Last time, I brought you the news that SAP Profitability and Cost Management (PCM) is scheduled to reach the end of mainstream maintenance in 2020. Three years may feel like a long way off, but now is the time to start considering your options. So what are they?
There are still dozens of organisations using PCM, providing a healthy revenue stream for SAP. So, it’s possible that SAP will make a commercial decision to extend mainstream maintenance, if enough customers are still using the software as 2020 approaches, and if it has yet to provide a suitable replacement for customers to migrate to… because currently SAP doesn’t have another product that does what PCM does.
Easy as ABC
It's true that SAP ERP has an Activity Based Costing (ABC) facility in Controlling and Profitability Analysis (COPA); it’s the SAP-CO-OM-ABC component. This doesn’t have the same functionality as PCM, though. In particular, PCM can model shared services such as IT and HR in a much more sophisticated and realistic way than COPA’s. COPA can apportion service costs to customers and products based on arbitrary drivers such as cost of sales or revenue, but apportionments like this don’t reflect the true cause-and-effect of how costs are incurred within the organisation. Consequently, the view of profitability that this delivers can be quite badly distorted.
Furthermore, doing ABC in a transactional system like ERP doesn't allow you to easily run planning and forecasting scenarios on profitability.
In any case, if you already have SAP ERP and it’s capable of satisfying your ABC-related requirements, chances are you should be using it already instead of PCM. If you’re a PCM user and you don’t have SAP ERP, it’s unlikely that you’re going to be investing in it only for your ABC project.
New kid on the block
SAP has a new product that does cost allocations and might be worth your consideration. It’s called “SAP Performance Management for Financial Services”, or “FS-PER” for short. You might also see it referred to as “Cost and Revenue Allocation for Financial Products”. Because it’s a new product, it doesn’t have PCM’s maturity, which means it isn’t quite as stable or as feature-rich. But it does have a few interesting characteristics.
As the name(s) suggest, it’s aimed at the Financial Services industry, but I don’t see anything in the product to limit it to that vertical. In fact, it’s generally much more of a blank slate than PCM. In PCM, the dimensions and the core methodology are baked into the software. For example, in PCM the Line Item dimension is predefined, and the allocations are already set up to allocate Line Item costs to Activities, based on a set of data in the Resource Drivers.
In FS-PER, on the other hand, you define your own tables and set up your own allocation paths. None of the core ABC methodology that you’ll find in PCM is there – you have to set all that up yourself. You may see this as a good thing (because you have the flexibility to define your own methodology) or a bad thing (because the ABC methodology is a well-defined practice in cost accounting, and why should you have to reinvent the wheel?).
If you’re thinking of moving from PCM to FS-PER, this probably isn’t good news, because rather than having a smooth transition path from one to the other, it will be necessary to rebuild all that logic yourself.
FS-PER on steroids
On the plus side, FS-PER runs on HANA, which means FS-PER is fast and can handle huge data volumes. In fact, the main target market for FS-PER is financial services companies that want to allocate their costs down to the individual account.
This is exciting, because it opens up the ability to perform new kinds of analysis that weren’t possible before. Specifically, you can allocate costs down to accounts and then aggregate those results into higher levels for analysis on-the-fly. In other words, you don’t have to identify subgroupings for analysis when you build your model, as you would in PCM. You can do that at reporting time.
In this way, FS-PER offers something different to what PCM offers. You could even say it’s disruptive.
FS-PER, however, as a young product, is still somewhat limited in terms of its activity-based functionality. In common with COPA, its reallocation capability seems to be missing. It has weaker ETL and data-entry facilities than PCM, and nothing like PCM’s rules engine. Currently, it offers allocation features that are more generic than PCM’s (good or bad? You decide), and which can handle larger volumes, but is lacking in the supporting features that PCM has built up over the years.
It’s to be hoped that FS-PER will add some of these features as it matures. A positive implication of being in on the product this early is that there’s still an opportunity to talk to the team that develops the product and influence its future direction so that it aligns with your own requirements. That said, SAP’s Road Map for Banking, which included FS-PER, has no news on future developments for the product, so your guess is as good as mine.
My recommendations at this stage would be:
- Talk to your SAP Account Executive and get a statement from them. If they are made aware of the concerns of enough customers, there’s a reasonable chance that they’ll extend the mainstream maintenance period.
- If you’re already an SAP ERP user, look at COPA as a possible alternative.
- Look at FS-PER; it’s not quite there in terms of functionality, but let SAP know your views and there’s a chance you’ll get to influence the product’s future development.
Whatever you do, do something. Now is not the time to bury your head in the sand. Three years will pass in the blink of an eye, and now is the time to influence and plan, to ensure your needs are met.