Software That Gives the Big Picture

What can the newest generation of enterprise-wide analytical tools tell financial executives about their operations?
Jackie CohenMay 30, 2001

Sometimes you need a piece of software that gives you the big picture, and Empresas Polar, which has been feeding 600 different food and beverage lines to the people of Columbia and Venezuela for the past 60 years, has been eager to get its financial planning into focus.

For a company with such a varied diet of businesses, financial planning can be a nightmare, and this became especially clear when the Caracas-based holding company merged all of its subsidiaries and centralized all its corporate functions.

“The level of information we had on each [of the 600] business lines was completely different,” says Alejandro Bombaci, CIO of Empresas Polar, which has more than $2.6 billion in revenue. “Each used different metrics, and had different information on geographic regions and product mixes.”

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Bombaci adds, “We also had different levels of SAP [enterprise resource planning software] usage. So we set up a formal system to use SAP to provide information at all levels, including the board of directors.”

To get the right kind of data to top management, Empresas Polar purchased SAP’s Business Intelligence. Such software — which goes by varying monikers like strategic enterprise management, enterprise performance management, business intelligence, or performance analytics, depending on which vendor you’re talking to, takes data from all of a company’s operational systems and uses it to generate company- wide performance reports and analyses.

The enterprise performance analytics tools generate composite numbers from across the company. That’s a sharp contrast to mainstream ERP functions, such as general ledger systems, which tend to provide individual line items, but not the detailed analysis found in the performance analysis tools.

“It provides an automated way to consolidate financial data, and be able to analyze and redistribute [our budget] among different cost and profit centers,” explains Bombaci. “Most ERP software provides information at a level very close to transactional data, and there’s a gap between that and decision making. Enterprise management software provides a very high-level means of access to the information and the ability to analyze it.”

The software itself is a fairly new addition to the broader ERP market. For example, even the market leaders like SAP and PeopleSoft have only had products available for the past year and a half. About 500 companies have bought the software, according to an informal estimate by Paul Hammerman, research director at Giga Information Group, in Cambridge, Mass.

Some analysts who track the ERP market say that performance analytics are the most recent major functional development in this class of software. What’s more, the analytical tools are needed if companies are going to reap the full benefits of their ERP systems. They expect that during the next several years, more large multinational firms will implement these analytical tools throughout their companies.

“There’s been a fair amount of interest in it, but it’s fairly difficult to implement,” as many of the systems require a foundation of a data warehouse and an existing ERP platform, says Hammerman. In addition, “it requires companies to adopt a whole new operating philosophy and discipline,” namely getting executives to quantify and analyze performance according to the software’s standardized metrics.

Despite the high costs and technical challenges, the analytical software can be a worthwhile investment in today’s economy. “The punishing climate of Wall Street and the steady stream of information have increased the already high demand for improved budget and corporate-planning processes,” says Bettina Zwerdling, an analyst at AMR Research. “More than ever, CFOs are looking for software to help them make better predictions and hit their financial targets.”

Empresas Polar has spent more time training employees on the business logic than on the technology itself, affirms Bombaci. The company has been integrating Business Intelligence with its existing ERP system from SAP. Bringing standardized data to the entire organization has been a $14 million project, including infrastructure, with the executive level information systems costing $5 million alone.

Despite the hefty price tag, Bombaci feels the software had paid for itself within just a few months of its being installed. Empresas has 17,000 employees, 250 offices, and 25 divisional or regional headquarters. Prior to the installation of the Business Intelligence package, it never had a detailed view of the expenses, revenues and profitability for each office. Now it does, and with that information, it’s been able to make quick decisions to improve the financial results at underperforming offices. It will be another three years before the implementation is completed, and Bombaci expects the payback to only increase.

Empresas is an example of a company that’s made effective use of performance analytics to react to changing business conditions, but other firms are using these tools while their entire industries are being turned on their heads.

For example, SunTrust, an Atlanta-based banking company, began installing PeopleSoft’s Enterprise Performance Management (EPM) last year, shortly after the repeal of the New Deal-era Glass-Steagall Act had been enacted.

The bank expects to have the system fully accessible to 5,000 managers by next spring. In the meantime, portions of the software are running at the bank’s management accounting division.

Part of the delay is due to the bank’s current reorganization of its operations to take advantage of the new regulatory regime brought in by the Graham-Leach-Bliley Act. The company is bringing together separate business entities under a single financial institution charter, although the data warehouse attached to the PeopleSoft system added to the complexity of the rollout.

“Eventually, all the senior management will be able to find information that will help them understand what’s happening in their business areas, and build better strategies from that,” says Cliff Hope, group vice president and head of management accounting at SunTrust, a $103 billion asset bank based in Atlanta. “It helps you understand on a high level which strategies are successful, how profitable our relationships are with various customers, as well as the products that these customers have selected to use.”

As both the experiences of both Sun Trust and Empresas make clear, installing performance analytics functions is a long and complicated task. But the benefits companies reap at the end of the process may be well worth the heartache.

AMR’s Zwerdling notes that once companies have their analytics systems up and running, they’ll be better equipped to react quickly to changing business conditions, and the benefit from that can be dramatic.

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