For many financial directors, it would be ideal to join all the features of ERPs and EPMs in one single global solution. In sync, these solutions would better complement each other and allow for better decision-making. The future of EPM and ERP is in convergence.
Even though there are many different enterprise solutions on the market, Enterprise Resource Planning (ERP) and Enterprise Performance Management (EPM) software are two solutions that many companies in all sectors are contemplating for their activities .
Even though these two systems may appear to be similar, they have their own unique characteristics and functions. Likewise, they have different objective and advantages.
So that companies wonder: “Which is the most appropriate system? Can one forgo one of the two solutions or must they be associated? Are EPM and ERP destined to become one in the future?”
EPM, the intelligent tool par excellence
An EPM application often serves as a complement to a complete ERP platform. Whereas the ERP software optimizes operational data, an EPM provides management-level information on this data to support the following management processes: planning, forecasting, modelling. Moreover, the solution provides management-level tools such as advanced analyses or even data reporting.
It may be difficult to accurately understand the information present in the ERP, which is often raw data. With an EPM, it becomes much easier to understand, company-wide, the implications of the measures taken.
Generally, it’s the finance department pushing for the implementation of an EPM, primarily because this software can facilitate the appropriate allocation of resources.
It’s possible to rely on the data provided by the EPM to perform the following tasks:
• Create initial targets
• Define initial budgets
• Develop plans and forecasts
• Coordinate the organizational resource planning
• Reach decisions using financial and operational results
Organizations can then take decisions supported by simulation scenarios based on modelling and advanced EPM analyses.
The 3 major differences between
ERP and EPM
It’s a difficult choice which enterprise software to deploy. Three major differences between EPM and ERP must be taken into consideration:
The field of intervention
Whereas ERP is a management system allowing for an easy, integrated and reliable access to a the data of a company, EPM serves then more as support for decision-making by suggesting analyses that improve the understanding of the company’s data.
The complexity of the implementation
The implementation of an EMP solution is fast in general terms. Depending on the features a business needs and its deployment model, an ERP implementation can be a long one.
The scope of the report
An ERP solution can carry out a certain number of management and consolidation reporting. Users can, for instance, access data to create financial statements such as balance sheets, cashflow statements or income statements. As for EPM tools, financial managers can define initial objectives and coordinate the financial planning in the entire organization.
Toward an ERP and EPM enterprise convergence?
The issue for companies, and in particular for financial departments, is to find the tools to simplify as much as possible the accessibility and deep understanding of information in order to make the most adapted decisions for each situation.
Generally, companies start by using an accounting or ERP system to manage day-to-day transactions and use Excel® spreadsheets to manage EPM processes such as budgeting, forecasting, and financial reporting. However, as the business grows, spreadsheets become complex and at this point in time EPM applications can be perceived as an alternative. These solutions, indeed, make it possible to automate the feedback of large quantities of data and to avoid manual tasks or too time-consuming formulas on tables.
Since their inception, ERP and EPM systems have not been designed to always work together, as the two solutions serve different needs. Their designers are, however, now tending to develop a unified interface that makes it possible to converge ERP and EPM by creating a new digital and financial solution.
Not always the best adapted convergence
If for some companies ERP and EPM solutions can be perfectly merged, it is not necessarily the right choice for all organizations.
For Maxime Delhaye, the CFO of Cérelia, the convergence of ERP and EPM tools greatly facilitates change management linked to strong external growth. As he explains in an interview for the SAP France YouTube channel: “I limit the changes to the tool because finally, I only make one, that is, the transition to a new ERP system. We will say that in terms of change management, you only have one step to take. As soon as you are going to deploy your ERP to other business units or other geographical areas, you will make them easily fit into your reporting processes.”
As a counterpoint, in the same interview, Cédric Le Menn, CFO of Korian, points out what he fears in the total convergence of the tools: "It is certain that the fact of having a fully integrated tool for the chief financial officer is the Holy Grail, but today it's also a little bit my fear. That of being bound hand and foot vis-à-vis of a single publisher.” One can understand that such a great dependence can become a blocking point towards a company’s ERP/EPM fusion.
What vision for the future?
François Bourgeois, SAP France Finance & Risk Director, explains: “One can create a transactional ERP core and connect to it building blocks developed on identical or compatible technologies that can come from SAP or third-party publishers.”
In other words, EPMs then become modules that can be grafted onto the ERP without the need for heavy integration. “The market is also moving in the direction of integrating third-party publishers,” he notes, also responding to the ‘too much dependence on a single publisher’ concern.
In conclusion, filling the gap between ERP and EPM will open organizations up to a richer and more extensive integration. Unification of ERP and EPM is expected to improve decision-making and better align strategic needs across the whole enterprise. The convergence of the two systems will undoubtedly improve the relevance and efficiency of decision-making while potentially reducing the risks of overly long integrations and incompatibility of different data sources.
A key to helping businesses become more responsive. This is also the vision shared by the designers of these solutions who are developing their products in this direction.
By Jonathan Lascaux, co-founder of FiveForty°
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