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POV

Striding into the Digital Era with Enterprise Performance Management

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by Alex-Paul Manders

The era of digital transformation is creating, among other things, a major paradigm shift in how we approach technology and finance. Yesterday’s way of thinking held that technology was the final component of an equation in which people were at the center, driving processes and change. Today, we’re seeing that equation flipped on its head as technology drives new and more efficient processes—and people, in turn, follow.

Digital transformation is now firmly at the heart of most enterprises’ efforts to remain competitive and profitable. And, to successfully embrace it, the IT and Finance organizations must be in alignment. Without this alignment and the agility needed to react quickly to rapidly changing market demands, organizations could easily find themselves playing catch-up with their competition and losing market share.

One of the most important things a CFO can do is to gain a deeper understanding of the role technology plays in future investments, and how IT cost transparency can help the organization make fact-based decisions about those investments. Technology is not just a support function, it is vital to corporate-wide policy, direction and strategy. And it is the job of the Finance team to work hand-in-hand with technology leadership to better understand the costs, benefits and performance metrics of new tech initiatives.

The CFO Looks toward Technology’s Role in the Enterprise

How do we get two separate departments that are accustomed to operating with a great deal of autonomy on the same page? Enterprise Performance Management (EPM)—the discipline of monitoring performance across the enterprise—is playing a growing role in helping organizations become more strategic in their use of technology as a business driver. EPM provides a comprehensive program that helps the CFO and the CIO quickly make better, more well-informed investment decisions.

When an enterprise implements EPM and takes into consideration the cost, quality and productivity metrics inherent in the practice of Technology Business Management (TBM), it allows the organization to track, measure and monitor the performance of IT investments. And this, in turn, drives digital transformation.

Strong EPM models and effective digital transformation rely on TBM, a methodology that builds transparency into IT spend and allows IT to forge closer alliances with the business. One critical mistake some CIOs make in approaching EPM is considering it as just another project and not as a transformational activity. Thinking of EPM as a project undercuts the investment and the time needed to make it a success.

Managing the Future by Understanding Today’s IT Spending

Enterprises that are undergoing a digital transformation run the risk of spiraling IT costs and an out-of-control IT budget. Without a baseline provided by the TBM framework and the related IT cost management activities, IT spending can become a black hole. And the difficulty of keeping up with digital transformation only increases—all while competitors are busy reducing their budgets and embracing agile methodologies. TBM creates visibility that can help decision-makers take advantage of competitive software pricing, as-a-service subscription models and a closer linkage between IT spending and business imperatives.

If an organization is unable to manage its present technology spend, it will struggle to compete during a move into the digital era—a move that requires a new level of dependence on digital products and services. EPM is the framework that will drive this digital transformation, and TBM and the IT cost transparency that support it are at the center of the entire equation.

For more insight into how and why IT has taken on such a transformational role, and why Finance must become more closely aligned with IT, listen to my comments on the CFO webcast, The CFO Playbook on Technology: Better Alignment of Strategic, Financial, and Operational Plans Through Enterprise Performance Management.