FSN: Why you should put integration at the heart of your BPM strategy?

Why you should put integration at the heart of your BPM strategy?

13th June 2005
An effective business performance management (BPM) regime relies on the ability to share data across different business applications on demand. Yet there are different degrees of integration on offer from BPM vendors. There are lessons to be learned from the success of ERP vendors in transaction systems.

Gary Simon, Managing Editor, FSN explores

Very few organisations can afford to embark on a full scale Business Performance Management (BPM) deployment. Management are wary of a big bang approach which might involve considerable business disruption, lengthy implementation timescales and high cost. Nevertheless the days of "point" solutions designed to solve a particular business problem in isolation have probably gone for good.

For all of its faults the ERP approach to systems provision has established the logic of buying a broad set of business applications from one supplier. Historically, the ERP world was limited to transaction systems, for example, manufacturing, financials and sales order processing. It is only relatively recently that ERP vendors have ventured into the BPM space with specialised applications for financial consolidation, budgeting, scorecarding and reporting. But what made the blanket solutions of the ERP vendors so popular with the management of large corporations?

Whilst one can point to several positive aspects of ERP implementations (and many negative ones) the overriding attraction of an ERP solution was the level of integration provided between the component applications of the ERP suite. For example, a single instance of a nominal code would be recognised whether you were using a bill of materials module, placing a purchase order requisition or drawing raw materials stock from a warehouse.

In other words structural information (metadata in the jargon) such as a chart of accounts, or an organisational hierarchy or product hierarchy appeared once within the ERP solution and could be shared between all of the applications.

Those organisations that adopted a Best of Breed approach by combining, say, a manufacturing system from one software house and a financials system from a specialist vendor often lost out. Integration of a sort was possible because data could be exchanged between applications and was often copied at regular intervals between them. However, metadata had to be duplicated. So if a finance department added a new nominal account in the financials system then the task had to be repeated in the manufacturing system. Needless to say, this often caused errors, rejected data and reconciliation problems even if the process was automated.

Not only did ERP vendors have the upper hand in the management of metadata but their solutions often benefited from a common user interface so that the 'user experience' was similar regardless of what part of the ERP solution was being used. In the main, the approach to menu structures, user navigation and tool bars was similar.

As the success of performance management hinges so much on integration it follows that the ERP era offers some useful insights into the construction of a BPM strategy. Clearly, in setting a BPM strategy one should look carefully at the systems architecture underlying a supplier's solution.

In some cases, the BPM solution is a collection of loosely coupled Best of Breed applications, whereas others have been built from the ground up with integration fully in mind. In these cases there is a single instance of metadata so that the organisational hierarchy is 'understood' whether you are in a budgeting application or a financial consolidation application. However, other solutions are a loosely coupled .

James Fisher, of Cartesis told FSN, "Historically management sought to merge their statutory and management reporting. Now they are trying to merge financial reporting with budgeting and forecasting. We see it as a natural extension of what has been done in the past and this degree of integration allows management to get multiple views of the business from a single technology platform. Not only are they improving their analytical capability but also driving out process inefficiencies. They can spend more time analysing the business and less time reconciling data between systems."

Richard Hawksworth of Outlooksoft agrees. "We make the distinction between integration and what we call unification. We prefer the term unification because it means that all of our applications share the same metadata which cannot be said of all BPM vendors. The problem is that if you replicate metadata then it costs a lot more upfront to implement the systems and costs much more in the longer term as well because you have to maintain the metadata again and again in each application."

Fisher also points out that the truly integrated approach helps to future proof the solution. "Not everybody wishes to implement all facets of a BPM solution with a big bang. If your solution shares an integrated data model used by all of the applications then you can implement, say a budgeting application in one year and add, for example a financial consolidation system later, safe in the knowledge that the applications can co-exist. This is important if you are trying to set a longer term BPM solution and do not want to be stranded after your initial investment."

A fully integrated solution with shared metadata is important for compliance as well, "We're seeing this in the US ," says Fisher. "Sarbanes Oxley has driven the need for a more cohesive approach and the same will happen here with the Operating and Financial Review. The OFR has a forward looking orientation, so it is vital that management can bring budgets, actuals and forecasts together in one place."

Outlooksoft's Hawksworth concurs with Fisher's views, "Unification is going to be vital to OFR compliance which is why we use one database and one set of metadata. By using a Microsoft platform we also benefit from their user interface and a familiar look and feel," he adds.

So next time you are offered a BPM solution FSN's advice is to look carefully under the bonnet! Is the solution comprised of a loose collection of applications or a tightly integrated performance management suite which shares metadata. Failure to recognise the difference could seriously undermine your BPM strategy.

About Us