesses to centralise, better access, and better understand key business metrics and predict future performance through business analysis.  BI benefits are faster answers without having to guess, on key business metrics reports on demand, to obtain business insight on behaviours of things controlled (measured) for the ability to identify deficiencies (learn how to remedy and streamline processes), or to enable cross and up-selling opportunities, improve inefficiencies in general and to understand the true costs of doing business.  Through this function time savings, easier and quicker access to information that is correct and relevant for making business decisions must realised.

Access to mission-critical business information is crucial and if impeded, limits an organisation’s ability to succeed.  When accurate business information is not easily available to the enterprise—in real time—it’s tough to make optimised decisions for a more competitive business position.  To solve the latter requires a business intelligence strategy.  Such a strategy is aimed to address the needs of the organisation to improve access to information.  Business intelligence is a key to enhancing business process improvement and cultivating business performance, i.e. better information lead to better decision making.  A BI strategy is much more that ERP reports and dashboards, it is a formal examination of overall business information needs and the alignment of tactical business intelligence resources to address these needs in the most effective ways to drive business process improvement.  A strategic approach to business intelligence helps prioritise business requirements, increase transparency and promote user access to key information.

The core elements of a business intelligence strategy are (Consultants, 2014):

  • Identification of the information needs
  • Including key performance metrics
  • The definition of the business view of information
  • How to look for information
  • What are the dimensions of the data?
  • The identification of the source of information
  • The selection of the technology to be used to support the BI plan
  • The users
  • The BI development plan
  • The BI roll-out plan

In order to derive a BI strategy the following areas have to be considered, among others:

  • Auditing the current state of reporting, metrics, and information access
  • Identifying enterprise-wide information needs in strategic, tactical, and operational areas
  • Setting the future state goals for adding transparency and insight into every function area for increased performance
  • Setting key performance metrics that support overall business process goals including key performance indicators (KPIs), balanced scorecard views, forecasting, and other analysis
  • Constructing an achievable life-cycle plan for rolling out individual initiatives
  • Defining effective business views of information.  What presentation formats support rapid internalization and understanding?  What are the dimensions of the data?
  • Analysing the frequency of data access that is required by all users, including aggregate and detail-level information
  • Identifying the sources of information
  • Auditing current technology tools now used to generate business information and identifying areas for increased efficiency

The Aberdeen Group research, on business intelligence, (Henderson, Santiago;, 2014) reveals the magnitude of the challenges faced when managing business data, analysis, and reporting:

  • 46% of businesses realise that too little data is used for business analysis
  • 77% of managers are not notified when important changes affect their business
  • It takes 11.5 days, on average, for managers to be notified of events happening that affect their business

Business intelligence also requires access by all levels of a business and not just the upper levels.  Much more complex tools have become available in recent times that help speed (at their most basic level) information across all appropriate levels of a company to foster collaboration and inform decision making.  BI as an analysis tool must be made available to users in a dashboard/ intuitive web interface as organised reports in self-service fashion with relevant tools to help users set up and select data that applies to business processes related to their roles.  So, also for BI and decision making, to allow the creation of key performance indicators that are displayed on a dashboard to show relevant information for business processes in a user’s area from which they are empowered to take decisions.  Functions like drill-downs, pulling of other data sources into graphs, maps or gauges, in real-time, should present the relevant analytic information to a user.  Centralised information allows users to collaborate on a single version of the truth with aids like data visualisation, using consistent up-to-date information, of a high quality, even available on mobile platforms.

There are several reasons why BI should be considered for reporting (Richards Foreman, 2011) but mainly because a BI component provides on-screen reports where columns and rows are manipulated, scaled, and outliers removed to generally work out what should be displayed.  Many BI component (application) vendors would provide BI content, e.g. standard reports, configured cubes, hierarchies and calculations that creating reports becomes a drag-and-drop effort.  Access allows the execution of these reports on-demand on current data or to run custom reports for other periods of data.  Because these BI reports are flexible, new columns and elements can be readily added or tweaked and drill-down functions allow successive investigations on current conclusions without effort.  Visualising the data and the ability to change the report aspects like switching between a tabular and graphical view or put year over year on the same graph to track seasonality or adding margins to revenue graphs, change periods, eliminate columns or consolidate data from various systems.  The ERP BI component should let data be used to discover trends, outliers, correlations, and anomalies, create alerts, and share data discoveries (collaboration).  For data to be valuable to a business it needs to be high quality, accessible, usable, and intelligent.  By integrating with the ERP system, the BI solution has access to such data and by employing dashboards and other data visualisation techniques the data becomes usable to the enterprise.  Self-service and mobile access ensure that data is accessible and a good BI engine turns complex data into business intelligence.

1.1.                        ERP, BI and CPM

An ERP system with a BI complement is the most comprehensive answer to corporate performance management (CPM) and is usually part of the overall CPM solution that cuts across all facets of an organisation (Girardi, Joni;, 2014).  CPM systems are built over the platform of ERP and BI and provides a bi-directional integration of strategy, operational and tactical business process metrics where strategy is broken down into operational targets and the execution is monitored and adjusted to achieve the set targets.  CPM makes the drive for performance the responsibility of each person in the company and builds on a number of methodologies and system solutions to achieve it.  However, CPM is not just about technology.  It involves processes, methodologies, metrics, and technology that are used to monitor, measure, and manage a business.  BI and analysis are used to understand and exploit what metrics and key performance indicators (KPI) are relevant to the business.  Not having decision support information that is relevant to the business risks CPM as it probably won’t suit the company’s needs.

The approach to CPM, based on the principle of predictability, visibility, accountability, and confidence emanating in the eyes of stakeholders and regulators is comprised of (Turbo Charging ERP with BI and CPM, 2014):

  • Enterprise risk management that requires predictive risk analysis capability
  • More stringent corporate governance to meet legislation accountability
  • Formation of executable strategy
  • Goals and rewards linked to strategy
  • Becoming an agile and real-time enterprise
  • Management process to improve beyond ERP

ERP is generally not a substitute for BI or CPM solutions (BDO Solutions, 2014) but many ERP vendors and ERP component vendors are providing business intelligence capabilities in their suites.  For example the cloud ERP system NETSUITE (NETSUITE, 2014) provides business intelligence built-in with their ERP offering, providing real-time dashboards, reporting, and analysis across all the integrated processes within the software suite.  Similarly Microsoft Dynamics AX, through various third party vendors with whom they have partnered, like ZAP or TARGIT, are providing bolt-on business intelligence capabilities.

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