Enterprise Performance Management

I N D U S T RY O U T L O O K

A P R I L 2 0 1 3

Enterprise Performance

Management

I N D U S T R Y O U T L O O K 2 0 1 3 : E N T E R P R I S E P E R F O R M A N C E M A N A G E M E N T

2 APRIL 2013

Business today is moving at light speed. At the same time, organizations are

governed by stricter regulations requiring more stringent compliance. This

creates a demand for more informed decision-making and faster turnaround

times in an environment of greatly increased risk.

For that reason, Chief Financial Officers these days are expected to take on more than

their traditional share of responsibility and accountability in the corporate hierarchy. Over

and above their traditional roles in finance and transaction processing, CFOs are now being

looked to as enterprise change agents and advisors to top management.

To aid in these added responsibilities, CFOs need standardized, enterprisewide data to

make more accurate and faster decisions. Technology — the right kind of technology — can

help. The spreadsheet, the traditional tool still widely used in offices of finance the world

over, is clearly narrow in focus and severely limited in functionality. ERP systems are effec-

tive but, in terms of data consolidation, unwieldy and incomplete.

This puts a spotlight on Enterprise Performance Management (EPM) applications and

processes. EPM offers the promise of effective information management, performance

measurement and business optimization. CFOs can leverage EPM to standardize and opti-

mize their organizations from the inside out, and at the same time help differentiate their

organizations from their competitors.

CFOs are the ones who need to drive the adoption of EPM processes and technology. And

many are beginning to realize that. In a survey last year, research firm Gartner found that

nearly two-thirds of CFOs were planning upgrades to their business intelligence, analytics

and performance management technologies.1

PRESSURE ZONES

CFOs are under increasing pressure in specific financial areas. One of the many critical

ones is the financial close. Due to the global, round-the-clock nature of business today,

there is an increasing demand for shorter, error-free close periods. In fact, “The Data

Directive,” Economist Intelligence Unit survey, 2013, commissioned by Wipro Technolo-

gies, found that improvement in financial close management was rated among the top

two process areas for which CFOs say data creates a clear positive difference.2

Again, in a recent survey of CFOs regarding the financial close process, Ventana

Research, a research and advisory firm, found that completing the accounting cycle

quickly and accurately is a good measure of efficiency — and more. “Companies that

Chief financial officers must address a growing list of modern business imperatives, and EPM can help.

1. Top 10 Findings From Gartner’s Financial Executives International CFO Technology Study,” John E. Van Decker, Gartner, May 16, 2012. http://www.gartner.com/id=2018115

2 “The Data Directive: How data is driving corporate strategy — and what still lies ahead.” Economist intelligence unit survey, 2013, commissioned by Wipro

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take six days or fewer after the end of the period to close their monthly, quarterly or

semiannual accounts demonstrate a basic level of effectiveness that those that take

longer do not,” according to Robert Kugel, senior VP of research for Ventana Research.

Unfortunately, that kind of financial performance is starting to lag. According to Kugel,

“companies in general take longer to close today than they did five years ago.”3

Another critical area for CFOs is statutory reporting. Due to burgeoning regulatory and

compliance requirements, there are far greater demands for organizational transpar-

ency. Those demands — as well as the difficulty in addressing them — increase in scope

depending on the size of the organization, its business model and its global footprint.

However, such transparency can be facilitated through standardized compliance report-

ing methods deployed throughout an organization.

A third area of increasing importance is the planning, budgeting and forecasting

process. Due to the dynamic nature of business, and the need for agile business models,

there are greater demands for flexible budgeting and planning capabilities, incorporat-

ing both short-term and long-term driver-based financial planning. Such pinpointed yet

flexible budgeting requires tightly integrated financial and operational planning models.

EPM technology and processes are designed to address each of these areas of impor-

tance. Organizations that have older or under-performing EPM systems will benefit

from modernizing and optimizing that technology and those processes to target today’s

emerging challenges.

BEYOND THE SPREADSHEET

Most CFOs realize they need more than spreadsheets to handle today’s multifaceted

business requirements. Yet, there is still a great deal of inertia in connection with

upgrading technology and its inherent potential for disruption.

“An over-reliance on Excel is an obvious problem that a lot of companies create for

themselves,” says Tanoop Gupta, General Manager and Global Head, Enterprise Per-

formance Management for Wipro Technologies. That’s because moving beyond the

spreadsheet may involve upsetting traditional, deeply ingrained, dyed-in-the-wool

financial processes. “Overcoming that over-reliance requires a decision that will affect

not only how they use technology, but also some of the processes that are part of their

planning, budgeting and forecasting.”

The advantages offered by EPM applications and processes offset the potential for

business disruption. At the same time, that disruption itself may be one of the biggest

advantages of EPM.

For instance, EPM can help CFOs in their efforts toward faster and more efficient

financial closures through standardized financial data and data management processes

within organizations, including their subsidiaries. Integration with ERP systems helps

with access to financial and nonfinancial data, including details of transactions, and

Improvement in financial close management was rated among the top two process areas for which CFOs say data creates a clear positive difference.

— “The Data Directive,” Economist Intelligence Unit survey, 2013, commissioned by Wipro Technologies

3. “The Financial Close Measures CFO Effectiveness,” Ventana Research, July 2012. http://robertkugel.ventanaresearch.com/2012/07/02/the-financial-close-measures-cfo-effectiveness/

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end-user-oriented workflow technology helps facilitate efficient data delivery.

Implementing EPM not only aids in collecting and consolidating standardized data,

but also helps organizations improve the way they go about their consolidations. “A

typical EPM engagement in financial consolidation will address the business processes

in addition to the technical implementation,” says Wipro’s Gupta. “It also brings up

opportunities for improving these business processes, not just of optimizing them in

their current setting, and that makes it a far more efficient financial close.”

EPM can help CFOs in the area of statutory reporting, by providing a sophisticated

level of governance, visibility and transparency into the financial close and reporting

cycle, enabling CFOs to be confident in the numbers they report to stakeholders. EPM

technology supports and incorporates reporting standards such as IFRS and XBRL.

By identifying the correct metrics to enable driver-based planning models, EPM helps with

establishing effective and efficient planning, budgeting and forecasting activities. EPM also

provides much-needed audit trails — a feature greatly appreciated by finance executives.

Indeed, EPM allows CFOs to approach planning proactively. “Any planning,” says Prem

Swarup, General Manager and Global Head, Business Intelligence for Wipro Technologies.

“It could be as simple as travel and expenses, or it could be their revenue plan, sales

plan, or workforce plan,” he says. “All of that requires certain budgeting, certain plan-

ning, and some kind of a forecasting, which can be automated with technology tools.”

THE MULTINATIONAL CHALLENGE

A steady stream of mergers and acquisitions shape — and reshape — the outlines of the

modern business environment. And that process shows no signs of abating. Experts say

to look for cash-rich American companies to boost M&A activities this year.4

A merger or acquisition presents an immediate challenge in terms of financial recon-

ciliation. There is a certain time period provided by statutory agencies within which the

merged entity needs to submit its regulatory reporting. Two sets of regulatory reports

have to be consolidated and a single, reconciled statutory report needs to be submitted.

But the M&A challenges don’t end there. Financial systems, processes and tools need

to be evaluated, optimized and integrated to facilitate the smooth flow of financial data

from the new entity to the acquiring organization as quickly and effectively as possible.

Those challenges are even more pronounced when it comes to multinational corpo-

rations. Consolidations across different countries are arduous. Budgeting in multiple

currencies and then translating that data into a single currency for planning and analysis

purposes can be time-intensive. And when it comes to statutory requirements, to be

in compliance with foreign regulations regarding, for example, currency translations,

is a daunting process that if not handled correctly can result in a worst-case scenario

of having to restate financial results. Foreign tax laws are emerging as an area that will

require strict oversight and considerable effort.

4.“PwC Says Fundamentals Are Strong for U.S. Mergers and Acquisitions Activity in 2013,” PwC, December 2012. http://www.pwc.com/us/en/press-releases/2012/pwc-mergers-acquisitions-outlook-in-2013-press-releases.jhtml

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EPM technology and processes address these challenges. The complicated process

of intercompany eliminations is one striking example. “If you take massive corpora-

tions and you view the number of these intercompany transactions, eliminating each

one of those transactions is absolutely vital, otherwise it may result in incorrect num-

bers being submitted to, for example, the SEC,” says Wipro’s Gupta. “And how that is

addressed and how that is handled both from a business process standpoint and from a

technical implementation standpoint is another key benefit EPM offers organizations.”

GREATER RESPONSIBILITIES

CFOs are also moving up the organizational responsibility chain, being looked at to

provide leadership in areas other than those traditionally assigned to the financial func-

tion, such as strategic planning, execution and performance measurement. For instance,

there is an increasing need to identify and execute viable and effective strategic plans to

enhance an organization’s business agility, competitive posture and, ultimately, value.

The financial function is in a position to interpret and institutionalize those mea-

sures and actions. EPM technology and processes can help in that effort by enabling

CFOs to develop realistic strategic plans, measure performance against goals, and

monitor the progress of those actions on a regular basis, and then communicate this

information across their enterprise.

CFOs are also in a strong position to help accomplish two compelling, present-day

business imperatives: maximize profitability and enhance cost management. EPM

can help CFOs understand cost and profitability beyond the usual lines of business,

such as product lines, service areas and customer segments.

SUMMARY

Financial processes are driven by data, and the quality of that data is of the utmost

importance, especially as it relates to the changing role of the finance function in

most organizations.

EPM technology and processes, in conjunction with business intelligence efforts,

can help CFOs maintain a high level of quality regarding their financial data by

pointing out where that quality level falls short. According to Wipro’s Gupta, “When

it comes to the data side, where BI gets involved, it is a rare EPM engagement that

does not reveal underlying data issues.”

Business intelligence, analytics and information management technologies are

becoming more and more of a priority for today’s CFOs because they address many

of the areas where financial operations are most vulnerable, and the areas where

CFOs increasingly need to focus to help advance their organizations. Savvy CFOs

need to champion initiatives to transform their finance functions and enhance their

organizations by aligning spending and organizational priorities through the use of

these powerful technologies and processes.

“An over-reliance on Excel is an obvious problem that a lot of companies create for themselves.”

—Tanoop Gupta, General Manager and Global Head, Enterprise Performance Management, Wipro Technologies

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