In the past decade, companies have launched an all-out attack on the complexity of their financial processes. Armed with performance management (PM) technologies, many have succeeded in handing off number-crunching tasks of staggering difficulty to the tools and resources best able to handle them -- IT hardware and software -- and turning over more holistic and creative tasks to the resource best able to handle those: their people. Along the way, they've learned how to untangle spreadsheets, tighten the accuracy of their budgets, and shorten closing cycles.

But having tackled complexity in a few core financial tasks, many businesses are now finding that it's sneaking through the back door via the performance management architecture itself. As their PM ambitions have expanded far beyond budgeting and planning, too many organizations have built a maze of add-ons, even for mission-critical tasks such as regulatory reporting. At the same time, relentlessly escalating government and compliance demands have added even more layers of complexity. The result: proliferating, multiple, and poorly linked systems and applications that reduce the accuracy of financial reporting, undermine decision-making, and saddle the organization with high administration and maintenance costs.

How many PM tools does an average company use? Would you believe ... five? In a global survey of stakeholders in performance management processes at companies of all sizes, the Business Applications Research Center (BARC), an independent institute and advisory firm, found an overall average of 4.9 tools per company. Nearly half of the respondents said that their organization uses four or more systems for its performance management tasks, and 11 percent say that they use a startling 10 tools or more (see Exhibit 1). In addition, unlike the situation for ERP, many companies don't have a PM strategy.

Not surprisingly, bigger companies tend to use more systems. And "the more tools companies use for performance management, the bigger the problems get," the study notes. "Data transfer between systems as well as different methodologies, processes, and user interfaces of different tools lead to many challenges in running and administering the overall PM and data management structure." For "challenges," read: "costs."

The study also points to sharp disjunctions among some core elements of performance management, even among the relatively few companies that claim to have achieved some sort of integration. Take planning, budgeting, and forecasting, for example. While 63 percent of companies with some level of PM integration say that they've linked these processes to consolidation and reporting, only 27 percent have managed to link them to strategy management, and just 22 percent have linked them to compliance and risk management.

"Integrated" or Unified?

The recent spate of buyouts in the PM market resulted in the formation of a few ERP-based mega-vendors, and you might assume that these players are best positioned to offer truly unified systems that weld PM's various components into a coherent whole.

It's a doubtful assumption, though. There's no question that these firms wanted to add PM capabilities to build a more comprehensive set of offerings. But comprehensive is a far cry from unified. What these vendors describe as "integrated" capabilities often turn out to be a collection of loosely connected, disparate applications that were acquired over time, but lack a single user interface, database, or administration.

Still, PM pros are convinced of the value of a unified platform. In the 2009 BPM Pulse Survey (available here) from advisory services firm BPM Partners, almost three-quarters of participants identified a unified front end as an important tech capability, and 58 percent placed a high value on a unified back end (see Exhibit 2).

At the same time, these execs are increasingly skeptical that the mega-vendors can give them what they need. In BPM Partners' previous (2008) poll, 54 percent of respondents said that they would consider an ERP provider as a performance management provider. In the 2009 survey, though, only 27 percent said that they would do so (see Exhibit 3). Conversely, the number of respondents who said that they would look at application or "best of breed" vendors that specialize in performance management jumped from 37 percent in 2008 to 68 percent in 2009.

What Would a Unified PM Solution Look Like?

The challenge confronting performance management is, to paraphrase Einstein, one of making everything as simple as possible -- but no simpler. Companies need a solution that meets their specific needs without sacrificing any of the power of PM. They need a solution that encompasses all of the complexity of their financial processes and delivers optimal simplicity. Call it "simplexity." What would constitute truly unified -- as opposed to "integrated" -- PM? Tagetik, a next-generation unified performance management solution, offers:

• One data platform. The quest for a single version of the truth can't succeed in a performance management environment that's cluttered with multiple databases, point solutions, and entity-specific PM tools. To meet today's control and compliance demands, the CFO needs to manage all PM processes companywide from a single data platform.

• One user interface. Finance processes are organically related, and moving from one work focus to another shouldn't mean switching between disparate interfaces. Users appreciate the seamless connections provided by a single, intuitive interface. It helps them learn the tool and may reduce training costs.

• A broad reach. The system's reach should extend beyond the PM basics to the intersection of finance with risk management (e.g., access management, segregation of duties, financial controls) and with operations. For example, strategic planning measures should be clearly outlined in operational budgets. The same tool that crunches the numbers for external financial statements should also be able to unify other critical financial processes such as consolidation, statutory reporting, working capital analysis, profitability modeling, and strategy management. It should also allow companies to leverage their existing technology infrastructure investments.