Product Code: IT014-002906
While most enterprises understand the value of an enterprise performance management (EPM) solution, they often find it difficult to justify its benefits and accurately know its costs. In this report, Ovum provides practical tips to enterprises on how to accurately model the costs and benefits of procuring and managing an EPM solution.
- Assumptions used to model ROI can change based on industry, company size, geography, and environment, so it is important to test assumptions internally.
- Enterprises that deploy in phases, spreading license acquisition smoothly over the deployment period, achieve profitability much faster.
- Explains how to accurately model the costs and benefits of procuring and managing an EPM solution, and arrive at a financial metric which best summarizes the decision for your enterprise.
- Discusses why quantification of TCO and ROI are not the only important metrics for justifying the economic value of EPM.
- How does one go about forming a use case for EPM purchase?
- What are the financial metrics best used for quantifying the value of EPM, and which ones are relevant?
- What are the key assumptions and which of these should be stress-tested to ensure correct output?
Table of Contents
- Ovum view
- Key messages
- TAKING STOCK AND MAKING VALID ASSUMPTIONS
- Generic assumptions should be avoided as much as possible
- UNDERSTANDING DIRECT AND FIXED COSTS
- Direct costs are relatively easier to calculate
- Software licensing costs (SWLC)
- Licensing costs - on-premises
- Licensing costs - SaaS
- Software maintenance costs (SWMC)
- Maintenance costs - on-premises
- Maintenance costs - SaaS
- Hardware costs (HWC)
- UNDERSTANDING INDIRECT AND VARIABLE COSTS
- Indirect and variable costs are tricky to estimate
- Data warehouse costs (DWC)
- Integration costs (IC)
- Personnel costs (PC) - running and administration
- Deployment costs (DC)
- Customization and application building costs (CABC)
- Training costs (TC) - development and delivery
- UNDERSTANDING DIRECT BENEFITS
- Increasing finance efficiency remains the key focus for EPM
- Time savings on financial tasks benefits (TSFB): close, planning,
- Time savings on IT tasks benefits (TSIB): data quality, maintenance,
- Direct impact on revenue and costs (DRB and DCB)
- UNDERSTANDING INDIRECT BENEFITS
- Important to acknowledge indirect benefits
- Better capital management
- Better cash conversion cycle
- INTANGIBLE COSTS AND BENEFITS OF AN EPM SOLUTION
- Improving data quality and becoming a trusted single source of truth
- Risk-adjusted performance management
- Higher management efficiency and faster decision-making
- ESTIMATING TOTAL BENEFITS
- CALCULATING RETURNS AND TRANSLATING RESULTS TO "BUSINESS SPEAK"
- Deriving results
- Using the right project-financing metric
- Recommendations for enterprises
- Stress-test assumptions with vendors, IT services providers, finance,
IT, and HR
- Deploy in a systematic fashion
- Choose the right IT services provider
- Recommendations for vendors
- Make the evaluation easier for enterprises
- Communicate the intangible and indirect benefits clearly
- Position EPM for competitive advantage
- Further reading
- Ovum Consulting