FINANCE

Enterprise Planning on SAP: Five Success Factors

September 2007

SAP is unique in terms of its size, its reach, and the extent to which large, global companies rely on it to manage their businesses. It's no exaggeration that SAP is a critical component of the information infrastructure of the world's largest and most successful companies.

Businesses derive tremendous value from their SAP deployments. Yet while each one is unique, all share common characteristics and present common challenges. Among the most pressing is the need to extend SAP functionality with a comprehensive planning and forecasting solution that enables a forward-looking view of performance.

Before discussing solutions for planning in an SAP environment, it's important to ask: Why do anything?

Three main goals

The first thing those seeking to change their processes want is improved accuracy in information about performance. Second is a closer alignment of resources with objectives across the organization so that, for example, marketing and sales are not working at cross purposes. Third is improved responsiveness, so the business can adjust more quickly to changes in the environment and minimize their impact on expected results.

These requirements can't be met merely by aggregating massive amounts of data. And SAP applications remain fundamentally transaction-based systems. IBM Cognos 8 Planning, by comparison, was conceived from the beginning as a solution for the forward-looking requirements of enterprise planning.

Enable forward-looking plans

Many SAP implementations are designed around financial reporting structures and operational transactions like supply chain. As such, they're focused on actuals. Planning and forecasting, however, almost always involves future organizational changes, changes to the product mix, adjustments to the management structure, or other as-yet-undefined alterations to the business landscape. Thus the ability to model not just what is but what may be is extremely important.

IBM Cognos 8 Planning addresses the forward-looking requirements of planning in two ways. First, it enables frequent contributions by hundreds or thousands of front-line employees so Finance has access to the most current intelligence about expected results. Second, it places ownership of business models and rules in the hands of Finance personnel, who can change structures and underlying assumptions quickly and easily without dependence on IT.

Enable driver-based planning

One of the strengths of SAP is its ability to collect, collate, and present information on a massive scale. Sometimes, though, this capability cripples the planning process. Asking for unnecessary detail in plans and forecasts creates unnecessary work for everyone involved in the process. It also encourages "gaming" and creates stress as employees plug in numbers they know they will later have to create a rationale for.

IBM Cognos 8 Planning was built from the ground up as a driver-based solution. That is, contributors are asked to input data in terms that are relevant to them – market share, margin, units sold, trips planned – while the software calculates the effects based on underlying assumptions that are modeled by Finance. Once the assumptions are more visible, Finance can examine and challenge the assumptions, rather than the raw data. This leads to infinitely more productive discussions about projections and adjustments to plan.

Reconcile top-down and bottom-up plans

Every organization engages in top-down planning. Executive set strategic targets for revenue growth, market share, total sales, and so on. Naturally, these targets have repercussions further down in the organization – hundreds of department and line managers must adjust their plans and allocate resources accordingly to maximize their ability to deliver on their respective part of the plan. Bottom-up planning enables an organization to understand the realities on the ground.

Reconciling top-down and bottom-up creates the most achievable plan. So these two processes must be in synch if the organization is to be successful. Calculations, assumptions, and underlying algorithms must be consistent from top to bottom to enable everyone to work in a coherent manner and toward a common goal. And it's in this respect that SAP users often struggle.

With IBM Cognos 8 Planning, however, plans created by the executive team retain their integrity as they are communicated down the hierarchy, regardless of the number of contributors or their geographic location. The plan serves as the common bond between the top-level goals and the bottom-level execution. It also helps secure buy-in and accountability.

Integrate data from different sources

Many organizations make multi-year, multi-million dollar commitments to SAP. In turn, SAP provides modules and applications to manage nearly every aspect of corporate performance. Yet the issue of disparate data remains. For example: a manufacturer may share its production plans with a strategic supplier that relies on Oracle. Another may acquire a competitor that runs PeopleSoft. And so at some point, every organization will need to incorporate data from a source other than SAP into its plan – meaning extensive IT input and significant delays.

True enterprise planning by default leverages core systems and data from all relevant sources. IBM Cognos 8 Planning, on the other hand, easily accomodates data in different formats from different core systems. It can automatically synchronize data and metadata (for example, charts of accounts, product hierarchies, cost center hierarchies, or employee lists) with other systems. As a result, Finance can build plans that engage the entire organization.

Owned by Finance

Naturally, IT must be involved in any planning implementation. It's essential that IT supports the plan and also ensures that the technology integrates with core systems. In many cases, though, claiming or assigning ownership of any specific SAP functionality or technology is a challenging prospect. In most organizations, SAP implementations are tightly controlled by IT and an elite corps of certified consultants and technicians. This approach, whatever its benefits in other areas, is simply not conducive to fast, responsive business planning.

In comparison, IBM Cognos 8 Planning was built from the ground up to be owned and managed by Finance. Product and customer hierarchies, calculations, and assumptions are done by Finance professionals in terms that they use and understand. As a result, plans can be created or updated as required, without waiting for IT intervention.

Drive user adoption

Of course, none of the above provides any value if people fail to use the system. And driving user adoption is a significant challenge in SAP-driven organizations. Most SAP applications feature a complex and demanding user interface that only those with a high degree of SAP-specific skills can navigate. Also, many planning-related tasks involve making changes to SAP's proprietary ABAP code – again, the domain of only a select few within any organization.

In contrast, high usability is core strength of IBM Cognos 8 Planning. For example: its Web-based interface lets users contribute to plans with only a browser and point-and-click actions. Menus and file names are displayed in many local languages or using any currency. Currency rates may be global, local, or tied to specific accounts or elements within a planning model. With its add-in for Excel, IBM Cognos 8 Planning offers a convenient alternative to its intuitive browser interface, enabling everyday users and spreadsheet users to work in the environments most familiar to them.

Finally, IBM Cognos 8 Planning integrates into many enterprise portals and with IBM Cognos 8 Business Intelligence, providing all contributors with a centralized source for plans, reports, metrics, and alerts.

Summary

Many organizations with massive investments—and confidence—in their SAP systems have turned to Cognos to transform their planning. One has to ask why. The answer is that IBM Cognos 8 Planning is the only enterprise planning solution that fully leverages and extends the immense business value of SAP; is purpose-built for the unique requirement of business planning, and integrates seamlessly with IBM Cognos 8 Business Intelligence for a complete decision-making and performance management platform.