Take an in-depth look at the global move toward true "business intelligence" (otherwise known as EPM, CPM, and plain old performance management). This article examines how and why organizations are finally moving beyond disconnected spreadsheets toward a strategic integration of technologies, metrics, processes, and methodologies. Read about: Moving from information to action. The art and science of transforming mountains of disconnected data into actionable information. Cultural evolution. Making everyone an accountant (or at least accountable). Success stories. Implementation of Oracle BI solutions by Absa Group, Atari, MBF, Solectron, and Sandia National Laboratories. Oracle CPM. An introduction to Oracle Daily Business Intelligence, Oracle Balanced Scorecard, and Oracle Enterprise Planning and Budgeting.

As Published In February 2005

The Birth of Business Intelligence
By David A. Kelly

Corporate Performance Management is Raising the Bar for Every Enterprise

One idea, so many names. What META Group calls business performance management, Gartner calls corporate performance management (CPM). Others call it enterprise performance management, plain old performance management, or simply business intelligence. Although no one in the industry seems to agree on the name, almost everyone seems to agree on the need for it.

"Companies are realizing that they can't get information out consistently. They realize they have six different reporting tools, but they don't have a consistent approach to results reporting, management reporting, budget and planning, and many other areas," says John Van Decker, senior vice president of META Group in Stamford, Connecticut.

"CPM is really critical for organizations today," says Lee Geishecker, research vice president and research area lead for CPM at Gartner Group, also based in Stamford, Connecticut. "In fact, Gartner forecasts that 70 percent of Fortune 500 companies will have implemented CPM by the end of 2006."

Gartner defines CPM as the processes, methodology, metrics, and technologies that enable an enterprise to manage the performance of its business. Although most companies probably have systems or applications that fit into that definition, many are just starting to look at the broader, corporate-strategy-oriented benefits that most analysts believe CPM can deliver.

"Anyone can say that they're doing bits and pieces of it today, but really, corporate performance management means getting a better finger on the pulse of an organization to make a better, more accurate, and more timely assessment of how an organization is doing," says Geishecker. "Enterprises need to move away from asking, 'How did we do last month or last quarter?' to 'How are we doing right now?' as well as 'How will we do next week?'"

Connecting Forecast to Reality: The Spreadsheet Problem

Those may be simple questions, but for too many firms, the answers are buried across multiple systems or in spreadsheets. For example, when gaming giant Atari needed a better sales forecasting tool, it ended up implementing CPM functionality.

"We did not have a good method of integrating our sales forecast at any level—actuals versus budget or actuals versus forecast, so there were no performance metrics built on the back end," says Glenn Magala, Atari's CIO. "Instead, we had a five-letter word—Excel—and a process that was all manual. There was a gap in reaction time that sometimes could be measured in days, and the manual process could potentially lead to errors. The data came from many different data sources, and we collapsed it into Excel, which was a very difficult and time-consuming process."

Snapshots Absa Group www.absa.co.za Location: Johannesburg, South Africa Industry: Financial services Employees: 31,658 Assets: US$47.9 billion Products and services: Oracle Database, Oracle Application Server, Oracle Application Server Portal, Oracle Developer Suite, Oracle Discoverer, Oracle Balanced Scorecard, IBM hardware, and IBM AIX 5L OS Atari www.atari.com Location: New York, New York Industry: CPG/consumer products Employees: 31,658 Revenue: US$468.9 million Products and services: Oracle9i Database and Oracle E-Business Suite, including Field Sales, Demand Planner, Internet Expenses, Order Fulfillment, Financials, Human Resources, Project Costing, Trade Management, and Sales Analyzer; Oracle Files; and Oracle Support MBF www.mbf.com.au Location: Sydney, Australia Industry: Insurance Employees: 1,100 Revenue: AUD$1.7 billion Products and services: Oracle Database, Oracle Application Server; Oracle E-Business Suite, including Financials and Balanced Scorecard; Oracle Real Application Clusters; Oracle Consulting; Oracle Training; Sun Solaris; and UNIX Solectron www.solectron.com Location: Milpitas, California Industry: Electronics Employees: 55,000 Revenue: US$12 billion Products and services: Oracle Database; Oracle E-Business Suite, including Financials, General Ledger, Payables, Receivables, Cash Management, Inventory and Order Entry; Khalix, from Longview Solutions; Longview Consulting; and Sun servers Sandia National Laboratories www.sandia.gov Location: Albuquerque, New Mexico Industry: Government research and development Employees: 8,300 Size: US$2.3 billion Products and services: Oracle Database 10g; Oracle Application Server 10g; Oracle E-Business Suite 11.5.9, including Financials, Procurement, Manufacturing, Daily Business Intelligence, and Balanced Scorecard; Oracle Discoverer/Business Objects; HPUX R8400 Servers; and consulting services from Softec Solutions

According to industry experts, being trapped in spreadsheet forecasting hell is one of the key indicators for companies that they should be evaluating CPM solutions.

"When it takes forever to produce a business plan, forecast, or reforecast, you know you need CPM," says Van Decker. "Spreadsheet-based processes don't speak to centralized controls, centralized data, or centralized metadata. Performance management is a very hot topic and a concern for many companies as they try to replace offline processes for analytics, such as Excel-based processes."

To overcome this disconnect between their sales forecasts and the actual numbers, Atari implemented Oracle Sales Online (OSO), Oracle Field Sales, Oracle Financial Analyzer, Oracle Sales Analyzer (OSA), and Oracle Demand Planning in the first half of 2004. "These particular modules address only a portion of CPM, so there's more to be done," says Magala. "But the visibility of the resulting information to various levels in the organization in real-time form allows us to react faster to the business situation. It's the connection of the forecasting data to the reality of what's occurring in our world. The sales group has never had anything like this before."

From the Atari perspective, better access to information, reconciliation of data, and better analysis allow them to manage business processes, such as receivables, much more closely. For example, Atari salespeople used to have to call into headquarters to gain visibility into a retailer partner's receivables. Now, with the new systems, they can simply bring up the customer information and see if a retailer is current with its invoices or on a credit hold.

"The use of OSO and OSA and the fully integrated model has saved the company a significant amount of time and offered great visibility into the performance of the sales group and of the company as a whole," comments Magala.

CPM Is More Than Technology

CPM is really about tying together the strategic initiatives of a company and being able to dynamically drill down into tactical execution plans and data that are coming from operational systems. "Companies may start with a specific need, such as a balanced scorecard or business planning, but ultimately they should choose a solution that can be part of a larger strategy and a larger vision," says Van Decker. Implementing business performance management is not like simply buying applications and suddenly having business performance management capabilities. It's really part of a business process to be able to more dynamically forecast and make changes to your enterprise plan at the highest level and then have those changes filter down into the organization, getting the results into the hands of the managers who influence business on a daily basis.

But CPM is more than technology. It often requires significant cultural change—from how people share information to what actions and behaviors employees take, based on performance metrics or business results.

"A cultural change is very important to be successful with CPM," says Geishecker. "In fact, it's the No. 1 challenge we see in relation to CPM. You're asking people to change the way they do things. The financial departments are asking people to share information they're usually responsible for guarding."

Unfortunately, learning to share can be as difficult for organizations trying to implement CPM solutions as it is for children on a kindergarten playground.

The Cultural Impact

Sharing information and tracking measurable business metrics in a more visible CPM solution may take some getting used to for managers or departments that are accustomed to a high degree of autonomy, as Sandia National Laboratories has found out.

"Our Balanced Scorecard initiative is designed to provide a lot more exposure to the various performance measurements associated with our projects, and that's going to change some of the behaviors around how we do things," says Gary Concannon, manager of the business technologies department at Sandia National Laboratories. "For example, it's going to provide a lot more emphasis on those things that have been negotiated—such as service-level agreements or project deliverables—that our managers will have to make sure are satisfied."

Sandia National Laboratories, in Albuquerque, New Mexico, is a national security lab run for the U.S. Department of Energy's National Nuclear Security Administration. It focuses on weapons research, nuclear stockpile security, and energy research and development. Concannon's business technologies department is responsible for implementing what it terms business performance management systems, such as Oracle Balanced Scorecard and Oracle Daily Business Intelligence.

Although Sandia was required to deploy corporate performance management solutions in part because one of its contracts with the Department of Energy tied performance management to budget and cost, it also makes business sense. "This has the attention of our CFO, Francisco Figueroa," says Concannon. "He sees it as something important to be able to increase the efficiency of the organization."

One way to increase efficiency is to enable different business units and departments to work together more effectively. Without a corporate performance management system, it was difficult for Sandia's departments to know what other departments were responsible for and how much they were being affected by changes in functional teams or new projects. "The Balanced Scorecard will actually highlight that impact now, because it has something called a cause-and-effect relationship," says Concannon. "So now you can associate cross-functional measures and get people involved. There's a collaboration tool that allows them to explain what's going on in such a way that everyone can see it in a central repository. With a business performance management approach, we don't have to go around making phone calls and saying, 'What's the status of this and why?' It's all centrally located and very visible."

Of course, it doesn't happen by magic. It does take some work to define the right metrics and collect the right data needed to populate them. For Sandia, this means integrating operational data from multiple sources. "We go to several different databases to get information for our scorecard," says Concannon. "It may not just be financial—we may also require some HR or some manufacturing data. It does require a variety of information, which is one reason we selected Oracle Balanced Scorecard: It can integrate disparate data sources, whether they're flat files, spreadsheets, or databases."

Consolidating information in a logical way, across traditional departmental or project barriers, enables Sandia managers to have a more complete and accurate understanding of project status, budget, and cost—all in a format that's easy to understand. "When you look at the scorecard, it gives you red, yellow, and green status of the negotiated items you have, so you can see in a very short period of time how well you're performing against those measures." Concannon explains.

Those metrics include a mixture of tactical and strategic measurements that Sandia refers to as 10, 5, 1. "We have 10-year objectives, 5-year goals, and 1-year milestones," says Concannon. "There are formal quarterly reviews with the Department of Energy, reviewing the status of every negotiated item and performance measure."

In the past, it would have been difficult for Sandia employees to gather this type of information. "Basically, we would collect the information, put it into a PowerPoint presentation, and then present it. There was no underlying tool that would actually measure these things for us," says Concannon. "Now we're taking it from our various sources and loading it into the balanced scorecard."

Changes in Culture: Making Everyone an Accountant (or at least accountable) For many companies, increasing profitability means not only increasing revenues but also controlling costs—especially in industries such as insurance. And controlling costs requires business managers to move from a reactive approach to expense management to a proactive approach. For MBF, implementing Oracle's Budgeting and Forecasting system is enabling its business managers to do regular forecasting throughout the year, rather than just setting a budget for a year and hoping they make it. "There's a strong message from our leadership team, our CEO, and key members of our executive team that we need to focus on accountability—that our managers need to be responsible for managing their individual costs," says Kevin Keane, financial controller at MBF in Sydney, Australia. "So rather than having the finance people pushing a department to reforecast, we're moving to an era in which managers are actually waiting for their costs every month, managing those, and doing reforecasts as they need to. Rather than finance having to push all the time, they're taking responsibility themselves." In short, the goal is to facilitate a move away from having the finance department manage all the finances to where the departments and individual managers are running the finances—with the finance department's help—for their business units. Of course, changing corporate culture from once-a-year forecasts and planning to a process of continual planning and ongoing revisions requires some cultural change. That's why MBF has hired a full-time business intelligence manager whose primary job is to help run the change management process over the next 12 months. "One of that person's key responsibilities is to help educate the managers and make sure the system is a success," says Keane.

Although it may take some time for Sandia's managers and team members to learn how to leverage the new CPM capabilities most effectively, they anticipate that they will become a critical component of their daily lives. "It's going to be kind of a cultural change, because now there's going to be a lot of emphasis on these performance measurements. They are going to be very visible to our management," says Concannon.

Managing from Corporate Objectives, Not Departmental Data

For many companies, the need for CPM isn't so much a lack of information as too much information—too much information from individual applications, focused on individual departments, without a broader, corporatewide context.

"Whereas business intelligence is often very departmental and very operations-focused, CPM is meant to span divisions, departments, functional areas, and geographic areas of companies," says Chris Rigatuso, senior solutions architect at Oracle. "The larger the company and the more product lines and service areas, the more disconnection there usually is from the mission. How do the various product and service areas fit together? How do you monitor and manage them as they relate to the overall strategy?" But CPM isn't a solution just for large enterprises. "Now, with integration and automation in CPM from Oracle, the benefits are available to midsize companies with virtually no CPM budget," Rigatuso adds.

An example of how the proliferation of information can overwhelm companies is the experience of the Absa Group, in Johannesburg, South Africa. A large financial services company with more than 50 business units, Absa routinely produces more than 1,200 business reports, generated by more than 30 business intelligence projects from different groups. The sheer volume of disconnected information was overwhelming and made it difficult for business managers to make decisions.

"Information doesn't have any value unless it tells you when to change something or stop something," says Cornie Victor, general manager in the information management division at Absa Group. "We needed to make sure that the resources we invested in information would actually help managers make better business decisions."

Although the individual business intelligence projects delivered definite value to the individual business units, they couldn't automatically be aligned with Absa's overall corporate strategy. To gain that alignment and give managers a single view of the customer and a single version of the truth, Absa implemented Oracle Balanced Scorecard and Oracle Discoverer. By standardizing on Oracle for its business intelligence projects, Absa Group can consolidate the departmental data into a balanced scorecard that reflects the company's overall strategy.

Absa is in the process of implementing Oracle Balanced Scorecard in 28 of its 50 business units and is already seeing the benefits of having metrics and performance systems that are relevant to both the business units and the corporation. "Now we can see how measures affect the organization as a whole," says Victor.

In addition to reducing software costs by eliminating multiple reporting technologies, Absa's new performance management-oriented solution is helping uncover inefficiencies and ways to improve business processes at all levels. For example, Absa's Home Loans division had been experiencing decreasing margins, and it needed to increase its loan volumes. By using Oracle Balanced Scorecard, executives were able to determine that part of their problem was that the employee-incentive program was counterproductive and contributing to reduced profitability.

The underlying message here? Corporate performance management could just as easily be called people performance management, because how people—employees, customers, partners—behave is really what's being measured as well as influenced. Uncovering behaviors, processes, and actions that affect the health of the organization is one of the biggest benefits that CPM offers.

Monitoring Your Numbers

The Oracle CPM Solution CPM is generally considered a holistic term that describes a collection of solutions that organizations can use to enable closer monitoring and management of their business processes and metrics. Although few organizations today are going out to purchase a complete, top-to-bottom CPM solution, almost all companies are using CPM-oriented solutions to drive greater efficiency and effectiveness across their organizational structure. "If you think about the definition of CPM, it can comprise anything from balanced scorecards to strategic planning, financial reporting, or statutory consolidation," says Lee Geishecker, research vice president and research area lead for CPM at Gartner Group in Stamford, Connecticut. "The early underpinnings of CPM were very much financially focused, but it really doesn't stop with finance—it blends over into operations and to all aspects of the business and even beyond." For Oracle customers, deploying CPM typically involves one or more of the following components: Oracle Daily Business Intelligence—A set of prebuilt operational reporting and analysis applications tools with more than 250 key performance indicators built in, including margin percentage, total head count, average salary per employee, and so on Oracle Balanced Scorecard—Provides a way to define and graphically illustrate key performance metrics Oracle Enterprise Planning and Budgeting—Provides enterprise planning and budgeting capabilities across departments Which of these solutions your organization needs depends on the exact problems you're trying to solve, but all can help organizations match their strategic plans to their operational systems. "Companies have the ability to look across Oracle applications to provide the backbone for their business performance management solution," says John Van Decker, senior vice president at META Group, who sees an organization's performance management capabilities as coming from a collection of applications such as the ones Oracle is providing. "What we're talking about is the ability to bring together a common view by leveraging integrated applications, and there are many applications in the Oracle stack that can provide the business performance management component. For an existing Oracle customer, this should be at the top of the list in terms of solutions they should be looking at for business performance management." To learn more about Oracle's CPM solutions, go to oracle.com/ applications/cpm.html or download the executive white paper on CPM at oracle.com/applications/cpm/SFBP_whitepaper.pdf.

Almost nothing that happens to a corporation can cause as much disruption—both positively and negatively—as an acquisition or merger. In a competitive marketplace such as insurance, acquisitions are one way to increase revenues—but only if you can easily and efficiently integrate the acquired businesses and product lines with your existing IT systems. That's why Australian insurance giant MBF turned to CPM. "Having the correct data in the right format in a timely manner is key for us, as is being able to give that data to managers on their desktops so they can analyze and report on it," says Kevin Keane, financial controller at MBF, in Sydney, Australia.

MBF is one of the largest private health insurers in the Australian market, with approximately 19 percent market share and about AUD$1.7 billion turnover per year. Since 2003 the company has been on a program to update most of its key business systems, starting with Oracle Financials, Oracle Procurement, Oracle Purchasing, and Oracle Internet Expenses. In January 2004, the company went live with Oracle Balanced Scorecard.

One of the main reasons that MBF is pursuing CPM initiatives such as balanced scorecard and more-streamlined and -integrated purchasing processes is because its corporate goal is to grow through acquisition. "We're heading into a period of acquisitions, and we needed to be able to very quickly integrate new business financial systems—that was really the key driver for us," says Keane.

In the case of the implementation of Oracle Balanced Scorecard, MBF's objectives were to be able to allow managers to monitor the organization's key performance indicators (KPIs) on their desktops. "In the past, that type of monitoring had always been done with a variety of written reports, which took time to prepare and distribute," says Keane. "Now we have a balanced scorecard that's built automatically from a variety of information from different sources, including financials, product systems, payroll systems, and other applications."

For MBF, this has meant a change in the focus for some of its resources, because the company is spending time—particularly in the finance area—getting the data into the right format for loading into the balanced scorecard, whereas in the past, it was primarily spending time on producing reports, printing reports, and distributing reports. "It does take some time and effort to make sure that the data is loaded when it's available," says Keane.

But MBF has also found that setting up Oracle Balanced Scorecard with the right data feeds isn't all it takes. "As you move from year to year, sometimes the metrics you're looking to manage are going to change," says Keane. "We've found that you may need to redefine those KPIs to make sure the information remains relevant." Another issue MBF has encountered in relation to its balanced scorecard is making sure that it has captured the right level of detail. "Our scorecard goes down to a certain level of granularity, but it's very hard to cater to every single manager's wishes—some like a high level of data, whereas others love having lots of data. It's very difficult to cater to everybody in a generic sense."

So far, even though it has taken some effort, the implementation of Oracle Balanced Scorecard has been a success for MBF. "We've had it up and running for only six months, and it's still in its infancy," says Keane. "The plan is that it will enable our business managers to make better business decisions and that eventually we can eliminate the need for paper running through the organization."

Counting on Performance

Even though different people call it different things, the idea behind corporate performance management is simple: better measurements and metrics to measure the performance of your business—across business units and departmental systems. Although there is no "You Need CPM" light on most business executives' desktops, the typical warning signs that you might need CPM are easy to spot:

• Budgets and forecasts that are managed primarily by spreadsheets
• A requirement to have metrics monitoring measurements that cross business units or departments
• A need for daily business intelligence set to predefined key performance indicators
• A need for increased flexibility in allocating costs
• A desire to articulate corporate performance metrics and tie them more closely to operations data

"CPM is about creating a plan for the enterprise, communicating that plan to everyone in the company, and then providing the operational reporting and strategic reporting on an ongoing basis so that people can see how they're doing compared to the plan and giving managers the ability, if things go wrong, to take corrective actions and to update the plan when it needs to be," says Kurt Robson, vice president and chief applications architect at Oracle.

From MBF's perspective, that's exactly what CPM is delivering, in the budget and forecasting process and elsewhere. "Traditionally, we had to run budgets and forecasts, making sure to get the right actual data into our budget tool and making sure that everything was on the same version of the numbers—it's a time-consuming and difficult task," says Keane. "Our CPM initiatives are taking us to where we have one version of the truth. We typically spent a lot of time reconciling those numbers in different systems, and we wanted to move away from that, so that we could know that what we're looking at is in one system, it's the right set of numbers, and no one has to worry about the reconciliation process." Although CPM initiatives such as better forecasting and budgeting capabilities or a balanced scorecard solution can pay off directly in time savings or reduced resource requirements, CPM solutions may also pay off in other ways, as California-based electronics manufacturing services company Solectron has learned. "Our users are pleasantly surprised by the impact we've had on our overall close time for the corporation and the dramatic impact we've had for some sites that have taken days out of their close time by using Oracle and our new process," says Peter Corsius, senior director of financial applications at Solectron (see the sidebar "Accurate and Timely Financial Data," on page 23). "It's nice, because people have become a little bit less skeptical and they've started believing that large companies have the ability to successfully deliver implementations that are good for them."

Accurate and Timely Financial Data Although growth is good, it can have difficult consequences. That's why Solectron, a US$12 billion electronics manufacturing services company, turned to CPM for help. Solectron experienced tremendous growth in the 1990s, growing from a small manufacturing company to a US$12 billion company today through both organic growth and acquisitions. The result was a company with more than 55,000 employees, more than a hundred locations around the world, and serious challenges on the financial side. "Solectron consolidates close to 150 general ledgers every single month," says Peter Corsius, senior director of financial applications at Solectron, "and with our previous consolidation application, the total consolidation time required every month was 120 hours." For a solution, Solectron turned to CPM and brought in Corsius to help design an architectural road map. The first step was to use robust general ledger (GL) functionality in Oracle to consolidate all ledgers every month and run the required translations, consolidations, and eliminations on a monthly basis. To do this, Solectron designed a one-to-one interface between each of the local enterprise resource planning (ERP) systems and the centralized consolidation GL and used the Oracle mapping functionality to map it into the common chart of accounts. "We're now able to do the monthly consolidations in about three and a half hours—down from 120. It's a huge difference," reports Corsius. With Oracle Financials holding Solectron's consolidated actuals, Solectron needed a better way to forecast revenue, define its annual plan, and manage its key performance indicators—including obtaining data that does not come as part of the standard consolidation process. It chose Khalix from Longview Solutions as its integrated performance management suite. Khalix enables organizations to streamline global financial functions, including modeling, budgeting, planning, forecasting, consolidation, and standard reporting. As in many other companies, Solectron's current data collection process for detail that does not reside in the general ledger is spreadsheet-based. "We send out workbooks to our site controllers. They fill them in and e-mail them back to our Corporate Finance groups, where we spend a significant amount of hours consolidating and validating the data," says Corsius. "Now, with Khalix we will have a completely Web-based architecture that allows people to log in via a browser, access the information that's already resident in Khalix that is coming from Oracle, and then fill in the additional information that we need for financial or regulatory requirements. For example, once we have consolidated our worldwide results, we will have Net Fixed Asset activity but no detailed information that allows us to do the cash-flow computation. With Khalix we will have a solution for effectively obtaining that additional detail." There's little doubt that Solectron's investment in CPM will pay off. "I believe that half the license fee for Khalix can be justified purely by our ability to capture all the information we need via a structured Web input template, versus having to send a workbook for each detailed request to all individual sites—there is a lot of time and effort associated with compiling all of that," says Corsius.