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Oracle EPM Index launched, amid modest achievement

Oracle has  launched the first Oracle Enterprise Performance Management (EPM) Index, in which businesses in Europe and North America are assessed on their ability to unite management processes and information systems to form a consolidated view of a business. On a scale of 0 to 10, these organizations attained an overall score of 5.13.

The results of the study indicate a generally modest level of achievement, with much work remaining to be done in developing an accurate and up-to-the-minute enterprise-wide picture of current performance.
The Oracle EPM Index is prominently featured on EPM TV – a new, innovative, internet TV portal dedicated to Enterprise Performance Management and powered by Oracle.

The research for the EPM Index was conducted by analyst group Quocirca, and asked 800 business decision makers in Europe and North America to rank their organizations on the processes and accuracy of information governing six distinct areas: the stakeholder environment, market model, business model, business plan, business operations and business results.

While organizations are moderately well-placed for each area (with the exception of stakeholder engagement) fewer than a quarter (22 per cent) feel that an integrated approach to the processes is necessary and more than a quarter (27 per cent) think that each process can be regarded in isolation.
Of the six areas researched, the stakeholder environment scores were the lowest.  This indicates that the involvement of stakeholders in the performance of the organization is not being optimized.  A high number of “don’t know” responses in this section indicates that many organizations were not even considering the needs of the stakeholders in their planning processes or value chains.

There is a high inverse correlation between a country’s Index score and its regulatory environment:  on the whole, the higher the Index, the lighter the regulatory touch.

The public sector and healthcare sectors, as the most highly regulated verticals, have the lowest overall EPM Index scores.
This inverse correlation demonstrates that businesses in countries and industries with demanding requirements for governance, transparency and accuracy of information are more aware of the challenges in linking disparate systems and processes to provide an accurate picture of performance.

Most organizations are slow to respond to changes in market and business environments with just 13 per cent of respondents believing themselves to be well placed in this regard.  The UK is markedly the most responsive in using processes to deal with critical events.

Use of Business Intelligence (BI) has a significant bearing on EPM achievement.  Respondents who see BI as being an “important” or “major” tool for their organization have index scores of 5.3, whereas those who see it as being an expensive means of visualising data scored 5, and those who see it as a tool for historical reporting only scored 4.9.

A pervasive common data model is rare in business.  While over half of respondents have a model or repository for some sets of data, only 1 per cent of organizations had a common data model across all sets.

Alain Blanc, Senior Vice President, Oracle EMEA EPM/BI, Western Europe Applications, said: “The Oracle EPM Index Research shows that organizations in Europe and North America have, as yet, achieved modestly in their quest for Management Excellence, by which we mean going beyond the attainment of operational excellence and making an organization smarter, more agile and better aligned.  We hope that we will see greater achievement as we repeat this research in the future.”

Frank Buytendijk, vice president and fellow of Enterprise Performance Management, Oracle Corporation, said: “As operational excellence becomes the norm rather than the exception in business, companies need a new source of competitive differentiation. Increasingly, strategic advantage comes through an ability to manage the overall performance of a company, rather than just its transactional processes. We call this new imperative “Management Excellence”. Oracle believes that Enterprise Performance Management is a significant part of organizations’ achieving this Management Excellence and that our technology has a key role to play in enabling EPM.”

Clive Longbottom, Research Director, Quocirca, said: “To know how an organization is performing is a basic need, requiring full visibility of various processes and workflows across an organization, its partners and other stakeholders, as well as the correct means of monitoring and measuring how effective these variables work to a required end result.  Our research shows that there remains much to be done, with disconnects between key steps and a lack of inclusion for essential stakeholders across processes.”
The EPM Index Research reveals a surprising lack of insight into the competitive environment, particularly where the success of potential new products and the profitability of existing ones were concerned:

Only a third of businesses rate their ability to assess the potential success of new product or service investments as six out of ten or higher
Only 12 per cent of organizations consider themselves well placed (i.e. score 7 or more out of 10) to determine profitability by product line, customer segment, market, channel etc.

Iberian organizations scored significantly lower than all other countries on all measures for the competitive environment, indicating that they have furthest to go in mastering these processes.

Only 13 per cent of companies score well (7 or more) in their ability to respond to business or market changes by modifying plans and budgets.
Buytendijk commented:  “The Oracle EPM Index demonstrates that financial consolidation often lives in total isolation in an organization and is not integrated with operational performance. Businesses are missing a trick in failing to feed information on operational performance back into financial planning and reporting functions.  Bringing these two disciplines closer together gives businesses much more agility to respond effectively to emerging challenges.”

There is a noticeable disparity across countries in the handling of risk and performance.  France and North America have the tightest links between risk and performance assessments with scores of over 5.2; Italy and Iberia the lowest at 4.5.

The UK has a markedly greater ability than any other geography to react to events in critical business processes and create new processes as appropriate with a score of 5.9, compared to Italy, which ranked second with a score of 5.5, and an average of 5.3 across all markets.

There’s a big variation between countries in accounting across business units – France (Index of 5.6) and Benelux (5.5) lead the way in linking multiple accounting reports.  Surprisingly, North America scores low with an Index of 5.1.

Only 16 per cent of businesses believe they are near a place where business units have visibility of their own accounts and these are all interlinked, providing a consistent view of performance both for individual departments and the business as a whole.
Three-quarters of organizations polled close their books within 10 business days of a financial review point.

Over 11 per cent of businesses have made substantial progress in their journey to eliminate reliance on numerous, disparate spreadsheets and put in place tools and processes that guarantee the timeliness, validity and accuracy of the final result – but 25 per cent still feel overly constrained by the amount of spreadsheet use in the organization.

Buytendijk commented: “In a complex international marketplace shaped by globalization, regulation and heterogeneous systems, covering the basics of reporting is no longer enough for forward-thinking enterprises. The challenge for businesses lies in connecting the dots across multiple departments and geographies to create an enterprise-wide management picture.”

Views of the role and importance of business intelligence are inconsistent, but only one-third of respondents see it as an important component in managing the business.  This contrasts with the picture shown by the research of a positive link between regarding BI as an important or valuable tool and a higher EPM Index score, and suggests that many organizations need to revisit the way they use BI.

The section of the EPM Index focused on stakeholder engagement ranked lowest of all six areas with a score of 4.8.  A major factor in the low score was a large proportion of respondents that were unable to say whether their organizations had consistent and repeatable processes in place to engage stakeholders in discussions or whether investors and regulators had a transparent view of their strategy.

Only about 13 per cent of organizations considered themselves to be well placed (i.e. scoring 7 or more out of 10) for the production of a comprehensive sustainability report (Slide 41)
Buytendijk commented: “The low level of confidence in procedures for stakeholder engagement suggests that organizations need to work harder to understand contributions from and expectations of their stakeholders.  Businesses will find themselves coming under increasing pressure from stakeholders across the board – the media, NGOs, investors and customers, etc. – to effectively monitor and reduce the environmental impact of their operations.  They should be looking at ways of incorporating this in their reporting cycles and associated business processes.”

Buytendijk summarized the findings: “The findings of the study give a good indication of the steps that organizations across the globe need to take as they aim for management excellence. The starting point is to recognize that stakeholder engagement, the competitive environment, the business model, planning, operations and reporting all play a coordinated role in providing a representative view of how the business is performing and how its performance could be enhanced.  Bringing together the information held within these functions, and supporting this with the appropriate business processes, enables the business to act effectively on the insights gained.  The next step is ensuring that there is a feedback loop to all of these processes, so that the business can continually refine and enhance the efficiency and agility of its operations.”


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