What is enterprise performance management (EPM)?

EPM is well suited to help streamline finance teams’ business functions, including budgeting, forecasting and data analysis. EPM software allows finance teams to optimize their business practices and inform future decision-making through advanced technology like artificial intelligence (AI), machine learning (ML) and other automation tools.

Organizations are using EPM solutions as a built-in assistant to assess new opportunities, automate routine tasks and make strategic planning decisions across industries like finance, HR, supply chain and sales.

Specifically, chief financial officers (CFOs) see the transformational shift necessary to keep up with evolving technology, with some of the most successful finance organizations tapping into AI systems. A recent IBM Institute for Business Value (IBV) report found that “nearly four in five CFOs’ plan to maintain or accelerate their finance organization’s pace of transformational change.” The report also revealed that 69% say that AI is integral to their finance transformation strategy.

EPM systems are a part of the digital transformation that many organizations are now implementing to meet the demands of the finance functions of the future. EPM processes help organizations make financial planning decisions and provide deeper insights for responding to disruption and uncertainty.

Enterprise resource planning (ERP) and enterprise performance management (EPM) both manage enterprise data for an organization. They play connected roles but serve different purposes. Understanding the difference between the two is critical for CFOs and financial planning and analysis (FP&A) teams aiming to move from transactional efficiency to strategic agility.

ERP is all about execution. It’s the backbone to the day-to-day finance operations of an organization—from tracking transactions to accounts payable to financial close. The ERP system is best understood as the engine that keeps the business moving. It provides data-driven insight into every transaction across the enterprise and is the single source of truth for what is happening at the operational level.

EPM is the strategic layer. EPM software takes the ERP data and turns it into forward-looking insights. The EPM role is to enable budgeting, forecasting, scenario modeling and performance analysis. Essentially, EPM is helping finance teams make plans for the ‘what if’ scenarios and how to prepare for them.

To put it simply, ERP balances the books, while EPM decides where to invest next. Together, they turn finance from a reporting function into a strategic partner.

Today, many finance organizations are layering AI and predictive analytics on top of the ERP‑EPM solutions. The goal is to shorten the distance between data and decision. Organizations are doing so by using operational accuracy from ERP and strategic intelligence from EPM to forecast, plan and pivot in real-time.

Over the years, it has transformed from a back-office reporting function. Today, it serves as a strategic intelligence engine for the finance industry. Its evolution mirrors how the finance industry made its own shift from historical record-keeping to forward-looking decision-making.

EPM is also sometimes synonymous with corporate performance management (CPM), business performance management (BPM) and financial planning and analysis (FP&A).

At the start, EPM was a manual system. Finance teams built budgets and forecasts in spreadsheets and passed files between departments. However, this workflow became inefficient—errors multiplied, version control vanished and insight was limited to what might fit into the cell. It was then that finance teams realized they were spending more time reconciling financial data than analyzing what the numbers meant.

The next significant step for EPM was on-premises EPM systems. This gave finance teams a platform to centralize data and standardize financial reporting across business units. Finally, finance leaders gained a consistent view of performance and automated financial consolidation. However, on-premises systems came with significant challenges: they were rigid, expensive to implement, slow to update and required IT departments to manage all changes.

Next, arrived the era of cloud computing. Cloud-based EPM tools, also known as software as a service (SaaS) made performance management more agile and accessible across an entire organization. Finance teams were able to collaborate in real-time, run multiple scenarios and update forecasts instantly. In addition, data integration improved, shifting finance into a role as a proactive business partner.

Building on the cloud momentum came automation and AI. Modern EPM systems now handle data consolidation, reconciliation and reporting automatically.

AI-powered EPM systems feature predictive analytics models that can identify trends and forecast outcomes that use real-time data. Advanced EPM systems can also handle many performance methodologies. Natural language processing (NLP) also allows finance professionals to query data conversationally instead of having to search through reports.

The evolution of EPM for the finance industry has gone from static spreadsheets to dynamic, AI-driven insights that are driving informed decisions and financial results.

Modern enterprise performance management (EPM) systems include several core capabilities that enable finance teams to plan strategically, respond quickly to change and make data-driven decisions.

An essential component of EPM systems is the unified dashboard. The dashboard gives finance leaders a single view of performance across the business by consolidating data from multiple systems into one interface. Instead of having to track financial statements and reports manually, CFOs can track key performance indicators (KPIs), cash flow and profitability in one place.

Having a unified dashboard can help turn financial data into actionable insights. A dashboard gives finance teams a detailed visualization that they can use to drive decisions faster.

Modern EPM systems should be a one-stop shop for planning, budgeting and forecasting. EPM solutions automate and connect these three steps into a continuous process. The solution allows finance teams to break down silos, collaborate across departments, update assumptions and align financial plans with business goals.

By using AI-driven tools, finance teams can speed up forecast cycles and improve accuracy by analyzing historical data and market data. The result is a business planning process that’s agile, data-driven and ready to adapt to changing market conditions.

Predictive analytics are transforming EPM from a backward-looking tool into a forward-looking finance engine. By analyzing operational data, historical data, market indicators and operational drivers, EPM systems can make forecasts with remarkable accuracy.

In addition, finance leaders can anticipate outcomes like cash-flow shortfalls or demand surges before they happen. Having this type of foresight is empowering data-driven decisions and helping organizations stay ahead of unpredictable market shifts.

Scenario modeling is used by finance teams to test “what-if” scenarios with confidence. With modern EPM systems, users can model multiple outcomes and see the financial impact instantly.

This type of scenario planning capability supports strategic planning, risk management and investment decisions. It gives CFOs a safe place to explore options without having to commit the resources, which is critical in uncertain markets.

A cloud-based EPM system provides finance teams with access to data, dashboards and reports around the clock without the need for VPNs or multiple versions.

Cloud infrastructure is a key financial management tool as it provides updates automatically and keeps data synchronized across teams. It can also reduce IT workload while building better relationships with stakeholders across global offices.

Cloud-based EPM keeps finance teams connected to business processes and ready to act at a moment’s notice.

Organizations can gain several important benefits. These advantages come from using enterprise performance management (EPM) solutions.

Successful enterprise performance management (EPM) implementation requires careful planning, strong change management and ongoing optimization to deliver lasting value.

Organizations can maximize the value of their EPM investment by following these implementation best practices.

Before diving into EPM implementation, finance leaders must decide what the organization really needs. This step might mean mapping current challenges, such as slow closes or siloed data.

After those needs have been identified, leaders must define how EPM can help solve them. Each organization is different and needs a distinctive approach.

This step is crucial for understanding workflows, decision timelines and cross-department dependencies before implementing an EPM solution. If the EPM system can’t support real operations, it’s setting up the organization for major challenges.

When the needs of the organization are identified, the next step is to pick the right EPM platform that fits the needs of the finance ecosystem. Teams should evaluate how scalable the platform is and if it can integrate with existing ERP and customer resource management (CRM) systems.

The EPM solution should enable collaboration, automate manual work and deliver intelligent insights. A platform should also be able to grow with the organization and have ease of use for non-technical users.

The success of an EPM implementation depends on people embracing it. A finance team can be resistant to new processes, especially ones that disrupt the norm. Therefore, it’s important to invest in change management, such as training, communication and leadership buy-in to help smooth the transition.

Teams should highlight the benefits of this EPM solution and how it will improve accuracy, save time and elevate the team’s role in the long term. These users must see personal value in the solution for there to be adoption and return on investment (ROI).

EPM capabilities are also dependent on clean, reliable data. Finance teams must do the work before implementation to integrate strong governance practices. This means consistent definitions, controlled access and automated validation across the organization.

Because EPM requires integrating data from multiple sources, those sources need to be accurate and synchronized. Finance teams should prioritize data early in the process to establish confidence in every report and forecast generated by the EPM solution.

The implementation is just the beginning of the optimization. EPM solutions require teams to regularly track performance metrics, such as forecast accuracy and user adoption. Separately, teams must gather feedback from finance and business stakeholders to review what’s working and what’s not.

The right EPM solution will evolve with the organization. Ongoing evaluation keeps them aligned as new goals emerge and markets shift. The EPM solution will need to be fine-tuned to make sure that the system remains highly valuable.

What does the future hold for enterprise performance management (EPM) in finance? It looks like it will become more intelligent and embedded enterprise-wide. The EPM solution began as a tool for financial reporting and is quickly evolving into the central nervous system for finance teams’ decision-making.

IBM’s own transformation is a glimpse into what’s possible for organizations. Facing fragmented data and more than 500 disconnected financial applications across business units, IBM needed a radical shift. To achieve data unification, the company developed an integrated EPM platform powered by IBM® Cognos® Analytics and IBM Planning Analytics (TM1 capabilities). In 2019, it added AI capabilities.

The results were profound. The integrated approach has achieved 95% fewer FP&A tools and a 40% gain in FP&A productivity since 2020. In addition, the company has accomplished “touchless” AI-driven forecasting with real-time reports and near-perfect model accuracy by using IBM watsonx® and Planning Analytics.

IBM’s own case study is an example of where EPM is heading and how an organization can become a connected ecosystem with advanced technology. AI is bringing finance leaders into the modern world and helping them evolve into strategic advisors who are one step ahead.