EXECUTIVE SUMMARY

Organizations are under tremendous pressure to provide accurate, timely information. Only by doing so can they support the performance management processes designed to improve performance and maximize shareholder value. But providing this information often involves working with a variety of disparate systems—or even a host of trusted advisors—to collect financial and operational data from throughout the organization. Managers must then compile, reconcile, and analyze the data before making a decision. As a result of this inefficient process, organizations waste countless hours correcting data inconsistencies, face unnecessary delays in making critical decisions, and limit their business opportunities.

In an effort to get actionable information to decision makers in a timely fashion, organizations have created data warehouses or implemented ERP systems—investing millions of dollars and thousands of man hours in the process. However, both of these approaches to performance management fall short. Data warehouses lack the business logic and context required for flexible “what if” analysis, and ERP systems are so rigid, they do not meet the needs of the business and force users to complete their analysis outside of the system.

A better approach is for companies to use purpose-built applications that perform specific performance management functions while linking with consistent data through an integrated data model (IDM). With applications leveraging a common IDM framework, decision makers no longer have to reconcile data before using it to evaluate performance. The IDM ensures, for example, that financial consolidation for GAAP reconciles with profitability analysis. Actuals are available for planning and forecasting. And historic sales data is always the same regardless of who in the organization is working on it, reporting it, or analyzing it.

The IDM ensures this data reconciliation and consistency without moving large amounts of data into a warehouse or duplicating data or chart of accounts all of which can compromise data or result in the loss of inherent business logic. Only the IDM can support a closed-loop performance management process, provide the common framework to ensure information consistency, maintain the necessary business logic and context to understand the result, and allow users to drill into further detail and perform what-if analysis to understand the impact of every decision.

This paper will describe the performance management cycle, identify the challenges associated with information chaos, and introduce the IDM and describe its benefits as a platform for supporting a closed-loop performance management system.

DEFINING THE CORNERSTONE OF ENTERPRISE PERFORMANCE MANAGEMENT:The Business Objects Integrated Data Model

Contents

1 Executive Summary2 The Performance Management Cycle3 The Challenges Of Information Chaos6 Overview of the IDM 6 Core Components 7 Benefits 8 Using the IDM to Tie It All Together10 Conclusion

Only the IDM can support a closed-loop performance management process, provide the common framework to ensure information consistency, maintain the necessary business logic and context to understand the result, and allow users to drill into further detail and perform what-if analysis to understand the impact of every decision.

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For most organizations, performance management involves a variety of business processes, including financial consolidations, scorecarding, planning, profitability analysis, and management reporting. Until recently, many organizations viewed each of these activities as discrete processes independent from each other. In the resulting patchwork of performance management systems each performed well individually, but organizations lacked an integrated system to support common data and provide a unified view of the business. This made it particularly difficult to set goals, ensure execution across multiple processes, and provide feedback to management. In addition, by using a fragmented approach to performance management, a company reduces its effectiveness as data is duplicated, manipulated, and pushed back out to users with little consistency.

THE PERFORMANCE MANAGEMENT CYCLE

Figure 1: The Performance Management Cycle

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In contrast, best practice organizations view performance management as a closed-loop cycle. The process begins by setting goals as part of a corporate strategy. Operational plans and budgets are then prepared to define the resources required, along with new initiatives, programs, and costs for supporting these goals. Best practice companies then measure and monitor results against key performance indicators, analyze exceptions and trends, and course correct to ensure they are optimizing for profitability and value creation. This is done on an ongoing basis to ensure that the business is responsive to change and can adjust projects and reallocate resources as needed to reach strategic goals.

Even though the process is closed-loop, each stage of the process requires a different set of unique capabilities. For example, to prepare the strategic and financial plan, managers need access to flexible modeling and immediate what-if analysis. But, when it’s time to consolidate results, they require the strict enforcement of GAAP and audit trails. Trying to force-fit the capabilities needed at each stage of the performance management cycle into a single rigid system leads to an approach that does not effectively support the needs of any stakeholders involved in the process.

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Not only do organizations need a closed-loop performance management system, they also must improve the quality, availability, and relevance of the information they use to make critical business decisions. While technology has allowed companies to amass vast stores of data, real insight on performance often requires delving into an array of disconnected systems and sources. Historical information is stored separately from forecasts, competitive benchmarks are gathered in spreadsheets, and financial data is stored in a separate silo from operational data. And as the number of systems in a company proliferates, the problem is exacerbated. Incompatibilities in data across systems require the additional time and effort of employees who must reconcile, cleanse, and report data—resulting in delays in decision-making that can cost millions of dollars in lost opportunities.

The profusion of system-of-record applications also leads to multiple sources of reference data (known as metadata, or data about data). Metadata is used to describe the information in a system; it includes dimensions, hierarchies, attributes, and business rules. For example: sales (account) in the United States (geography) for a laptop (product) sold over the internet (channel) last month (time period) were $5 million. Only when the $5M is described with metadata—account, geography, product, channel, and time period—does it have meaning. The problem is that each system—whether for planning, financial consolidation, reporting, or any other performance management domain—contains a set of metadata that may be internally consistent on its own, but which likely does not agree with metadata outside of the system. Trying to synchronize information from each system by building bridges and links is made all the more challenging due to a pervasive lack of coordination and standards for metadata at both the business process and technology levels.

This combination of disconnected systems and inconsistent metadata results in information chaos that presents several challenges for an organization, including:

• Compliance and regulatory challenges—Mandates such as Sarbanes-Oxley and Basel II have raised the bar on reporting processes. It is no longer sufficient for a smart analyst to pull information together in a spreadsheet. Consistent and reliable audit trails from source to financial statements can mean the difference between a good quarter and going to jail. Timely and accurate reporting is also essential to meeting the global regulatory requirements of the SEC, IFRS, and other governing bodies.

THE CHALLENGES OF INFORMATION CHAOS

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• Poor decision-making—Countless business decisions are made every year based on faulty, invalid, or out-of-date information, costing companies millions of dollars. Version control problems are rampant as users can’t identify which source of infor-mation contains the latest data—or worse yet, lack access to the data they need.

• Missed opportunities—Stiff competition exists in every industry. Companies able to take quick, decisive action remain nimble, seizing opportunities to gain a competi-tive advantage. Disconnected systems and multiple manual workarounds result in information delays, placing competitive advantages at risk.

• Increased costs—As systems and processes are duplicated, users are forced to reconcile information. Organizations end up paying the price for additional soft-ware, hardware, and maintenance. They also shoulder the additional cost and effort required from staff attempting to reconcile the data and integrate systems.

To minimize the impact of information chaos, many companies have elected to build data warehouses and data marts or implement ERP systems. But neither of these approaches is optimal for supporting ongoing performance management. Data marts provide strong application-specific functionality, but rely on extract, transform, and load (ETL)1 integration. Data context can be lost and extensive IT support is often required to ensure data consistency. And while ERP vendors have long promised an all-in-one solution, in reality this approach has been cumbersome to implement, costly to maintain, and short on the functionality required to address specific performance management needs. With both data marts and ERP systems, informational queries are performed and the results dumped into standalone spreadsheets, undermining the credibility of the information. The questionable business logic built into these spreadsheets ripples through the organization, exacerbating the problem for inconsistent and inaccurate data.

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1ETL—extraction of data from one system, and transformation of the data to make it suitable for loading into another system

As a balanced framework, the IDM combines the robust capability needed to support distinct performance management processes with a consistent view of all data across the organization. By providing a common framework or set of rules, the IDM avoids the patchwork of cobbled-together systems, databases, spreadsheets, and reporting tools that can drain resources and compromise accuracy. The IDM framework allows each best-of-breed application to perform its unique role in the performance management cycle. Because all reporting references lead back to the IDM, consistent results are fed to the appropriate financial report, dashboard, or ad-hoc query, ensuring that everyone works from the same data set. Balancing the need for best-of-breed capabilities and technical simplicity, the IDM supports all enterprise performance management (EPM) components on a single, integrated data model.

Figure 2: The IDM is the balanced approach to supporting EPM

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The average billion dollar company wrestles with 10 different general ledger systems, 12 budgeting systems, and 13 reporting systems. By comparison, best practice companies have no more than two of each and many have standardized on a single platform.2

David Axson, Best Practices in Planning and Management Reporting

2David Axson, “Best Practices in Planning and Management Reporting: From Data to Decisions”, 2003 by David A. J. Axson and The Hackett Group, published by John Wiley & Sons, Inc., Hoboken, NJ.

The IDM serves as the common set of business data, metadata, global business drivers and assumptions, and KPI’s—all of which allow applications to seamlessly share data without the need to transform or reconcile it. The result is that finance and business users all work from the same data, yet they each manage their own systems and processes. Each of these performance management processes directly integrates to other core processes in the organization, allowing users to spend more time understanding and analyzing information so they make better decisions, minimize risk, and maximize value creation.

The IDM recognizes three tenets. First, there is significant business value in centrally managing the core components of performance management applications. Second, the performance management cycle is iterative, linked, and requires data and metadata to be shared. And finally, purpose-built applications are required to efficiently run core business processes. These best-of-breed applications are easier to learn, faster to deploy, and less costly to manage than monolithic solutions or toolkits. The IDM provides the business integration required for performance management and eliminates data duplication as well as complex ETL data mapping and transformation issues related to data warehouses.

Figure 3: The IDM provides that unifying layer in the Business Objects EPM suite

OVERVIEW OF THE IDM

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Core ComponentsAs the cornerstone of the Business Objects EPM solution, the IDM includes metadata, global assumptions, common data, and business rules shared by Business Objects performance management applications. There’s no need for complex ETL, data movement, or data synchronization to perform these core EPM functions.

• Metadata—the information used to describe the data, including dimensions, dimension members, and hierarchies.

• Global assumptions—performance management assumptions such as exchange rates, price lists, economic rates, and other variables that are used to create business models.

• Common data—includes financial data, such as revenue and expense information by product and line of business; non-financial data, such as volume of units sold or total square footage; and KPI/scorecard data, which includes combinations of both financial and non-financial information. The data in the IDM is the source data managed by the EPM applications.

• Business rules—definitions of calculations, workflows, and ratios and how and when to apply them.

The IDM allows common elements from the key performance management domains to be shared across applications in the performance management cycle.

BenefitsCompanies that adopt the IDM as a platform for a complete, closed-loop EPM process will be better equipped to make proactive decisions to respond to today’s competitive and regulatory pressures. Specifically, the IDM affords companies three key benefits: data integrity, deeper insight, and more control.

Data integrity means having a single version of the truth across all performance management applications, thus reducing or eliminating timely and costly data reconciliation processes. The IDM satisfies the CFO’s needs for accuracy and alignment by providing access to relevant information and improving visibility on key performance metrics. The IDM is also welcomed news for the CIO, since technically capable staff members are not bogged down in the creation and management of error-prone ETL procedures. Furthermore, the IDM allows a company to implement only one or two applications from the enterprise performance management suite, and still have a framework that can easily accommodate the addition of other applications in the future.

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The robust, purpose-built performance management applications linked via the IDM support deep business insight and provide finance and business professionals with the functionality they need to carry out business activities. They can rely on trusted data to reduce financial closing and reporting cycles and shorten the time to produce the budget. The access to reliable, consistent data also increases the accuracy of forecasts and allows managers to more precisely define the drivers of profitability—confident they are sharing common definitions for the rules that define their business.

Finally, with an integrated data model, adhering to compliance and audit standards is simplified. The metadata and data contained in the IDM is managed using performance management applications that come with built-in process and approvals mechanisms that facilitate compliance. With the appropriate workflow in the Business Objects EPM applications, managers can easily change the chart of accounts structure, add a journal entry, submit a plan or forecast, or create a cost object and be confident that an audit trail will track the change from source to disclosure.

Using the IDM to Tie It All TogetherLet’s consider an example to illustrate how the IDM can be used as the unifying foundation for a company’s EPM processes.

Executives begin the planning process by reviewing their analytic dashboard supported by BusinessObjects Scorecard. They focus on reviewing the company’s performance-to-plan in both operating measures and financial results. BusinessObjects Planning allows the executives to compare their actuals data from finance and targets from planning in real time, since both are based on a common chart of accounts and organization structure with the IDM. In addition, competitive information can be conveniently pulled into the IDM through EdgarOnline and XBRL. Because data structures are consistent with external standardized reporting, executives can evaluate their performance against industry benchmarks and their competitors with the confidence that they are making an apples-to-apples comparison.

Armed with key financial, operating, and competitive information, executives can continue their strategic planning process by defining high-level targets using BusinessObjects Planning. To evaluate options, the strategic plan also includes a set of what-if simulations based on a variety of project and initiative combinations. Budgets can be seeded with detailed data using workback and automatic allocations and managers can refine and modify budgets as needed. To increase

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plan accuracy, key drivers and global assumptions can be shared via the IDM from BusinessObjects Activity Analysis to create driver-based models. These models will reflect the true costs in each line of business and can be used to better predict results.

With the first reporting cycle, BusinessObjects Finance is used to produce a budget that is consolidated alongside the most recent actuals, providing a consistent view of the results for external reporting and guidance. Data can be used at different levels of detail to support various EPM processes, but the data is still reconcilable at all levels and across all processes. For example, because of the IDM, there is no reconciliation required for plan versus actual data since the hierarchies are common to both applications.

With the IDM, users can seamlessly pull information from any application through a common reporting interface, resulting in consistent reporting across the entire EPM suite. Users can be confident that the information they are viewing is accurate, consistent, and has the detail and business logic necessary for them to understand and analyze results. Analytics, financial statements, variance analysis, and scorecards all leverage the IDM to provide a single view of the information business managers need to make the right decisions. For example, a manager may learn from monitoring dashboards that the company is in jeopardy of missing operational targets. To course correct, the manager can use detailed profitability analysis to understand the product mix and channel that will best achieve plan targets. Because the IDM ensures that product and channel lists are common across the profitability and planning applications, there is no need to reconcile the metadata. And, if the manager updates either of the hierarchies, changes are reflected in real time in both applications.

Finally, assisting with creation of a risk and control framework, a common chart of accounts underpins the key controls supported by BusinessObjects Financial Governance. Key account details are available in real time through the IDM, enabling rapid scoping of materiality. The compliance status on key controls can then be included in dashboards, financial statements, or any other EPM application.

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In theory, performance management represents a set of integrated processes that are carried out by business managers and executives with efficiency and effectiveness to increase the value of the organization. However, in reality performance management processes are often disconnected and inefficient. Strategic plans are not linked to operational goals and targets, a variety of systems and data stores make reconciliation a major challenge, and the valuable analysis of profitability and performance is done in isolation. Some organizations look to remedy this situation through a data warehouse that removes information from business logic and context, while others adopt monolithic ERP-style application and end up sacrificing functionality and flexibility. In the end, organizations adopting either alternative won’t have access to the data they need to optimize performance.

The Business Objects integrated data model balances best-of-breed applications with the need for common business rules across the enterprise performance management process. Information retains the context and business rules necessary to perform detailed analysis while key data elements and hierarchies are shared to ensure consistency across the enterprise. The IDM leverages the core capabilities of each application in the Business Object EPM suite and eliminates the inefficiencies of having to link them together. Ultimately, the IDM eradicates information chaos and provides the best balance of business capability and technical simplicity.

CONCLUSION

Figure 4: The Business Objects EPM Suite

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© 2007 Business Objects. All rights reserved. Business Objects owns the following U.S. patents, which may cover products that are offered and licensed by Business Objects: 5,555,403; 6,247,008; 6,289,352; 6,490,593; 6,578,027; 6,768,986; 6,772,409; 6,831,668; 6,882,998 and 7,139,766. Business Objects and the Business Objects logo, BusinessObjects, Crystal Reports, Crystal Xcelsius, Crystal Decisions, Intelligent Question, Desktop Intelligence, Crystal Enterprise, Crystal Analysis, Web Intelligence, RapidMarts, and BusinessQuery are trademarks or registered trademarks of Business Objects in the United States and/or other countries. All other names mentioned herein may be trademarks of their respective owners. May 2007 WPxxxx-A

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