Managing a business means using a lot of different software, and two very common forms of software used in large enterprises are Enterprise Resource Planning (ERP) and Enterprise Performance Management (EPM).
Often the two types of software are confused and are thought to be similar in terms of the characteristics they offer, but they are two distinctly separate systems. So, what are the differences? And where are each used?
What is Enterprise Resource Planning?
“ERP is focused on transactional processing and coordinating the company’s resources, providing operational data to the organisation. ERP helps the organisation determine the best ways to use given resources within the company on a day to day basis.”
Traditionally, Enterprise Resource Planning (ERP) was greatly focused on addressing the ability to capture transactional data to precisely report the economic condition of the organisation. ERP expanded from accounting to supply chain to manufacturing and even to human resources.
ERP is now a field of business performance management that considers the visibility of operations closely across all areas of the business and assists employees in doing their job more proficiently by breaking down barriers between different areas of the business.
What is Enterprise Performance Management?
“EPM supports the management processes that the enterprise can use to improve profits, and performance. EPM is designed to help the enterprise set goals, develop and execute plans and make changes needed through periodic reviews of results.”
Several years after ERP systems were developed, a completely separate and independent set of capabilities evolved to address deficiencies such as budgeting and forecasting, analytics and reporting, which were either missing or not meeting the demands of the enterprise, the solution to which was Enterprise Performance Management (EPM).
Enterprise Performance Management is made up of a variety of business planning tools and comprises of evaluating and managing performance to aid in the achievement of business performance goals. Using EPM can help determine how to optimise performance and create more profit for the enterprise overall. It is generally driven by the finance department or CFO of the enterprise and is a system used to monitor, analyse and manage the performance of the organisation, particularly in terms of evaluating and allocating resources.
Enterprise Resource Planning Vs Enterprise Performance Management
Generally, companies start off by using an Accounting or ERP system to handle day to day transactions, and will often use Excel spreadsheets to manage EPM processes such as budgeting, forecasting and financial reporting. As the company expands however, they outgrow spreadsheets and at this stage are likely to implement EPM applications as an alternative.
ERP & EPM Cloud Service Convergence
From their inception, ERP and EPM systems were not always designed to work together, as they were designed with different objectives, but now, Oracle is presenting a unified interface converging ERP and EPM and creating a new digital and finance solution.
The product will help to merge financial management and planning tools to help drive businesses forward. It will also help to cut costs across organisations with automated and better-managed processes. In addition, it will simplify compliance with a wide range of increasingly strict regulations.
Closing the gap between ERP and EPM will hopefully result in offering organisations a richer, more extensive integration. Unification of ERP and EPM should work to improve decision-making and better align strategic needs across the user enterprise. The convergence of the two systems will, no doubt, improve efficiency and effectiveness, while potentially lowering risk and helping businesses to become more responsive.