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Consolidation in the cloud
Is EPM in the cloud right for your company?
June 2016
2 Consolidation in the cloud
Enterprise performance management applications: Visibility into business performance
Enterprise Performance Management (EPM) applications are tools that provide integrated financial and operational information to executive decision-makers, allowing them to gain a view into the profitability and performance of their business for the past, present and future. To gain deep visibility into business performance, companies need a performance management platform that provides insight into historical information and current results and also enables predictive analytics to help them manage and plan for the future.
EPM applications help finance departments facilitate and streamline a wide spectrum of the financial close process—from information gathering, to regulatory and management reporting, as well as planning and budgeting. With a properly installed and configured EPM platform, companies no longer have to rely on multiple, often error-prone spreadsheets, off-line reporting, and email communications and phone calls in order to successfully gauge the health of their business and the status of their accounting close. In short, everything is in one place.
Moving EPM applications to the cloud is no longer simply coming—it’s here—and for companies this has been a significant transition over the past 10 years. Many Chief Financial Officers and Chief Information Officers are now embracing the many benefits of cloud-based applications.
Benefits of EPM in the cloud Cloud computing offers a scalable model for sophisticated financial reporting at a fraction of the capital expenditure required for typical on-premise EPM solutions. By automating key accounting processes, cloud-based solutions have the potential to save time during the period-end close and help decrease the risk of error associated with manual approaches.
The benefits for transitioning a company’s IT systems—including their EPM platforms—to the cloud are considerable: shorter implementation time, reduced consulting fees, broader geographic reach, real-time patches and upgrades performed by the vendor, and the ability to account for monthly subscription costs as an operating expense versus capital expense. Companies
also require a much smaller IT footprint to manage such applications.
With on-premise EPM applications, companies have to maintain the software in multiple environments on multiple servers, and staff their IT and Finance departments with sufficient resources to manage them. Outside consultants and internal administrators are also often needed to make many changes to the software. Additionally, every two to three years companies may need to complete a costly upgrade in order to benefit from the latest features, security updates, and general enhancements to stay current—which may mean a lengthy and labor-intensive implementation process and new hardware. These costs are considered capital expenses, and can stay on a balance sheet for years. The upside for companies in moving EPM to the cloud is indeed considerable.
Potential risks of EPM in the cloud There are, however, potential disadvantages to cloud-based EPM applications. These include privacy and security concerns around critical data, the worry that cloud-based consolidation systems may not be able to handle complex accounting environments, and the risk of “outsourcing” the administration of such critical systems to third party vendors.
Furthermore, customization of cloud-based EPM applications may be limited, and this is an important consideration. Rarely do two companies have an identical financial close, budgeting or reporting process, and therefore custom configurations of EPM applications are often a requirement, and not necessarily a strength of cloud-based EPM applications.
Given these potential limitations, EPM in the cloud may not be right for all companies—at least not yet. Cloud-based EPM systems are in many cases still in the development stages, and quite a few of the features of on-premise EPM systems—such as large entity, multi-currency reporting structures—may not be as robust in the cloud as existing on-premise EPM applications. For companies that have a large EPM footprint, including multi-users, entities, reporting structure, and currencies, the cloud may not be the appropriate solution at this time.
Consolidation in the cloud 3
Is EPM in the cloud right for your company?
Given that EPM service in the cloud is now a reality, is EPM in the cloud right for your company? The answer depends on several factors that may vary by company.
EPM in the cloud may be right for your company if:
Spreadsheets are your standard ‘consolidation tool’
Spreadsheets are causing major financial data inconsistencies
Mundane and redundant tasks consume your day
Limited functionality of your accounting software prevent you from supporting multiple tax rates, currencies, etc.
Protecting data from alteration is nearly impossible
Performing an audit trail is nearly impossible
Manual data entry leaves your team questioning when, why, or who was responsible for the last written entry
If you do not have any existing consolidation or budgeting tools, or the above factors describe your organization, then EPM in the cloud is an option to seriously consider.
The relative low cost of entry, the ease of access for finance teams, the streamlined and controlled consolidation and budgeting process, along with the enhanced security of data are all considerations that make the move to EPM in the cloud a viable option for your company.
EPM in the cloud may not be right for your company if:
You have a large EPM footprint (over 100 users)
Your application has customizations that are needed to perform internal and external reporting
You are in multiple countries, performing sub-consolidations that roll up into a global consolidation
Your company has multiple currencies, entities, or complex inter-company transactions
Your company makes thorough use of the journal entry features in your existing EPM application
If these factors describe your organization, then you may not be a good candidate for the cloud—at least not yet.
While the cloud will likely become the way of the future for most entities regardless of their size, some of the major benefits and functionality of on-premise EPM applications have not yet been sufficiently replicated in the cloud. This is particularly the case for organizations that have complex consolidation processes.
However, leveraging EPM applications in the cloud is not a black and white decision—there is a potential third way—an EPM “hybrid” approach.
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Is EPM in the cloud right for your company?
A hybrid of cloud and on-premise EPM tools may be right for your company if: Your company is currently using a EPM application
Your company has a medium-sized user base (50 or fewer licensed users)
There is a relatively simple accounting setup required such as few complex calculations, hierarchies, or reporting structures
Your company is interested in cloud-based planning, but are not yet comfortable with the financial consolidation & reporting capabilities in the cloud
Your company wants to lower your on-premise footprint to save on licensing and consulting fees required for on-premise tools
If these factors describe your organization you may want to consider a hybrid cloud approach to EPM. For example, your company could take advantage of cloud-based planning, but not cloud-based financial consolidation or reporting. The consolidation and reporting capabilities could stay on-premise, but moving planning functions to the cloud can help reduce costs. Many companies are taking a hybrid approach, moving to the cloud in an incremental manner, and then fully migrating at a later date once cloud-based EPM applications better meet their needs.
Conclusion The days of entirely manual planning and consolidation processes (i.e., via spreadsheets) have long since passed, and the days of purely on-premise EPM applications are dwindling as well. The high cost of an IT infrastructure and full software license ownership have been quite a challenge for both smaller companies and mid-tier companies looking for alternatives to complex, expensive on-premises or spreadsheet based models.
Mainstream EPM applications in the cloud—featuring adaptable maintenance and support, lower total cost of ownership, unlimited licensing, quick deployment and re-usable planning models—is the new market direction. Since these solutions can stand alone, or be blended with on-premise solutions and managed service models, they are attractive for companies of all sizes, but in particular for small to mid-sized businesses.
The scalability, reliability and opportunity that the cloud offers to companies will continue to expand in the coming years and organizations that adapt and adopt sooner will be light years ahead of the curve and able to more quickly capitalize on their investment.
Contacts
For a deeper discussion on cloud-based EPM solutions, please contact one of our Enterprise Systems Solutions professionals:
Robert Clark Principal +1 267.330.2497 [email protected]
Sachin K. Mandal Principal +1 973.580.9950 [email protected]
Timothy J. Simkiss Manager +1 267.330.4785 [email protected]
