Juliette Welch: Okay everyone, thanks for joining us today for our call: Enterprise Performance Management, leveraging of reporting an analytics tool to fully realize the potential of ERP.
Shawn Windle is going to be our speaker for today. Shawn is the Founder and Managing Principal of ERP Advisors Group based here in Denver, Colorado.
ERP Advisors Group is one of the country's top independent enterprise software advisory firms. ERP Advisors Group advises mid to large sized businesses on selecting and implementing business applications from enterprise resource planning, customer relationship management, human capital management, business intelligence, and other enterprise applications which equate to millions of dollars in software deals each year across many industries.
There are only a few people in the world with the practical experience that Shawn has gained with helping hundreds of clients across many industries with selecting and implementing a wide variety of enterprise software solutions.
On today's call, Shawn will talk to you about using your ERP to its fullest potential as it relates to enterprise performance management and he will share with you some practical insights about getting the most from your ERP reporting and analytics tools.
Let me introduce Shawn Windle.
Shawn Windle: Thank you, Juliette. And hopefully sound-wise we are good here. Just going to do a little change here with the phone so we should be good.
So, thanks for joining us today.
This is a great topic. The enterprise performance management and how it relates back to ERP solutions. It's an area that I think has a lot of confusion in the marketplace.
So, what I'm going to do today on the call here, probably just 20 minutes or so it's — as you all know if you've joined us for some of these calls in the past, we like these trusted advisor calls to be very succinct and very to the point with some really key topics that we're seeing across a lot of clients and folks that we're talking to in the marketplace.
So, as Juliette said, today we're going to talk about a class of software that's called enterprise performance management and specifically on how an enterprise resource planning application can be more utilized with an EPM tool that sits on top of your ERP.
And I hate to use all the acronyms, but you're definitely going to hear them.
What I want to start with is I want to talk about why companies really look to an ERP and when I say companies, I do mean that generically — it could be a nonprofit, could be a government agency — we work with everybody.
What ends up driving an enterprise resource planning decision very often is the individuals — the executive team needs more information about the business that they're working in, and they're not getting it with the existing tools.
So, if you think about an organization that's been in existence for a while, it's probably grown, it's expanded over the years, there's more business processes that are happening that are outside of the executives’ heads — basically, they're in other people's minds. Other people are doing the work.
And so, the business gets a little bit outside of what an individual who's running an operation or an area or department can really control. Because there are multiple people that are doing things that maybe they used to do before.
We actually call these business blind spots where activities are occurring and the people who need to know what's happening and can do something about it don't know because other people are doing it. They don't even know there may be a problem.
So, with those business bind spots, a lot of clients will come to us and say, look, we've got to fix this. We've got to know where our manufacturing line is. We need to know where sales is. We need to know our employee on-boarding. We really need to understand the inventory.
I mean it really goes around the entire organization. We need to know our grants and our funding sources and how we're actually producing compared to the budgets that our granters have given us.
Even for some of the government agencies with the specific emphasis even on fire departments, we need to know what's happening with our patient care reporting so we can ensure our quality is in on our medics and ensure that there's any other kinds of calls and services that we can provide to our public that we're doing that.
Those are really good decisions actually to look at a new enterprise resource planning application or software that helps automate processes.
So, then we go through the process of helping clients to determine what software can help and getting solutions in place that are really going to solve their business needs.
That's the key part is what apps are really going to solve the needs that the clients actually have to solve — the problems that they're really experiencing?
So, in that instance, when we really start looking at business problems, ERP is really made for transaction processing.
Meaning, in a government agency, if you look at the funding that a school district is getting from different sources, they need to track those resources, that income that comes into the organization. It needs to be understood. They need to make sure they're collecting the money and that they're reporting it back to their constituents correctly.
From a professional services firm, a professional services firm needs to make sure that they're tracking their time correctly, and that they're billing their customers correctly and that they're meeting the deliverables and the expectations that they set with their customers.
So, an ERP is basically a system that can manage those transactions and make sure that from beginning to end those processes are automated as much as possible and that the work gets done.
Does the system do the work? Not necessarily.
But people who do the work use the system to say, here's the sales order that I just created, now send that sales order to the customer. Professional services — I created all these deliverables and now it's — I spent four hours on that. Put that into the system.
So, we're automating billing processes, automating throughput processes.
And that's great. That's a big step. it's almost if you look at it like remediation even because oftentimes clients have a lot of manual processes that they need to get automated.
That is what ERP does really well. What it doesn't do very well is honestly reporting and analytics.
Now most applications, whether it's Epicor, NetSuite, or SAP ByDesign, or SAP Business One, you name it — Deltek — we've worked with so many efforts with hundreds and hundreds of applications.
They all come with hundreds of standard or canned — you hear the phrase canned like out of a can or out of the box reports — so it could be something as simple as accounts receivable outstanding or accounts payable of vendor bills that we have to pay that we haven't paid yet. Could be an income statement. Basic reports, right?
Every app has the ability to create those kinds of reports and then typically they give you the ability to do analytics on top of that. So, who are our most profitable or who are we selling the most revenue to? Which customers are top selling customers? Which vendors are we spending the most money with?
Those are very basic reporting and analytics tools that you can get out of an ERP. And you will get that; there's no doubt about it. Every app has those reports and you're set and as long as well as hundreds of other reports similar to that.
But inevitably, when a client implements the software, they look at the reports and they want to tweak them a little bit, because maybe their business is a little bit different, but then they want more.
They want to understand the performance of the enterprise. They don't want to just understand what transactions took place but they want to understand something like the profitability of a customer and this is where we start getting into the enterprise performance management world and out of the enterprise resource planning world.
So, if you look at something like profitability, you look at the metric called profitability. You have to know the revenue — how much was sold or how much revenue was incurred for let's say a customer. Now, it could also be a geography. It could be a specific location. It could be any other factor that we want to measure profitability by. It could be a division of a company or organization.
But we need to know how much money came in. And we need to know how much money went out. And we also need to know how much other costs we should allocate to that customer let's say to then come up with profitability.
Now the sales side or the revenue side — yeah, that's in the ERP. It better be. We shouldn't be selling anything to customers or bringing in revenue for a nonprofit or grants that isn't accounted for in the accounting system — in the financial system. So that's usually pretty good to come. You can come up with that date. The direct costs related to servicing that customer and that can be a little bit more tricky.
A wholesale distributor will know, oh well, we sold these parts — these items — to our customer. And I know the costs of those parts based off of where these items based off of our costing methods, which FIFO/LIFO weighted average well we don't want to get into that right now with more accounting terms. And I know the difference between what I sold for and what I bought it for and that's the profit.
That's easy in the wholesale distribution business, but for everybody else, it's a very complex process to actually track the specific costs that go with the specific products or services that the customer received.
So, the ERP has that cost information, but what it may not have is the algorithm or the allocation to take a cost and allocate it across a customer based off some methodology.
And see that's what an EPM will do for you. And EPM isn't just a transaction processing system that then we can report out the transactions. We can actually do really complex logic and allocation methods. And do things that it's almost more of a — if you think about dashboards and gauges and the display of information in a more really interesting and useful in rich way, now we start getting into the EPM world.
So, that revenue minus cost equals a gross profit. That calculation is best done in an enterprise performance management tool.
So, now that you kind of understand how an ERP and EPM are different, I want to talk about how specifically companies are using EPMs and some of the really good uses that we've seen and how it's really changing their organization.
So, the first example that I want to bring up is actually a nonprofit that for years has relied on their ERP for more of this kind of reporting.
And what that really meant was they relied on Excel and then a really good Excel jockey we call him, who's usually a senior business analyst or financial analyst — it's not really an accountant, but maybe they have an accounting background and they're not really a pure businessperson and they had some technology background and bring together this trifecta of financial accounting technology and some business process.
You get that person and then you just dump data out of the ERP which is basically transaction data like we talked about. And then this one individual creates spreadsheets that pull data — you see a lot of the lookups you see a lot of pivot tables — when I hear the words be vlookups and pivot tables, I automatically think this is a candidate for an EPM.
Because you have an individual who's putting all this together and then they produce these reports and the reports usually go to the senior executives of the organization because those are the reports that they want to see — how much revenue is really being generated by different kinds of dimensions that the ERP can't do? And they're able to do that in a spreadsheet.
And so, they've really been able to understand their organization a lot better by putting in the spreadsheets.
But then our client realized — we're working for the office of the CFO — he realized that he did have a bit of a risk in that this this core business data and performance data — hhe’s reporting that back to his board of directors — this is a national organization — it's been in business for over 100 years and its board of directors are individuals from Fortune 50 companies, usually CFO's.
So, they're very aware of risk in financial reporting. They're signing their names on the dotted line confirming the financial performance of their organizations, and they expect the same of this particular organization.
And so, the CFO spotted, wow, we're doing all this in Excel and Excel breaks. Excel is like a good friend that makes a lot of promises to you, and usually they do pretty good, but sometimes they don't and then they forget to pick up your kids a couple times and it's a whole nightmare and you're like, oh my God, what's going on?
Like I know people on the call, you've had an Excel spreadsheet bust or it just gets corrupted or Microsoft Excel just decides that it's not going to open and you lose hours and hours of work.
So, there's some instability that you get with Excel because of the nature of it being an office app versus more of a relational database — like a database driven application, it's a different architecture than that.
So, our client realized, wow, we're doing all this really key reporting in Excel, and it's dangerous. Excel breaks. Excel doesn't work sometimes.
So, that was the first thing. But then he also realized that the individual who is doing the Excel work himself — he was very dependent on this individual who's a good guy and knew exactly what he was doing.
It built up this this like mounds of all over the place of Excel. And so, then they became dependent on this one individual.
And then as the organization was shifting into the future, the third aspect that he looked at was going forward I need my business unit owners.
The line of business managers, the general managers for the different business areas of their operation. They really needed more self-service. They need to be able to go out and get the data that they need. They need to be able to slice it and dice it and show it however they want to and not be dependent on my key guy or on Excel to do things that Excel really wasn't meant to do.
So, we helped them through a selection process and ended up choosing an application called Adaptive Insights, which is a very powerful enterprise performance management tool. You also will hear it called Corporate Performance Management.
And it allows the ability to do financial planning and analysis — kind of typical accounting. Where's our rolling budget? What are we looking at for our forecast? But then this other kinds of analytics and reporting on the business that was really important for their board of directors to see.
So, that's why this particular organization did go through the effort of selecting an EPM, and they had actually even come to us and said we think we need a new ERP. We want you to take a look and confirm it and then tell us and help us through selection process.
And we said you know what, you really don't. Your transaction processing is okay. But what you really need is more of this reporting and analytics, and so that's why we ended up looking at the EPM solutions from there.
So, with all of that said, you understand the difference between ERP and EPM now.
As well, you have an idea of why a company would select an EPM.
Let me give you just a few key tips here on the marketplace and what we see in this space of enterprise performance management. Orient you a little bit, because chances are you've been online, you've looked at some of these tools, and we've even done some demos so far.
So, let me just give you a little bit of orientation around the market for enterprise performance management solutions.
So, much like all the rest of the software applications that we help clients in across the board, whether it's financial, customer relationship management, human capital management, business intelligence, supply chain planning, there's all these different categories of software and EPM is one of those categories.
You can really dissect the market into three different buckets. You have enterprise class solutions at the top. Then on the bottom you have an entry point where the software is very lightweight and it's not really built for really heavy use cases but for some lightweight usage. And then you have a midsize category.
So, on the enterprise level EPM solutions, you'll see solutions like from Oracle has had solutions, as has SAP, there's Cognos, and there's Hyperion that's sitting out there. IBM has IBM Cognos, I think that's where Cognos sits these days — I should check because it does tend to move.
But those are solutions that are maybe a quarter of a million dollars just to get into the software. And then there's implementation and delivery on top of that.
So those are higher end solutions for enterprise scale companies that are looking at pretty big implementations and they have a lot of data. And there's a lot of complexities, and they want a lot of tools to give to their users to their business analysts, to their subject matter experts, to really kind of slice and dice through the application.
You may even hear this concept of an online analytical processing application, an OLAP or a cube, where you take the concept of Excel and then you look at a pivot table where you just go from columns in Excel to a pivot table has multiple columns in multiple dimensions X Y and Z coordinates where you basically get the idea of a cube. And then you go into these enterprise applications and you can really slice and dice and move through those cubes and learn a lot about an organization that way.
But like I said, it takes a lot of money to set up a cube and understand the business users’ requirements and the technology of the run that can be can be pretty big, so that's kind of the enterprise size.
Then the mid-size applications — and oh I'm sorry like I said on the enterprise side, Hyperion, Cognos are probably the two biggest applications and most prevalent in that space.
And then you have a midsize EPM again, corporate performance management, we kind of use those phrases interchangeably.
And these are tools that are less costly. They're usually software as a service, so you don't have to worry about the technology infrastructure to run them, and they may even come with prebuilt integrations into a specific ERP.
So, you might have tools that pop into SAP ByDesign automatically or the integrations already built and nothing’s automatic — into a NetSuite into some of the other groups that are in that mid-size area.
So, those are solutions that are really — they're usually pretty user-friendly. They're built — maybe even have some built in tools that and some analytics around things like customer profitability, product profitability, maybe even looking at the costing side and getting into more detail out of the box.
So, those are nice tools to also look at and some examples there like I said are like an Adaptive Insights, there's definitely host analytics.
There's actually a whole slew of applications you can just go online and type in Adaptive Insights competitors and you'll see how many there are. There's a ton.
Oracle has a tool — it's called like financial planning for the cloud I think it is. It's a strange acronym. I can't remember the acronym off hand, but it plays in that mid-level area and it's basically Hyperion kind of brought down for a mid-sized company in terms of price and its functionality.
But those tools are pretty strong. We've had a lot of successes with those applications with our clients.
And then we have lower end tools that are a little bit more lightweight like I said and maybe don't have as much capability as certainly the enterprise or the lower end, but they're still fairly strong tools and they can get you going in the right direction.
We see those for the use case for that is where maybe somebody — a client really just needs some lightweight financial planning and analysis. Like maybe they want to do some forecasting, maybe some really lightweight budgeting as well. So, those kinds of tools are a little bit more cost effective as well.
And there's a couple that you can look at. There's an excel for apps which actually works out as a lower end tool.
There's some budgeting tools as well that if you go online and you can even look at Capterra is a site we use sometimes and you'll see a whole list of applications. The ones that you haven't heard of are usually the smaller end tools.
It's a funny way to do it, but there's really not a lot of options for EPM tools that are very prevalent in the marketplace.
So if you hear that MicroStrategy adaptive host — there's just a bunch of tools in that midsize, but then all the rest of the smaller ones, you can get things even like an EPM live and I'm just actually kind of looking online for myself to see what's out here because there's a lot of tools that come into the marketplace that we haven't even heard of, like Capterra has Board and Cysteine and Jedox performance management.
So, there's a lot of tools in the CPM space and really try to categorize them if you're looking at buying one of these tools by that big, medium, and low and see where they fit in and then that's also going to help you decide on the pricing — on what you're willing to pay for and give you a little bit more orientation on what you're looking at in the marketplace.
And of course, definitely if you're looking at these kinds of tools, give us a call. We'd love to just get you going in the right direction, if not help you through that process.
But at the end of the day, EPM is almost honestly like between us the reason why companies buy ERP because they want — the executives — want and need that visibility into their business. They know they have those business blind spots.
And they want to resolve those business blind spots. But what they often don't realize is okay, what we have to do first is get all the transaction processing automated as much as we can, get our business data in one system if not two — maybe three — but get it all really well codified and understood.
And then you can layer an EPM on top. And that's really what our clients really want at the end of the day.
So, when we're going through and advising clients, we'll tell them that here's the road map, you have to get your transaction set up. We've got to get the data solid and then we'll get into enterprise performance management.
So, if you have a good, solid ERP today and you have good transaction reporting that you can do, layering on an EPM will really help you out a lot.
So, I'll turn it back to Juliette and thanks for your time.
Juliette: Great, thank you, Shawn. A lot of great information as always.
Thank you again everyone for joining us for today's call. As Shawn said, please let us know if we can answer any questions you have.
Our next phone call or conference call is February 13th: How ERP Can Help with Mergers and Acquisitions. We will discuss the three most important factors in evaluating our merger software and data and how that can be a make or break point for transitioning into a new operating entity. Please go to our website erpadvisorsgroup.com for more details and to register.
Thank you again.
