BPM Forum (Business Performance Management), Advancing Performance Accountability
Advisory Board  

August 2004

Copyright © 2004 by BPM Forum.
All Rights Reserved.

  The BPM Forum’s e-newsletter, Brainwaves, is distributed quarterly. Expect business performance management news, ideas that challenge your thinking and industry content that will help inform your decision making. Look for business performance management thought leadership every month from Brainwaves.

In This Issue:
Editor’s Cut

With the new regime installed under the Sarbanes-Oxley Act (SOX), the legal liabilities of finance chiefs and their bosses have never been so high. From reporting rules and speed, to installing adequate disclosure controls, the work required to comply with SOX has become painfully intricate.

While it is clear that information technology will play a crucial role in compliance, it is still uncertain whether IT’s role will be that of a leader, or rather, that of mere spectator-executer. Will IT develop processes allowing businesses to easily comply with any new regulation it encounters, or will it, in stead, scramble each time new regulations arise?

The BPM Forum was created to help business performance management professionals raise and answer these kinds of questions. Beyond merely informing, BPM Forum strives to initiate though-provoking debates and discussions about future compliance and any other topic that may help clarify and improve business performance.

This issue of Brainwaves is our first attempt at communicating and providing our readers with the tools and information necessary to make better decisions, and we hope you will join the conversation and help us make business a better place.

Member Mindset

BPM Technology Delivers New Tools For "Working Capital Management", By Harnish Kanani
Copyright © 2004 by BPM Forum. All Rights Reserved.

It has been said that, in business, “cash is king.” If so, working capital is the power behind the throne in any commercial enterprise.

Working capital refers to the money that companies use to fund their operations. The flow of working capital is a cyclical phenomenon. Cash comes into the business via accounts receivables. Cash goes out via accounts payables. The companies that effectively manage this “working capital cycle” are best able to attain profitability and effect sustainable corporate growth.

In many respects, there is nothing new about the working capital cycle as a financial imperative. It is a timely concept, nonetheless. In today’s volatile economic environment, the need to actively manage the cycle has never been more vital. This is a result of factors spawned by global economic and geo-political conditions. For example, since many of the working capital processes are highly transactional, many global companies have established Shared Service teams that focus specifically on these functions. Shared Services teams offer higher cost efficiencies by servicing multiple business lines or operating units across the world with smaller but highly specialized teams of personnel. In this respect, working capital functions have recently received a sharper focus based on their ability to offer competitive cost advantages to many c

Additionally, the spotlight on working capital has been an offshoot of new government directives that mandate better internal accounting systems and broader disclosure of financial transactions.

The most far-reaching government directive, of course, is the Sarbanes-Oxley Act of 2002 (SOX). The provisions of SOX closely relate to the elements and the specific practices underlying working capital management.

SOX: Section 404
At the core of Sarbanes-Oxley is Section 404: the requirement that a public company’s officers certify the existence and efficacy of their organization’s internal controls . SOX makes mandatory internal controls-related disclosures . information that must be included in quarterly and annual filings. Corporate officers must report whether there have been significant changes in the internal controls infrastructure or in other factors that could affect controls-related policies and procedures. In short, Section 404 ties to management’s need to regularly assess the effectiveness of their controls and financial reporting procedures.

So what does all this mean in terms of working capital management?

The answer has to do with the level of transaction-related specificity and documentation now required by the SEC. Senior officers can no longer be vague about accounts-payable and -receivable reporting issues. SOX’s call for greater transactional detail necessitates monitoring the working capital cycle more carefully than ever before.

BPM and the Working Capital Cycle
Sarbanes-Oxley emphasizes the importance of collecting accurate data for financial reporting purposes. Business Performance Management (BPM) evolved as a natural response to SOX compliance requirements. Over time, BPM has further developed into a managerial mindset and series of best-practices that, collectively, help support working capital management.

BPM is focused on creating an organization where all managers work toward common goals. They do so by tracking key performance indicators (KPIs) vis-a-vis strategic and financial metrics. In complex organizations, robust information technology systems are a prerequisite for BPM data management. Thankfully, powerful BPM-focused technology has been developed to help companies both comply with SOX and heighten their competitiveness using BPM principles.

As stated, Sarbanes-Oxley calls for greater financial detail and documentation. BPM, by definition, calls for strategically amassing (and disseminating) that same level of transactional specificity to best monitor business performance. Let’s look at two cash-related challenges that point up the benefits of using BPM tools and techniques for SOX compliance and for managing the working capital cycle. The two challenges are:

  • Bad debt
  • Reducing DSO (days sales outstanding)

Bad Debt
Bad debt refers to situations where certain revenues from sales will never actually be received by the selling organization (e.g., an indebted vendor goes bankrupt). This is a problem that plagues all companies, albeit to varying degrees. Historically, public companies were able to report statements of bad debt in decidedly vague terms. That’s no longer the case with Sarbanes-Oxley.

Prior to SOX, companies were able to cite, with minimal detail, the level of bad debt they had incurred in a given financial reporting period. SOX now mandates that management document a specific audit trail that answers such questions as:

  • Why the bad debt was incurred?
  • What specific explanations were provided by the customer to explain the situation?
  • What actions did management take to try to avoid incurring bad debt?
  • What was the end result of management’s attempts to resolve the individual dispute or situation?

The upshot is this: managements cannot simply say, “We incurred X-amount of bad debt.” They must explicitly detail what steps were taken to avoid the situation before writing it off as a corporate deduction. The greater detail is applicable from a BPM and working capital management standpoint.

By tracking data that must be ultimately be included in audited financial statements, management arms itself with intelligence that can forestall future bad debt situations. By studying relevant data using BPM technologies, managements can spot problem situations and trends early on — before they escalate into irreversible financial set-backs. Better information leads to better decision-making.

The ability to monitor and manage bad debt is just one benefit of deploying BPM tools to comply with SOX and improve working capital management. Another benefit ties to the concept of “days (of) sales outstanding” (DSO).

Reducing DSO
DSO refers to the payment terms specified by a seller relative to when monies for goods are due.

It is in a company’s best interest to minimize its DSO. That’s because with lower DSO, an enterprise generates more working capital. With more working capital, a company needs less borrowed dollars from loans, lines of credit, and other financing sources. When that’s the case, there are lower levels of interest payments. This reduces the overall cost of operations. Importantly, technology systems deployed for BPM can also assess DSO trends as a means of enhancing this all-important financial performance metric.

By actively approaching working capital management through the use of BPM tools, companies are able to lower costs and heighten profitability. In terms of bad debt, collection efficiencies are achieved. In terms of DSO, data analysis and resultant customer policies can help balance the flow of cash in and out of the enterprise.

The advent of Sarbanes-Oxley has highlighted the importance of managing the working capital cycle. As a catalyst of BPM, Sarbanes-Oxley — introduced to ensure greater accountability and shareholder protection in the post-Enron business world — could not have come at a better time.

To some, the greater level of fiscal detailed required by SOX poses bad news from a reporting standpoint. But the good news is this: SOX requirements provide a strong impetus for better managing the working capital cycle. Using BPM as a methodological frame of reference, working capital management becomes a timely tool for ensuring corporate success.

The Author : Harnish Kanani is Senior Vice President, Global Services for Emagia Corporation, the leading provider of Enterprise Cash Flow Management software solutions. He is a member of the Business Performance Management Forum ( http://www.bpmforum.org ) — an important independent organization helping to advance the understanding of business performance management techniques, technologies, and processes in global enterprises

Industry Insights

Scoop on Sponsors

New Survey Underway: "Turning Software Drain into Business Gain"
Eliminating Dated, Deficient or Redundant Business Applications
Sponsored by Cognizant Technologies with the BPM Forum

Developing, managing, maintaining and supporting the proliferation of business software applications cost global corporations billions annually. Many of these applications are redundant, outmoded, and deficient—consuming valuable IT resources, draining business performance and compromising essential processes and operations.

Cognizant and the Business Performance Management (BPM) Forum are teaming to study the economics of rationalizing and reducing the number of business software applications running in corporate America from both a qualitative and quantitative viewpoint. Together, they will examine the risks, liabilities, costs, complexities and IT operational inefficiencies inherent in the vast number of unnecessary business applications deployed today. Cognizant will involve its customers and BPM Forum members and media partners in a strategic analysis of best practices, processes and systems for optimizing the value, availability and integrity of software applications as a critical component of business performance across key vertical industries. These include banking and financial services, insurance, retail, health care, pharmaceuticals, manufacturing, telecommunications, and manufacturing.

The online survey initiative around Business Software Economics (BSE) will:

  • Target a cross section of business line, operating and finance executives, as well as CIOs and IT personnel
  • Drill into organizational, cost and business performance issues around improper application portfolio analysis and software "sprawl" in corporate environments
  • Identify the scope and range of problems faced by each company; develop a BSE economics auditing tool and software management best practices matrix
  • Identify and categorize the challenges, problems, concerns, characteristics, consistencies, commonalities, etc.

Quantify views, opinions, implications, awareness, costs, and prevalence around the availability, quality, and criticality of using, managing, maintaining and supporting software across the organization

Survey results will be published in August, reported to the media, and presented to members through an interactive web conference, webcast and content syndication and presentation over the Web.

New Survey Underway: “Gauging the Cost of What’s Lost”
Sponsored by the BPM Forum and the CMO Council

With billions of dollars expended annually on sales and marketing, corporate leaders are taking a more penetrating look at the business value, performance and compatibility of both these functional areas. They’re among the largest line items in operating budgets yet rather than being synergistic, they’re frequently at odds. Sales complains about the volume and caliber of leads; marketing questions the ability of sales and channel groups to effectively access, engage, cultivate and convert customer prospects. Result: Vast numbers of leads that are generated at great cost often end up in untouched or fragmented repositories.

Business Performance Management (BPM) Forum and the Chief Marketing Officer (CMO) Council are joining to undertake a major study of Lead Lifecycle Management (LLM) and Lead Conversion Economics (LCE), dubbed “Gauging the Cost of What’s Lost.” This news-making, Authority Leadership™ initiative will examine the value that still resides in wasted, dated, unused, or unrealized opportunities, as well as the upside business benefits of proper Prospect Harvesting Practices.

The joint study will:

  • Drill into organizational, cost and business performance issues around lead waste and prospect conversion
  • Identify the scope and range of problems faced by each company
  • Identify and categorize the challenges, problems, concerns, characteristics, consistencies, commonalities, etc.
  • Quantify views, opinions, implications, awareness, costs, prevalence and concern, around the availability, quality, and criticality of using, managing, maintaining and refreshing business leads across the organization
  • Look at the resource requirements, dynamics and variables of acquiring, managing, and acting on leads, as well as factors influencing lead rejection and waste.
  • Lead to the development of an LCE auditing tool and LLM best practices matrix
  • Increase executive management sensitivity to ways in which LCE can be improved and marketing ROI enhanced.

The results of the study will be published in August, reported to the media, and presented to members through an interactive web conference, webcast and content syndication and presentation over the Web.

Hyperion Essbase 7.1 Generally Available
New Analytic Engine Delivers Record Scalability and Speeds that Advance the Power and Reach of Business Performance Management

SUNNYVALE , Calif. , June 30, 2023 Hyperion (Nasdaq: HYSL) today announced the general availability of Hyperion Essbase 7.1, the most dramatic advancement in its analytical technology since the introduction of Hyperion Essbase in 1994. For the first time, users can rely on a single real-time analytic architecture to meet the scalability and response-time needs of sales, marketing, human resources and supply chain applications, and the complex analytic requirements of finance.

“Hyperion Essbase 7.1 marks a major milestone in our product innovation. It provides unmatched speeds for analyzing both financial and operational information with one platform,” said Godfrey Sullivan, president and chief operating officer at Hyperion. “I couldn’t be more pleased with the timeframe in which we were able to execute the development and delivery of this product. With this release, we are reinforcing our commitment to driving leadership in the analytics marketplace and to our customers.”

The latest version of Hyperion’s legendary OLAP engine for Business Performance Management shatters traditional notions of scale and speed limitations. Hyperion Essbase 7.1 can deliver the sophisticated needs of finance and the data scalability requirements of the broader enterprise to thousands of concurrent users with no compromise in performance. A key innovation behind Hyperion Essbase 7.1 is Aggregate Storage, which provides higher availability, faster processing times and better data compression for applications outside of finance that require analysis of large and sparse volumes of data sets.

“Beta testing has validated that customers are experiencing dramatic reductions in batch processing, data loading and calculating times with Aggregate Storage, and can now increase the data volume—as well as the dimensions within that data—that they can analyze,” said Robert Gersten, chief development officer at Hyperion.

Hyperion Essbase 7.1, a key component of the Hyperion Business Intelligence Platform, also provides increased functionality with visual analysis capabilities that enable even novice business users to rapidly identify trends and highlights in large datasets.

“Hyperion customers have expressed the need to advance the power and reach of Business Performance Management solutions throughout their organizations,” said Sullivan. “The release of Hyperion Essbase 7.1 is a vital step toward helping our customers meet this need.”

IBM Unveils New Business Partner Program for Business Performance Management
Thirty-four business partners support new initiative aimed at enabling dramatic improvements in a customer’s business

LAS VEGAS, IBM PARTNERWORLD, March 2, 2023 . . . IBM today announced a new initiative to help Business Partners deliver comprehensive Business Performance Management (BPM) solutions to customers.

BPM combines business processes, information and IT resources and aligns a customer’s core assets — people, information, technology and processes. This enables an organization to create a single, integrated view, with real-time intelligence, of both its business measurements and IT system performance and obtain business information faster, respond more quickly to market trends and competitive threats and improve operational efficiencies and business results, all attributes of an on demand enterprise

In the retail industry, for example, store managers face daily decisions on urgent issues related to sales, product merchandising and promotions, inventory replenishment, supply chain logistics, pricing changes and employee schedules. They need to have up-to-date information on key retail performance indicators so they can react to problems quickly. This means a store’s business processes have to be linked to the IT system to provide an overall view of store operations, an electronic dashboard that tracks key performance indicators automatically and replaces having to sift through paper reports to spot potential problems. A BPM solution can enable a store manager to make daily decisions, based on multiple source of information, that align with the store’s strategic direction.

New initiative offers a set of frameworks
IBM’s new initiative offers Business Partners a set of BPM "frameworks" for information, processes, events, business rules and workplace and business systems. The frameworks include tools for software developers, core IBM middleware technology, and technical education and support to enable Business Partners to provide customers with solutions unique to their industry.

"BPM combines business intelligence, business integration, service management and intelligent orchestration, all areas where IBM has demonstrated clear technology leadership in the industry," said Steve Mills, IBM senior vice president and group executive, Software Group. "Business Partners want to work with us because we offer the expertise, education, enablement programs and support to enable them to implement BPM solutions quickly for their customers."

Thirty-four business partners
IBM also said that thirty-four Business Partners initially are working with IBM to extend the value of BPM to their customers. The BPM initiative addresses customers who want to respond faster to market opportunities, competitors’ moves and regulatory changes but who also say they are hampered because they don’t have a good view of their business environment, can’t make changes quickly and can’t put what is happening in their industry into the proper business context.

By following IBM’s On Demand roadmap, Business Partners will be able to use IBM’s BPM expertise to create industry-specific solutions that can help enable a customer to see business processes, end to end, across both business and IT operations. In an insurance company, for example, a claims adjuster or executive might be able to see the status of the overall claims process, data on individual customers and the status of the IT infrastructure that supports the claims process.

BPM ecosystem
As part of this initiative, IBM is working to build a BPM "ecosystem." It will consist of a set of Business Partner frameworks and a software development toolkit that will enable IBM to engage with its Business Partners to provide industry-specific BPM solutions for customers in need of monitoring, analyzing and optimizing their business operations and IT infrastructure.

The IBM middleware infrastructure supporting the BPM initiative features modeling, monitoring and process integration technology from WebSphere, information integration and business intelligence capability from DB2 software; business service management from Tivoli, including Tivoli Intelligent Orchestrator and systems management software, and Workplace technology from Lotus. All are made available to the customer in a single view.

Common Event Infrastructure
A significant new component to IBM’s middleware platform supporting BPM is the Common Event Infrastructure (CEI). CEI is designed to enable a business to capture cross-application events in a cohesive way from many IT components – servers, network routers, switches, applications, databases. This event data then can be used for business-level analysis, which will enable an organization to improve real-time management of its enterprise.

At the PartnerWorld conference, IBM also is announcing a CEI Software Developer’s Kit to enable Business Partners and ISVs to write new applications and drive service engagements.

IBM Business Partners supporting this initiative
The IBM Business Partners who are supporting IBM’s BPM initiative are:
Accretio Group, Actuate, Adexa, Alphablox, Amberpoint, Ariba, Ascential Software, Bottomline, Bristol Technology, Business Objects, Cerner, Cognos, Corticon Technologies, Fair Issac, The Haley Enterprise, Hyperion, i2 Technologies, Informatica, iSpheres, Keynote, Lanner Group, MicroStratgegy, Pegasystems, Peregrine, Retek, Salesforce.com, Sapiens, Siebel, Systar, TeamQuest, Viacore, Viador, View Software and YASU Technologies.

BPM Forum to Partner with Chief Executive Magazine
Joint Programs Will Advance Thought Leadership on Driving
Performance Accountability Across the Enterprise

PALO ALTO, Calif., May 24, 2023 — The BPM Forum, an organization aimed at advancing Business Performance Management (BPM) strategies and practices, today announced that Chief Executive Magazine will become a media partner and co-producer of thought leadership programs. Chief Executive joins an influential lineup of companies involved in the BPM Forum, which currently represents some 500 global corporations with combined annual revenues of more than $400 billion.

The alliance will enhance the BPM Forum’s ability to deliver meaningful and relevant information to C-level decision makers and will enable Chief Executive magazine to gather executive opinions and insights on building performance accountable cultures, improving operational visibility, optimizing financial outcomes, and assuring better compliance and governance in today’s increasingly regulated business environments.

“We know from our interaction with CEOs that most companies are under tremendous pressure today to enhance performance and do so in a transparent manner,” said Ed Kopko, publisher of Chief Executive Magazine. “For our part we’re planning a series of initiatives that bring business performance issues front and center. And working with the BPM Forum, we can facilitate discussion and learning on a broad range of related subjects.”

“Chief Executive Magazine has carved out a unique reputation for itself as the leading source of intelligence for and about CEOs, and that’s what makes it the ideal partner in our ongoing efforts to advance performance accountability across the organization,” said BPM Forum executive director Donovan Neale-May. “Just as the magazine’s audience is keenly aware of the issues they need to confront, we can work together on everything from gathering exclusive research to publishing influential thought leadership platforms.”

Companies now represented in the BPM Forum include founding sponsors Hyperion and IBM Business Consulting Services, as well as GE, Harper Collins, Hewlett-Packard, JP Morgan Chase, IBM, ICN Pharmaceuticals, Phelps Dodge, PPG Industries, Price Waterhouse Coopers, Sabre Holdings, Safeway, Saks Incorporated, Southwest Airlines, Starwood Hotels & Resorts Worldwide, Bank of America, TD Waterhouse, Tyco International, The Gap, Canadian Imperial Bank of Commerce, Commonwealth Bank of Australia, and many others.

Join the Conversation

BPM Forum would like all of its members to share with the business performance management community articles or white papers that relate to current issues and developments in corporate governance, compliance (Sarbanes-Oxley, Six Sigma, STP, etc.) and any topics or issues associated with BPM. Your contributed pieces will appear on BPM Forum’s website and will also be featured in Brainwaves.

To contribute articles and other BPM-related content, or to schedule an interview for a newsletter feature, please e-mail us and explain what kind of insight you could contribute to the BPM community. The BPM Forum is comprised of more than five hundred members representing companies with more than $400 billion in combined annual revenues. BPM members include influential business line managers and senior executives overseeing enterprise finance, operations, and technology functions.

For your contributed pieces, please adhere to the following guidelines:

  • While mentions of your company are welcome, articles should not be self-promoting
  • All content should not exceed the maximum of 750 words
  • We welcome pictures, illustrations and charts

If you have any questions, don’t hesitate to contact the BPM Forum through our website at: http://www.bpmforum.org/contact.htm or send an email to our staff.