The unprecedented turmoil in financial markets and the global economy, together with unbridled growth in regulation and compliance, is placing the finance function under increasing strain. In these circumstances, timely visibility of performance across the enterprise is critical to staying strategically aligned and competitive. But historic approaches to CPM have had limited success. In this new whitepaper, FSN’s managing editor, Gary Simon, considers how Tagetik, a new breed of CPM provider provides a clearly differentiated approach to meeting the more exacting needs of major multinationals with its deep heritage of financial expertise combined with a unified architecture and a passion for CPM.
CONTENTS
INTRODUCTION
The pressing need for CPM
HOW HAS THE SOFTWARE MARKET RESPONDED?
Best of Breed vendors
The ‘mega-vendors’
Pure-play Cloud vendors
SO WHAT IS REALLY NEEDED OF A CPM SOLUTION?
Breadth of applications
Common User interface
Shared metadata
Shared processes and collaboration
Scalability
Visibility
HOW DOES TAGETIK MEET THE CHALLENGE?
Financial specialization
Streamlining CPM processes
Cast iron Auditability and control
ERP agnostic
Finance owned and operated
Flexibility of deployment
PUTTING THE “PASSION” INTO PERFORMANCE
Customer relationships
SUMMARY
INTRODUCTION
It is no exaggeration to say that today’s multinational businesses face the most testing global economy for more than half a century and market volatility on an unprecedented and overwhelming scale. Take for example some of the conflicting economic data since the beginning of the year. In February, China recorded its largest trade deficit in at least a decade, as imports grew at twice the rate of exports, yet the US Federal Reserve upgraded its short-term outlook for US growth from "modest" to "moderate". At the same time economists predicted that much of the euro area would see little if any growth in 2012, but German business confidence rose for the fourth straight month in March, to its highest level in more than a year. Defying all expectations, India's factory output grew 6.8% year-on-year in January, emphasizing the unpredictability of economic fundamentals.
Add to this the unfettered growth in global regulation and the seemingly unstoppable clamor for companies to be more transparent in their reporting to an ever widening circle of stakeholders, and it is not difficult to see why keeping up-to-date with all of these developments presents a formidable challenge to those held accountable to shareholders for the performance of their enterprise.
The pressing need for CPM
Managing performance in a large and diverse organization is demanding at the best of times, but keeping the organization on course and ensuring that its people are strategically aligned when everything around it is in a constant state of flux means that management must have its finger on the pulse. Never before has there been a greater need for accurate and timely visibility of corporate performance.
Yet despite the vast sums of money that have been ‘thrown’ at the problem over the last decade, many organizations find themselves bereft of reliable information from which to derive meaningful business insight and are floundering when it comes to forecasting future prospects. For many organizations, what started as a common vision of performance management has turned into a modern ‘Tower of Babel’ - with fractured systems leaving everyone speaking a different business language. What has become clear at the beginning of the second decade of the 21st century is that there is a profound need to change how organizations design, build and deliver performance management processes and applications.
HOW HAS THE SOFTWARE MARKET RESPONDED?
Corporate Performance Management is a cycle of closely interwoven management processes that commence with strategy formulation and the definition of performance objectives which are carried through into management scorecards, dashboards, budgets and forecasts, to be compared with actual performance. Under and over-performance, identified through reporting and analysis, allows management to take steps to re-allocate resources where needed to bring the organization back on track and ensure it remains strategically aligned. Ultimately, new insights gained through completion of the cycle informs the original strategy and allows management to adjust its direction in the light of experience gained – the basis of so called ‘closed loop’ performance management.
Diagram 1 The Performance Management Cycle
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So the essence of performance management is that it is a continuous cycle in which information is passed in an unbroken chain from one process to another. But although this theory holds good, historically very few software vendors have been able to deliver it in practice. To date there have been three main approaches:
Best of Breed vendors
As the name suggests, ‘Best of Breed’ vendors develop specialized capabilities but usually restrict these proficiencies to one or two niche areas, such as budgeting and planning or perhaps financial consolidation. Sometimes called ‘Point solutions’ these applications provide valuable capability, but in a vacuum, divorced from the rest of the performance management cycle by technical and logical barriers that prevent the sharing of information with other parts of the process. So in effect, they solve a particular short term issue, or perhaps a problem in a limited number of business units and divisions, but do not fit the model of a cohesive solution on an enterprise scale.
The ‘mega-vendors’
The term ‘mega vendors’ refers to the handful of global software houses that have grown their performance management solutions by acquisition. However, the task of assembling Performance Management suites from the potpourri of applications that they acquired has proved more challenging than many envisaged. For example,
• Complex data management - The integration of products from different supplier ‘stables’ can lead to convoluted processes just to keep metadata consistent across the portfolio. This is often complicated by different customers using different versions of the same product.
• High cost – the Performance Management suites are relatively expensive and it is not always possible to buy into them application-by-application which is the case in the ‘Best of Breed’ world due to high infrastructure and installation costs.
• Reliance on IT and Consulting – the scale of the suites together with their varied origins make it difficult for any particular individual to acquire the expertise to manage the applications overall. Companies often find themselves reliant on “experts” or consultants in individual applications and processes. Not only is this expensive but the lack of knowledge-transfer means that end users are rendered incapable of configuring or operating the applications for themselves, which is a major drawback in a rapidly changing business, trading and regulatory environment.
• Spreadsheet-bound – in view of the reliance on external consulting and IT resources, users continue to develop reports and work-arounds in poorly managed spreadsheets, compounding issues of control and auditability that performance management suites are supposed to resolve.
Finally, in assembling the product suites by acquisition, the large vendors have ended up with overlapping products some of which they no longer want or need. As a result some products have been ‘retired’ earlier than end users envisaged, casting doubt on the value of their investment and creating distrust in future product roadmaps.
Pure-play Cloud vendors
Cloud vendors have emerged as a new force in the performance management market but often simply reinforce the errors of the past – just concealed in a new technical environment. For example many of them are ‘Best of Breed’ vendors perpetuating the problem of broken performance management cycles in the Cloud. Indeed, since most legacy applications still reside ‘on-premise’, it could be argued that they have exacerbated the problem of integration by requiring solutions to bridge Cloud and non-Cloud applications.
Although some vendors have created more comprehensive performance management solutions in the Cloud, there are doubts about the responsiveness of the solutions when handling large volumes of users or data in the Cloud and the desirability of hosting market or competitively sensitive data outside of a company’s firewall.
SO WHAT IS REALLY NEEDED OF A CPM SOLUTION?
There are a number of characteristics that are essential to supporting fully the performance management cycle, as follows;
Breadth of applications
Since CPM is a cycle of closely interrelated management processes then by definition any competent solution has to provide all of the applications necessary to support them. But true CPM cannot be achieved through a portfolio approach or a loose federation of acquired applications as is the case with the mega-vendors. It is vital that there is no discernable gap between one application and the next, and this is best achieved in a single unified computing environment with a consistent ‘look and feel’, common metadata (the structural information or data about data), common processes and a shared data store.
User interface
The value of a common user interface is frequently misunderstood, yet the human-to-machine interface plays a crucial role in the effectiveness of the solution. A single interface across the performance management cycle provides a welcome degree of familiarity for all users, regardless of their role, and helps to simplify accessibility and understanding. Regardless of whether a user is in working with a budget or constructing a report, a consistent approach to the interface helps with navigation around the CPM cycle and improves productivity by allowing users to move from one area to another.
Shared metadata
Meta data describes the static or structural information in a system, such as, organizational hierarchies, entities, periodicity, chart of accounts structures, and versions of data (actual, budget, forecast). It is important that metadata is managed consistently across the performance management cycle – something that is difficult to achieve with applications authored by different organizations and often requires an additional product or module to accomplish.
A uniform approach to metadata ensures that information recorded anywhere in the CPM cycle has a consistent meaning and function. For example, that “revenue” is identical whether the data is retrieved in a budget, reported in consolidated actuals or captured on a management dashboard. While mega-vendors have invested considerable resources in ‘metadata management’ to equilibrate metadata across many acquired applications, there is clearly no necessity to manage metadata in a CPM system built from the ground up as a single unified application. The metadata is simply defined once and is instantly available to all of the applications that share the environment.
Similarly, data (transactions and balances) should be stored once in a single database instance which is shared across the CPM environment. In this way there is no duplication of data across multiple products and no danger of conflicting information that sometimes arises in loosely coupled applications assembled from different suppliers.
Shared processes and collaboration
Shared processes are the essence of the performance management cycle. For example, business objectives and KPIs set as part of a strategy development process should flow unimpeded into planning, budget setting and forecasting, and the results of the financial consolidation process should appear effortlessly as a data set alongside budgets to allow easy comparison across the two. Shared user interfaces, metadata and data stores are the building blocks which provide the essential capability for shared processes.
Scalability
The inexorable growth in the complexity and breadth of financial reporting has increased dramatically the volumes of data that have to be accommodated within a CPM system. But the number of concurrent users has also grown as the opportunities for collaboration and cross-functional working increases, like the example of integrated operational and financial planning. So the modern CPM solution has to be scalable to accommodate growth, in volumes and users, as more users share data and the CPM cycle spreads across the enterprise.
Visibility
In a volatile economy it is crucial that performance across the enterprise is monitored constantly and managed consistently. This means that decision makers need visibility of the entire organization supported by multi-dimensionality which allows management to gain deeper insights by taking different views of performance.
HOW DOES TAGETIK MEET THE CHALLENGE?
Tagetik has been designed from the outset with all of the design goals of a complete CPM solution in mind. It therefore has the advantage of a consistent user interface with shared metadata and processes which leverage a single data store. The elegant simplicity of the technical solution means it is both scalable and extensible, but Tagetik is also differentiated in its detailed design and the way that it is delivered with a “Passion” for performance management.
Financial specialization
Tagetik’s history is steeped in a deep understanding of the complexities of financial consolidation and reporting, such as different methods of consolidation, managing the transition to IFRS, multi-GAAP and regulatory reporting in financial services (Basel II, Solvency 2). The structures and hierarchies within Tagetik are geared towards complex statutory and management consolidations for large entity structures where there are a variety of cross holdings, inter-company trading, associates, subsidiaries, minority interests and joint ventures. In addition, with its roots in Europe, Tagetik is accustomed to the complexity of multi-currency reporting to meet the stringent needs of its global customers reporting to different stock exchanges. As such, Tagetik is designed to handle the more technically demanding accounting and consolidation requirements seen in global 500 companies. So called ‘Financial Intelligence’ i.e. the ability to accommodate financial logic within the body of the system, for example, mathematical roundings, automatic signing of balances and even double entry to generate funds flows and cash flow statements is second nature.
Streamlining CPM processes
Tagetik has continued to build on this financial tradition, streamlining complex processes and extending the capabilities of the solution in an innovative way to deal with newer regulatory impositions such as XBRL and e-filing. In fact Tagetik has been at the forefront of developing solutions for the extended Last Mile of Finance, the historical term used to describe the processes, tasks and activities which stretch from the period close (sub ledgers) in reporting entities through to the electronic filing of results, i.e. everything that follows on from the close of the underlying records in ERP systems.
A recent example of innovation is Tagetik’s next generation Disclosure Management product in which ‘numbers’ and ‘narrative’ (including XBRL Tags) are stored in a single unified database that serves the whole financial reporting process providing consistency in reporting, eliminating rounding differences, and ensuring that numbers can be traced from any report back to the original submission of data (with an audit trail of every change in-between). The ability to manage financial close activities, tasks and issues in parallel provides for the first time a robust environment in which group finance has control of documents, the numbers they contain, and has complete visibility of how they were derived.
Cast iron auditability and control
The single unified environment built on a solitary database that accommodates both numbers and narrative provides a very sound basis for audit trail. Unlike portfolio solutions that have been built from a variety of acquired systems, Tagetik can provide a complete bi-directional audit trail of transactions in the system. In other words, items can be traced the whole way, from final documents and e-filings, back to the original submission of data from subsidiaries as well as forwards from the capture of balances in entity level source systems to the final destination in group reports and disclosures.
ERP agnostic
Tagetik does not only leverage the two most popular databases, i.e. Oracle and Microsoft SQL Server, but can also draw data from the major ERP systems. This ability to work with other leading technologies helps Tagetik to fit into a variety of technical environments and helps businesses to reduce risk by not having to depend on a single ERP vendor for all of their core transaction processes and information requirements.
Finance owned and operated
An important attribute of a unified environment is that it is easier for the finance function to maintain without external support. Centralized metadata enables the finance function to introduce new information requirements and to produce reports that straddle different entities and processes much more easily than systems that store data in different places. By the same token, the ease with which the finance function can undertake changes for itself eliminates the need for costly application consultants and IT specialists.
Flexibility of deployment
The simplicity of a unified environment also lends itself more easily to scalability across the enterprise. Furthermore, with all of the CPM applications available in a single solution from day one it is much simpler to ‘switch on’ new CPM processes as the need arises. For example, an organization can start benefitting from a Tagetik CPM solution with a statutory consolidation and then gradually add on a management consolidation or a budgeting process as the need arises. All of these new applications, when implemented, can benefit from existing structures, reports, calculations and historic data in the system. There is also flexibility in the way that Tagetik’s CPM solution is deployed, i.e. via the Cloud or On-premise, allowing organizations to choose the management model that best suits their organization and resources.
PUTTING THE “PASSION” INTO PERFORMANCE
But Tagetik’s offering extends beyond the pure technical and financial. In a CPM world dominated by sometimes ‘faceless’ mega-vendors, “Performance with Passion” plays both to Tagetik’s Tuscan roots and its commitment to a traditional style of service delivery focused on customer satisfaction. But what exactly does Performance with Passion mean?
In the eyes of some users, a problem with the mega-vendors is that they are extremely large businesses. CPM forms a relatively small part of their business compared, for example, to database, hardware or ERP sales. It means that product roadmaps and technology direction may be driven by factors beyond the strict needs of CPM customers.
CPM is also a complex and professionally demanding set of applications which requires a high level of specialized accounting, business and management knowledge to configure. In the mega-vendors most of this knowledge resides in individuals acquired along with the products that make up their CPM portfolios. This manifests itself as pockets of expertise in, for example, financial reporting, budgeting, BI and analysis. The result is that the CPM customer can be faced with a series of experts proficient in designing, building and delivering ‘their’ part of the product suite rather than individuals who have the breadth of understanding that is critical to delivering CPM overall.
By contrast Tagetik is the author of its CPM solution, which has been designed and built from scratch by the same people who started the company. Headquartered in the Tuscan region of Italy, the organization has a unique, family-like culture where it seems that everybody is familiar with the products and its customers. Many individuals can talk to the whole product suite – a task made infinitely easier because of the unified environment.
Customer relationships
Are customer relationships important to project success? The indications are that they are extremely important. To the smaller vendor like Tagetik, every customer is valued. This is in stark contrast to the world of the mega-vendors where relationships are sometimes motivated by competitive considerations such as the sale of an ERP system or a new database. Tagetik does nothing else but focus on CPM software so it is undistracted by broader interest, internal conflict, and shareholder demands.
Its ‘passion’ for CPM translates into a level of dedication and attentiveness which the mega-vendors struggle to emulate. For example, Tagetik will often build a ‘proof of concept’ to demonstrate quickly how the solution meets the business need - something that large vendors with complex product set-ups are often reluctant to do. In the process it brings an impressive degree of specialization, industry best practice and domain knowledge to ensure that each customer’s requirements are understood and that any solutions are configured to best advantage. Its maxim is it is worth going the extra mile to make sure a customer is “completely satisfied.”
In addition, it is becoming clearer that Tagetik’s approach is more cost-effective over the life of the product. On average, the ratio of software cost to implementation cost is between 1:3 and 1:5, so implementation costs and ongoing maintenance cost are much more significant than the initial purchase price. Tagetik believes its implementation costs are only a third of the cost of implementing the mega-vendor’s suites because of the efficiency of the unified structure of the solution and the deep expertise the organization can bring to bear on any implementation. Furthermore, the savings accumulate as the implementation expands into other CPM processes.
Finally, Tagetik’s passion for CPM means that it is constantly striving to improve the way that it delivers its capability. As a smaller software house it can be more agile and responsive to market needs and as a result was one of the first to market with XBRL filings and Disclosure Management. Now it is exploring the use of embedded Social Media and advanced analytics.
SUMMARY
The unprecedented turmoil in financial markets and the global economy, together with unbridled growth in regulation and compliance, is placing the finance function under increasing strain. In these circumstances, timely visibility of performance across the enterprise is critical to staying strategically aligned and competitive.
Historic approaches to CPM have had limited success. The mega-vendors, with their large CPM suites built by acquisition have suffered from complexity and a lack of cohesiveness and consistency. As a result they are expensive to buy, configure, adapt and maintain. On the other hand, Best of Breed solutions have limited scope and do not suit the comprehensive needs of large multinational enterprises. Cloud vendors that have only recently entered the CPM market are relatively unproven and have not overcome lingering concerns about putting market sensitive data in the Cloud.
Tagetik provides a clearly differentiated approach to meeting the more exacting needs of major multinationals. A deep heritage of financial expertise combined with a unified architecture and a passion for CPM allows Tagetik to ‘punch well above its weight’ in the market.
Tagetik’s unified platform, comprising a common user interface, shared metadata, common processes and a single data store, ensures a consistent and extensible approach which supports a complete suite of CPM applications.
Its passion for CPM and unrivalled commitment to product excellence and domain expertise, combined with its publicly declared passion for customer service, makes Tagetik, despite its relatively modest size, one of the foremost players in the global CPM market.
About FSN
FSN Publishing Limited is an independent research, news and publishing organization catering for the needs of the finance function. This white paper is written by Gary Simon, Group Publisher of FSN and Managing Editor of FSN Newswire. He is a graduate of London University, a Fellow of the Institute of Chartered Accountants in England and Wales and a Fellow of the British Computer Society with more than 27 years experience of implementing management and financial reporting systems. Formerly a partner in Deloitte for more than 16 years, he has led some of the most complex information management assignments for global enterprises in the private and public sector.
Gary.simon@fsn.co.uk
www.fsn.co.uk
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