While the terms ERP and EPM/CPM have been part of the Finance and IT nomenclature for over 15 years, there is sometimes confusion about these terms and their fit in an overall IT systems strategy. Here’s a short primer to set the record straight.
Enterprise resource planning (ERP) and enterprise performance management (EPM), a.k.a. corporate performance management (CPM) systems are different but complementary solutions that address specific business problems in an organization.
ERP Focuses on Operational Processes
ERP systems focus on helping organizations manage operational processes. The term first came into use in the 1990’s to extend the capabilities of manufacturing resource planning (MRP/MRP II) and to reflect the evolution of application integration beyond just manufacturing.
Today, ERP is generally referred to as a category of business management software — and typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from these many business activities. Examples of the business activities ERP systems help automate and track include:
- Supply Chain Management
- Project Management
- Order Processing
- Finance and Accounting – e.g., General Ledger, Fixed Assets, Accounts Payable, Accounts Receivable, Cash Management
The objective of ERP systems is to automate and integrate these processes across the enterprise to drive accuracy and efficiency in day to day transaction processing and operations.
CPM/EPM Focuses on Management Processes
CPM or EPM systems focus on helping organizations improve management processes. EPM/CPM systems help organizations achieve their financial objectives by linking corporate strategy to plans and execution. It includes the process of collecting and integrating data from many systems across the enterprise (e.g., ERP, CRM, HCM) to monitor and manage performance. Examples of the key processes EPM/CPM systems help automate include:
- Strategic Planning
- Budgeting, Planning and Forecasting
- Financial Close and Consolidation
- Financial and Management Reporting
- Profitability Management
- Analytics and Scenario Modeling
There are several management methodologies that are often associated with EPM/CPM such as The Balanced Scorecard, Activity-Based Costing, and Rolling Forecasts and that are supported by EPM/CPM software. The EPM/CPM concept has also been extended into operational areas such as sales performance management. Organizations typically adopt EPM/CPM software to replace spreadsheets, email and other manual processes, and bring more control, audit trails and visibility for management.
ERP and EPM/CPM – Better Together
As you can see, ERP and EPM/CPM systems are related, but are focused on different purposes. ERP systems are often thought of as the central nervous system of the enterprise, and are essential to the effective execution of day to day transactional activities. EPM/CPM systems can be thought of as the “brain” of the enterprise, helping to align and coordinate goals, objectives, financial and operational plans and execution across the enterprise.
EPM/CPM systems source most of their data from internal systems including ERP, but also human capital management (HCM), customer relationship management (CRM), and increasingly external sources such as web sites, social media and industry information.
Both systems are critical to the success of an organization. ERP systems are used to run the business, EPM/CPM systems are used to manage the business and make critical decisions..
Data Integration is Key
To be effective, EPM/CPM systems must have the ability to integrate data at a corporate level from multiple ERP systems used across the various operations of the organization. While some organizations have standardized on a single ERP system, most have multiple ERP systems from different vendors (e.g., SAP, Oracle, Infor etc.) running in different subsidiaries and divisions. So EPM/CPM systems must support “one to one” or “many to one” mappings of data from ERP and other systems. And the EPM/CPM system must have the ability to integrate data from on-premise or cloud-based ERP systems, regardless of where the EPM/CPM system is running.
Beyond integrating data from multiple systems, to be effective, EPM/CPM systems should also provide the ability for users to “drill back” to detailed transactional data in ERP and other systems. This is critical to supporting rapid analysis of information. A good example would be when a senior manager sees an unfavorable variance in actual travel & expense (T&E) costs compared to the budget for a particular time period. They should be able to “drill-down” from a summary report to the specific cost center and account that is causing the variance, and then into the transaction detail to truly understand the cause and take corrective action.
To learn more about the power of EPM/CPM and ERP solutions working together, check out our customer case study and video on Evoqua Water Technologies, who have integrated OneStream XF with their SAP ERP and other data sources.
- John O’Rourke
John O’Rourke is Vice President of Product Marketing at OneStream Software. With a background in accounting and finance, John has over 30 years of experience in the software industry, including 20 years of experience in product marketing at Hyperion Solutions, Oracle and Host Analytics. He has worked with many customers and partners on financial reporting and planning initiatives and has spoken and written on many topics in corporate performance management. John has also held positions in strategic marketing and product marketing at Dun & Bradstreet Software, Kenan Systems and Decisyon.