SAP Analytics
Thought Leadership

The COVID-19 pandemic hit just like the children’s game of musical chairs. As the music of our economy stopped, if you were not near a safe place to sit, you were caught out in the open…finding yourself at risk. Similarly, your EPM solution was likely being enhanced, and upgraded on a certain path before the virus came into being. Any EPM strategy not ready for intensified operations learned the hidden weaknesses of their solution.

To make you feel better, almost no EPM solution was ready for this.

Whatever the state was of your EPM solution, that is the tool you had to wield as you navigated your organization through  the impacts of the virus. As we said in part one of this blog series, the jarring impact to the market doesn’t specifically need to be the virus, it could be anything. Just some unpredictable market influence that won’t wait for long running processes.

"The Chinese use two brush strokes to write the word 'crisis. ' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger--but recognize the opportunity." 

John F. Kennedy, US President 

It's the sort of blockbuster movie plot you'd expect to see while sitting in the dark confines of a movie theater, booming audio and a gasping crowd. A thrilling plot has your eyes riveted to the screen, where the dramatic tension is only broken when you run out of popcorn or the movie ends. In that scenario, you can return to your "real life" in a little over an hour, with no discernible life altering impact. It is now clear this COVID-19 provocateur is no movie; this virus will not go away so quietly without leaving an indelible impact on the world.  It most certainly will impact how you and the leadership team rely on your EPM software and Enterprise Performance Management in general. 

For this article, we'll define EPM software as Gartner does as dealing with “the process of monitoring performance across the enterprise with the goal of improving business performance.”  Other activities we'll include under the Enterprise Performance Management umbrella are FP&A modeling, budgeting, forecasting, reporting, and consolidation.  Keep reading to find out how our plot unfolds. You'll learn how to avoid high latency, Excel centric planning.  You'll also learn 3 stages of recovery and the leadership principles needed to accelerate  your Enterprise Performance Management and remodeling during COVID-19. 

We have all overcome mistakes in life, using the rearview mirror to observe how easy it would have been to sidestep the pitfall, commenting, “If only I knew then what I know now.” This thought crosses my mind almost daily.

What do you do when you feel this way about the EPM process, BPC or your consultants? Do you ever wonder how they became experts, or how qualified they truly are? How do they define best practice? Recently, I worked with a customer who started their BPC journey with an early version of BPC for NetWeaver. They sought out highly talented consultants, assuming their talent and experience based on their reputation within the industry.

Two things are certain in life: death and taxes. An EPM user might add “struggling with EPM software” to the list of unavoidable challenges. In the case of taxes, one could (and absolutely should) hire an experienced tax services provider to craft a tax minimizing strategy. You will still pay taxes, but the difference between paying a lot, or a little, lies in the expertise of who you hire.

In the last article we looked at the definition and content of the EPM Maturity Model.

In this article we’ll look at how to gauge EPM Maturity and how to identify areas to improve. At the core of the Maturity Model is the definition of:

• Right Model
• Right Audience
• Right Time

Across these definitions we lay a scale that moves from low levels of maturity to high levels of maturity:

Organizations need to plan, measure and manage across Strategy, Operations and Finance. Isn’t that what Enterprise Performance Management (EPM) is all about? It seems like a simple formula. But what about if we change the question to ask what makes successful EPM and successful organizations? If we start with the definition that “Successful EPM drives organizations that dramatically outperform their competitors in terms of both financial and non-financial results” – this gives a very different perspective on the importance and value of EPM. It also means that you need to have a mechanism and framework to objectively review your EPM capabilities and relative maturity.

SAP BPC is a tool that can be customised to facilitate planning, budgeting and forecasting processes for different
 functional areas such as Revenue, Human Capital Management, Operating Expenses, and Capital Expenditure. In this blog we will talk about how to integrate these functional areas into one unified BPC reporting model, for fully integrated planning.

The different functional areas require different data structures and consequently we  will need to use a separate BPC model for each area. To give some common examples:

The Revenue model may, depending on the modelling requirements, need to have Product dimensionality in order to plan the sales volumes and calculate planned revenue according to the price by product, and a Customer dimension to plan sales and analyse the outstanding payments by customer or channel.

The Labour planning, or HCM model may need to include a role dimension, in order to plan the salary by role or grade, or an Employee dimension to enable planning by employee or job grade.

The Operating Expenses or OPEX model should enable the user to plan the expense related General Ledger accounts at the required level of detail, for example, by collecting the number of flights and hotel nights and using forecast unit costs to calculate travel expenses.

The Capital Expenditure or CAPEX model should include an asset dimension which will include the company’s asset list and allow the user to plan new asset purchases and the corresponding depreciation for the planning period.

You may have noticed in the news recently that many large multinationals have been the subject of some rather intense media and public scrutiny regarding the amount of tax they pay in certain countries.  As media pressure and public anger has escalated, governments and regulators have been compelled to take action to improve the visibility of where companies make their profits and where they pay their taxes to help ensure that they pay a fair share to the coffers of the national governments.

It had become obvious to governments that the underlying issues could not be addressed by unilateral regulation and instead need a cohesive joined up approach to tackle tax base erosion and profit shifting through transfer pricing arrangements between multinational subsidiaries.  The OECD in conjunction with the G20 countries devised an action plan which includes the need for greater levels of disclosure from multinational enterprises (MNEs) in relation to the countries where their economic activities occur and amounts of tax they pay in each jurisdiction.   This has resulted in the creation of the Country by Country (CbC) reporting standards by the OECD that are being implemented through the local tax governing bodies of all OECD members.

The OECD CbC regime requires the following reporting on a country by country basis;

Aggregate country wide information relating to the global allocation of

* Income;

* Taxes paid;

* and; other indicators of economic activity (stated capital, accumulated earnings, tangible assets, no of employees)

BPC has always been a flexible tool with many “hooks” through Excel and the database layer enabling all manner of customizations to increase usability to customers’ exact specifications. The risk of customizing is the potential of that customization being an impediment to an upgrade. One popular access point provided by SAP/OutlookSoft was the “MNU_Commands” hook.

We know that EPM (and specifically SAP BPC) implementations have the potential to be very profitable, more so than other IT projects like ERP implementations. But how do you prove that?

This blog takes a step by step approach to building a solid business case for a SAP BPC implementation. There are many intangible benefits to an EPM project which are difficult to put a value to, but we can set out all the costs and calculate a large part of the benefits. Even without adding in the intangible benefits, such as improved data quality, higher management efficiency and faster decision making, BPC projects can still be very profitable projects, so let’s go through the business case elements step by step.