What's in a name?
MI&S's answer to Gartner's view on CPM
‘Gartner is retiring the concept of CPM’: words from two Gartner seniors in a blog written by David Williams, SAP’s Enterprise Software Marketing VP. As such, it has become clear Gartner has dropped the concept op ‘Corporate Performance Management’. According to Serge Vigoureux, business unit leader Management Information & Systems at TriFinance, Gartner has lost its compass needle, by no longer differentiating between financial consolidation and managerial CPM.
At first, it looks like nothing more than a terminology game. Gartner says: ‘Magic Quadrant for Cloud Strategic Corporate Performance Management Solutions has been renamed ‘Magic Quadrant for Cloud Financial Planning and Analysis Solutions’ and ‘Magic Quadrant for Cloud Financial Corporate Performance Management Solutions has been renamed ‘Cloud Financial Close Solutions’. David Williams from SAP: ‘this reflects that Gartner has officially retired the concept of CPM and reclassified it to two existing Quadrants. It should more accurately reflect the purchase patterns of customers. Customers are said to be more pragmatic in performance management. As such, they are returning to core financial management value propositions. Consequently, the CPM concept is said to become void.
Tongues in Babel
But is it really? Gartner is confusing the tongues in Babel. Why is that? Because it replaces the CPM-concept by two new terminology sets: ‘financial planning and analysis’ (incorporating the old strategic CPM) and ‘financial close’ (incorporating the old financial CPM). This new Gartner approach will only create more confusion throughout the whole financial – and even business – community. The overlap between financial and managerial reporting remains. Serge Vigoureux, business unit leader Management Information & Systems (MI&S) at TriFinance: ‘The difference between financial consolidation and managerial CPM is crucial. Sometimes, both approaches might even lead to different outcomes. Moreover, most CPM-packages make a clear distinction between these two. Therefore, we believe it to be a mistake when Gartner does not differentiate between the two.’ In its daily practice as consultant, MI&S has noticed that there are almost no companies where one and the same person is dealing with both financial consolidation and managerial CPM (the latter typically being the domain of the controller).
Back to basics
In a workshop earlier this year, entitled ‘CPM: back to basics’ MI&S made clear what the real content and value of CPM actually is. CPM should be seen as an umbrella covering three main areas of performance management: financial consolidation (consolidation, the basics), managerial CPM (reporting based on managerial principles, with a focus on figures) and strategic CPM (focus on strategy, with financial as well as non-financial figures). The advantages of such a trichotomy are obvious. Vigoureux: ‘Financial consolidation only deals with the actual and previous years’ figures and how to formally report them, based on accounting standards such as IFRS. Managerial CPM is a tool to steer management, basically for internal rather than external audiences. It differentiates between actual, budgeted and forecasted figures.’ The third one is a pure strategic reporting, totally focusing on driving strategy execution.
For sure, it is far more important to focus on content, rather than on semantics, when dealing with CPM. But before doing so, let’s get the fundamentals right and use the same vocabulary. It seems Gartner has understood its mistake, and now says ‘mea culpa’, yet replacing it by creating even more semantic ambiguity. Or, as MI&S said during its spring 2018 workshop on CPM: let’s get back to basics.’ Let’s leave Babel and speak one and the same CPM-language.
Picture: Serge Vigoureux, business unit leader MI&S - TriFinance (copyright Jerry De Brie)
SAP-blog: 'SAP a visionary in new magic quadrant for cloud financial planning and analysis solutions'
Gartner, “Back to Basics: The Refocusing of Corporate Performance Management,” John E. Van Decker, Nigel Rayner, Christopher Iervolino, 31 October 2017.