Four Reasons to Avoid CPM Solutions from Your ERP Vendor
Today, most ERP vendors offer some kind of CPM functionality as part of the ERP platform. Their premise is that CPM is merely an extension of the ERP system. This premise is wrong. ERP systems are transactional in nature, whereas CPM systems are management tools, and thus work very differently from each other. Companies that try to combine ERP and CPM inevitably do a disservice to both and give up key advantages in the process. Here are four reasons why modern finance organizations should NOT buy a CPM solution from their ERP vendor:
The Wedge – Good for Salads; Bad for Software
Having spent over a decade working closely with one big ERP vendor, let me give you some insight into how they think. Everything revolves around the ERP system. To paraphrase Revelation, ERP is the alpha and the omega, the beginning and the end. This philosophy permeates not only product development, but also sales and marketing. Internally, ERP vendors refer to all non-core ERP solutions (such as CPM) as wedge offerings. As in, “we can use CPM as a wedge to sell more ERP licenses.” In other words, they view CPM solutions as a means to an end. That end is to serve the needs of the ERP vendor, rather than provide a true CPM solution to the customer. In these cases, a wedge offering is deemed successful only if it leads to an ERP sale.
Heterogeneous Environments are the Norm
ERP vendors often tout their CPM functionality in terms of how it works with their own general ledger system. For example, they might demonstrate drill-to-detail at the GL transaction level as a benefit of “integrated” CPM and ERP functionality. However, ERP-based CPM solutions start to break down when they are asked to perform in a heterogeneous environment. The most effective CPM deployments leverage inputs from a multitude of systems, including different ERP platforms, sub-ledger systems, and operational systems. The advantage of standalone CPM becomes even more dramatic when an organization is acquisitive. Rather than spending vast sums of money to migrate acquired companies on to the parent company’s GL platform (the ERP vendor strategy), companies that run modern CPM systems can leave existing systems in place. The result is a faster, more cost-effective way to integrate acquired entities.
Acquired Technologies vs. Purpose-Built
Nearly all ERP-based CPM solutions are derived from acquired technologies. ERP vendors, like Oracle and SAP, have spent billions of dollars to buy first-generation CPM solutions and then integrate them into their ERP platforms. However, the DNA of these systems has always been different than that of the ERP, requiring additional code and development to make the tools work together. In the case of one ERP vendor, they had to create a whole other product license (which customers paid for) just to manage synchronization of metadata between these acquired products. Independent CPM solutions are purpose-built from the ground up and don’t have to simulate integration with an ERP platform that was built by someone else. Also, today’s second-generation CPM vendors were purpose-built for the Cloud, using modern technologies that make first-generation CPM systems look quaint.
One final note about ERP vendors: they love having leverage over customers. The promise of ERP (going back to the 1990s) was that large, integrated systems were good for customers. Less integration, more productivity. While this has proven mostly true, the unintended consequence is that ERP vendors have built walled gardens in which customers can find themselves trapped. Unplugging a big ERP system is simply not feasible in most cases, which puts the ERP vendor in a position of power and leads to poor customer service and support. Customers should be thinking about diversifying their vendor footprint, looking at best-of-breed solutions, and building their own gardens which they control. A modern CPM system is a great place to start given the strong time-to-value proposition that can be achieved within the existing ERP environment.
Caution: ERP vendors will often “throw in” CPM as part of an ERP upgrade to keep independent CPM vendors out of their existing customer base. Remember, cost and value are two different things. A year or two from now, success will be measured by delivering (or exceeding) the expected value. The good news is that customers are beginning to catch on: in a recent survey, 70% of companies stated that they preferred best-of-breed, independent CPM solutions vs. those offered by ERP vendors.
Bottom line, there are several excellent second-generation CPM platforms on the market today which run circles around the first-gen, acquired products offered by legacy ERP vendors. And while ERP vendors continue to pitch these offerings as ‘integrated’ solutions, customers should be aware that these offerings are no longer best-in-class. Customers are better served by looking at the current generation of modern, unified CPM solutions in today’s marketplace.
To learn more about next generation CPM, visit www.onestreamsoftware.com
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