Manage Learn to apply best practices and optimize your operations.

Magic Quadrant for CPM suite defines tactical, strategic CPM

In part one of this Q&A, a co-author of the 2013 Gartner Magic Quadrant for CPM explains why strategic CPM is rising in popularity.

Oracle, followed closely by SAP and IBM, were the leaders in this year's Magic Quadrant for Corporate Performance Management (CPM) Suites, published by Stamford, Conn.-based consultancy Gartner. In part one of this Q&A, Chris Iervolino, Gartner research director and one of the report's authors, explains what effect in-memory computing capabilities and industry-specific approaches are having on the CPM software market. He also elucidates the difference between tactical and strategic CPM and explains why strategic CPM modules are gaining in popularity.

The report states that "the market has intensified its support of industry-specific approaches to CPM." Can you explain why that's happening, and what some of the pros and cons might be of deploying an industry-specific CPM approach?

Chris Iervolino: This is something that's happening over time. Vendors will work with consulting partners with expertise in different industries, and smaller vendors focused on a particular industry will create [products]. It's something that continues to happen because, in order to address the more strategic aspects of CPM, more of a comprehensive performance management approach is needed. If an industry-specific approach is taken, there's an opportunity to integrate additional operational data and workflows based on different industry factors. Conversely, deeper functionality [in] a particular industry vertical or area of functionality results in a more narrow set of application use cases.

More on corporate performance management software

Read a CPM software special report

Get CPM suite deployment tips

Find out why one retailer transferred certain processes from Excel to SaaS CPM

What effect are in-memory computing capabilities having on CPM software?

Iervolino: More RAM-based data provides the same advantage as [in] many BI applications -- more data can be analyzed faster. The key [factor] for CPM software is that it brings more powerful analytic capabilities closer to the office of corporate finance. For instance, corporate finance commonly analyzes financial information at a more aggregated, enterprise level. This level of detail mirrors the consolidated chart of accounts that supports the creation of structured financial statements; however, the lack of granularity limits their ability to develop analytic insight. So, as we move past descriptive analytics and increasingly require more predictive and prescriptive analytics to provide the CFO with additional decision-support capabilities, rapid access to more detailed data is necessary. In the paper, we talked about examples from the standpoint of forecasting and planning or profitability modeling. Because now we can store more detailed data, have more users access it and run models and simulations more frequently in response to changing business conditions, we can increase financial analytic effectiveness.

The report makes a distinction between strategic and finance-focused CPM. Can you explain that difference?

Iervolino: Finance-oriented CPM is more tactical. It describes more traditional CPM, where these applications got their start -- financial consolidation, reporting, traditional budgeting and forecasting -- those areas that the office of finance needs for efficiency, accuracy, transparency and compliance.

Strategic CPM are those areas that also benefit the organization outside the office of finance, such as forecasting. For example, the CFO needs to not only report what happened regarding financial performance but also advise why performance was what it was against targets and what will happen in the future -- that's the type of strategic advice that helps drive the organization in one direction or another. So forecasting, strategy management, profitability modeling -- although they're within finance's purview, they benefit the organization as a whole, from a performance management standpoint.

These different CPM types have always existed, but [now] the CFO is investing more heavily in financial analytics. As financial analytics [rise] in importance to help the CFO with their decision-support needs, strategic CPM becomes more necessary, more popular and basically more distinctive in terms of the CPM modules.

Certainly most finance users use office of finance CPM. If you look at some of the survey data we take with the CPM Magic Quadrant, we see that [tactical] areas like financial consolidation, reporting and budgeting continue to be most widely used. However, [strategic] areas like profitability modeling and strategy management, the need for dashboards and things along those lines are growing at higher rates.

Can you give examples of vendors that focus more on tactical CPM versus those that focus more on strategic?

Iervolino: Most of the vendors cover both, especially the CPM suite vendors; it's just that some take more of a performance management approach, largely by providing more expansive analytics, and [others] support deeper financial processes. For example, as described in [the] CPM Magic Quadrant report, within the leader's quadrant Oracle, SAP and IBM are ranked closely. However, Oracle's higher completeness of vision ranking reflects its depth of finance support. Within Gartner's BI and Analytics Magic Quadrant report, IBM is ranked higher in completeness of vision to reflect its business intelligence (BI) and analytics offerings, which they leverage within their CPM suite to provide additional analytics and performance management capability.

Read part two of this Q&A to find out how BI technology and cloud computing are affecting the CPM software market.

Emma Snider is the associate site editor for Follow her on Twitter: @emmajs24.

Dig Deeper on CPM software

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.