What is EPM (Enterprise Performance Management)? 

What is EPM (Enterprise Performance Management)? 

By Kristina Mihaylova

What is EPM (Enterprise Performance Management)? 

By Aleksandar Mihaylov

July 4, 2024

Enterprise Performance Management (EPM) is a crucial set of processes and tools used by companies to plan, monitor and manage business performance. EPM acts as a guide for organizations, turning strategic goals into actionable plans, ensuring efficient resource allocation. This guide will go in detail about what is EPM, what are the key components of EPM systems and how to implement it to your organization for enhancing decision-making capabilities.  

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EPM is a management process for monitoring performance across organizations to improve business performance. It’s the core process for planning, budgeting, forecasting and reporting on business performance. 

Nowadays, EPM is crucial for organizations, as it integrates various components such as strategic planning, performance analysis, profitability and costa management. By leveraging these components, EPM provides detailed view of business performance, enabling data driven decision-making and strategic alignment. 

By turning strategic goals into stable plans and actions, it ensures that organizations navigate through the modern economy with purpose and efficiency. The numbers speak for themselves: 

  • 83% of organizations that implemented EPM improved decision making-capabilities. 
  • 65% experience enhanced strategic alignment across departments. 
  • 70% see major increase in budgeting and forecasting accuracy. 

Evolution of Enterprise Performance Management (EPM)

EPM has evolved from basic financial management & control tools to comprehensive systems that support strategic decision-making and performance optimization across the entire organization. Its evolution in the business world reflects the ongoing transformation in how organizations plan, execute, and monitor their performance to ensure alignment with strategic objectives.  

Financial Accounting and Control Systems

In the early stages, businesses primarily focused on financial accounting and control systems. The use of these systems in the 1960s-1970s was mostly for historical financial reporting, with little emphasis on forward-looking planning or analysis.  

Spreadsheet Software

The invention of spreadsheet software in the 1970s-1980s revolutionized financial planning and analysis. Spreadsheets were revolutionary at the time for handling financial data and performing complex calculations. They allowed for more dynamic financial modeling and scenario analysis, enabling more sophisticated budgeting, forecasting and financial reporting processes, but were prone to errors, difficult to consolidate for large organizations, and challenging to control, highlighting the need for more robust EPM solutions. 

Enterprise Resource Planning (ERP) Systems 

The 1990s saw the rise of Enterprise Resource Planning (ERP) systems, which integrated various business processes and data into a single, unified system. ERP systems provided a foundation for integrating financial planning and performance management processes with operational data. However, ERP systems often lacked the flexibility and analytical capabilities needed for advanced performance management, leading to the development of specialized EPM software. 

Specialized EPM Solutions

Specialized EPM software solutions began to emerge in late 1990s-2000s, offering more sophisticated, error-free & efficient tools for budgeting, forecasting, financial consolidation, and reporting. These solutions aimed to address the limitations of spreadsheets and ERP systems in supporting comprehensive performance management. EPM software started to incorporate business intelligence (BI) capabilities, enabling more in-depth analysis and insights into business performance. 

Cloud-Based EPM Solutions

Cloud-based EPM solutions in the late 2010s offered greater scalability, lower upfront costs, and easier maintenance compared to on-premise solutions. The advent of cloud computing has significantly impacted the EPM landscape, making powerful EPM solutions more accessible to a wider range of businesses. Cloud-based EPM platforms offer scalability, flexibility, and cost-effectiveness, along with enhanced collaboration features. The incorporation of advanced analytics, artificial intelligence (AI), and machine learning (ML) into EPM tools has enabled more sophisticated scenario planning, predictive analytics, and decision-making capabilities.  

Keep Exploring: Gartner Magic Quadrant: Exciting EPM Software Trends Every Business Should Know in 2024 

Key Components of EPM Systems

Enterprise Performance Management (EPM) systems are comprised of several critical components that work together to enhance business performance. These components ensure that organizations can set strategic goals, track progress, and make informed decisions based on real-time data. Let’s see some of the key components that make up an effective EPM system. 

Strategic Planning

If the strategic planning is the “foundation’ through which an organization defines its strategy or direction and makes decisions on allocating its resources to pursue this strategy, the EPM is the ‘’execution engine” – the framework for monitoring performance against strategic goals. The synergy between strategic planning and EPM is vital for any organization aiming to thrive in today’s dynamic business environment. While strategic planning sets the direction, EPM ensures that the organization moves effectively towards its goals.  

Budgeting & Forecasting

Budgeting and forecasting are crucial components of EPM systems. EPM enhances these processes through integration, automation, and advanced analytics, facilitating more accurate, efficient, and dynamic financial management. Leveraging AI and machine learning, EPM systems can analyze patterns in large datasets to predict future trends. This allows organizations to be more agile and responsive to changes, streamline the budgeting & forecasting processes, improve accuracy, and enhance strategic alignment. 

Financial Consolidation & Reporting

These processes involve aggregating and harmonizing financial data from various parts of an organization to produce a unified financial statement that reflects the company’s overall performance. The automation of these processes through EPM reduces the potential for human error and frees up finance teams to focus on analysis and strategic activities. Reporting with EPM goes beyond the standard financial statements to include management reports, regulatory filings, and other analytical reports that help in decision-making.  

Performance Analysis

Performance analysis via EPM systems significantly impacts strategic decision-making by providing a data-driven foundation for evaluating the effectiveness of strategies and initiatives. It enables organizations to quickly identify and respond to performance gaps or opportunities, make informed decisions on resource allocation and investment, adjust strategies in real-time to align with changing market conditions or organizational objectives, foster a culture of continuous improvement and accountability by making performance data accessible and actionable.  

Scenario Modeling

Through scenario analysis, organizations can better manage risk and determine the best allocation of resources across different potential futures. This ensures that resources are invested in areas with the highest expected returns or strategic importance. Scenario modeling is not only about planning but also about monitoring current performance against the projected scenarios. EPM systems enable organizations to track actual performance relative to the scenarios, adjusting strategies and operations as needed. 

Profitability & Cost Management

By identifying and analyzing the cost drivers and profitability of different areas of the business, organizations can streamline operations, reduce waste, and improve overall efficiency. EPM enables businesses to allocate resources more effectively, investing in high-margin products and services while reducing or eliminating those that do not meet profitability targets. By managing costs effectively and focusing on profitable segments, companies can price products and services more competitively and invest in areas that offer a competitive advantage. 

What Are the Benefits of EPM Systems?

Enterprise Performance Management (EPM) offers a comprehensive suite of benefits that transform the way organizations plan, execute, and monitor their strategic objectives. By integrating data across the enterprise, EPM enhances decision-making with actionable insights and predictive analytics, ensuring that strategic goals are met with precision. Here are some of the top benefits from EPM implementation: 

  • Increased Agility
  • Streamlined processes
  • Data-Driven Culture
  • Enhanced Strategic Alignment
  • Improved Risk management
  • Cost-optimization
  • Scalability

EPM and Competing Tools

While Enterprise Performance Management (EPM) is distinct in its focus on strategic planning, financial management, and analysis, it intersects with several other types of business software that can be considered as having rival functionalities in certain contexts. Some of the rivals to EPM include: 

Business Intelligence (BI) Tools

Business Intelligence (BI) platforms are perhaps the closest rivals to EPM systems, offering data analytics, visualization, and reporting capabilities. BI tools enable organizations to aggregate, analyze, and present business data to help inform decision-making. While EPM focuses on financial performance and strategic management, BI tools provide a broader view of data analysis across various business functions. Examples include: 

Enterprise Resource Planning (ERP) Systems

While advanced ERP systems are pivotal for optimizing daily operations and integrating business processes, EPM software focuses on the strategic management of an organization’s performance, combining financial and operational data to guide long-term decision-making and strategic alignment. Notable ERP systems include: 

Corporate Performance Management (CPM) Systems

Corporate Performance Management (CPM) systems, sometimes used interchangeably with EPM, offer similar functionalities such as budgeting, forecasting, and financial reporting. The rivalry here is more about the specific features offered by different vendors rather than distinct categories of software. However, some distinctions might be drawn based on industry focus, with certain CPM tools offering more specialized features for specific sectors. 

While these systems may rival EPM in certain functionalities, it’s important to note that they are often complementary. Many organizations leverage a combination of these tools, using EPM for financial planning and strategic management, BI for data analysis and insights across all business areas, and ERP for operational management. The choice between these systems depends on the specific needs, existing software ecosystem, and strategic goals of the organization. 

You may also like: EPM Software Pre-Built vs. Custom Solutions: What Is the Right Choice for Your Business?

EPM Tools  

Enterprise Performance Management (EPM) tools are essential for organizations to streamline their strategic planning, budgeting, forecasting and performance analysis. Among the top tools available, Anaplan, Oracle and Workiva are notable for their features and capabilities: 

  • Anaplan – Anaplan is a cloud-based platform, known for its scalability, versatility, and advanced analytics, ideal for dynamic modeling and real-time data. 
  • Oracle – Oracle offers powerful financial and reporting features with wide customization options. 
  • Workiva – Workiva is the best for regulatory reporting and compliance, ensuring accuracy and streamlined management of complex financial data. 

All these tools are highly effective and can bring value to any organization, depending on its goals. They offer various features supporting aspects of EPM, such as financial consolidation, regulatory compliance, and advanced analytics. However, Anaplan’s unique combination of scalability and versatility, also advanced analytics sets it apart.  

Anaplan: A Leader in EPM Tools 

Anaplan stands out as one of the leaders in the EPM landscape, offering cloud-based platform known for its scalability and versatility. It facilitates the dynamic modeling and real-time data, allowing teams to collaborate seamlessly. Anaplan has advanced analytics capabilities, enabling businesses to align strategies with operational reality. To further enhance its capabilities, it can integrate with ERP and BI systems, making Anaplan a preferred choice for various organizations seeking sophisticated EPM solutions

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Why Implement EPM Solutions? 

Implementing EPM in your organization is a strategic move to streamline financial processes, align strategic goals across departments, and enhance decision-making capabilities. It offers a holistic view of business performance, enabling leaders to make informed, data-driven decisions that drive growth and efficiency. EPM fosters agility in responding to market changes, optimizes resource allocation, and improves financial accuracy and compliance. By integrating EPM, organizations can navigate the complexities of today’s business environment with greater confidence, ensuring that strategic objectives are not just set but achieved, positioning the company for sustained success and competitive advantage. 

Future Trends of EPM Solutions

The future of enterprise management trends towards integrating AI and machine learning for predictive insights, embracing cloud-based solutions for agility and scalability, and prioritizing sustainability reporting to align financial performance with environmental and social governance (ESG) goals. 

AI & Machine Learning Integration

These technologies enhance predictive analytics, automate routine tasks, and provide deeper insights into financial and operational data. AI and ML can transform how businesses forecast, plan, and make decisions, moving from reactive to proactive and predictive management. They enable more accurate forecasting, anomaly detection, and the automation of data analysis and report generation, significantly improving efficiency and strategic insight. 

Cloud-Based EPM Solutions

The shift towards cloud-based EPM solutions is accelerating, driven by the need for flexibility, scalability, and cost-efficiency. Cloud platforms offer the advantage of anytime, anywhere access to Enterprise performance management tools, facilitating collaboration and real-time decision-making across geographies. They reduce the need for extensive IT infrastructure and upfront investment, making advanced EPM capabilities accessible to a broader range of businesses. Additionally, cloud solutions can be updated more frequently with the latest features and security measures, ensuring that organizations are always at the forefront of performance management technology. 

Increased Focus on Sustainability Reporting

As global attention on sustainability and corporate responsibility grows, EPM tools are evolving to include comprehensive sustainability and Environmental, Social, and Governance (ESG) reporting features. Organizations are increasingly required to report on sustainability metrics alongside financial performance. Future Enterprise performance management trends include enhanced capabilities for tracking, managing, and reporting on ESG indicators, enabling organizations to align their strategic planning and performance management with sustainability goals. This integration helps businesses not only meet regulatory and stakeholder demands but also identify opportunities for efficiency improvements and risk mitigation related to sustainability issues. 

Enterprise Performance Management (EPM) FAQs

Optimize Your Enterprise Performance Management with B EYE

As businesses navigate an increasingly complex and data-driven world, Enterprise Performance Management (EPM) becomes essential. Anaplan stands out as one of the most powerful EPM tools, boosting organizations strategic planning and financial managements, driving efficiency and growth. Anaplan serves as a great scalable, responsive and connected system for synchronized planning, allowing you to adapt quickly, plan dynamically and improve intelligent decision-making. 

With its extensive EPM solutions, B EYE is ready to bring its expertise for your business needs, escalating your strategic planning and improving informed decision making.  

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