SAP PCM – it’s the end of the line

8 May 2017

Steve Mainprize

Steve Mainprize

Consultant

It’s true. In less than four years, SAP Profitability and Cost Management (PCM) will reach the end of SAP mainstream maintenance. If you’re a current PCM user, now is the time to start to think about life after PCM. What are your options for either continuing to use it with reduced support from SAP, or replacing it with another product? 

steve-M-PCM-End-of-the-line-content.jpgThe overview  

PCM is SAP’s most sophisticated allocation tool. Positioned by SAP in the Enterprise Performance Management (EPM) space, it has multiple applications in the areas of product and customer profitability, process improvement, transfer pricing, product costing, amongst others.

A quick (and terribly over-simplified!) summary of PCM’s activity-based approach would say that an allocation methodology must reflect true cause-and-effect within an organisation. It’s not justifiable to allocate costs directly to, say, a product, unless the measure that you’re using to allocate the costs truly reflects how the product consumes the costs. To this end, PCM uses a two-stage allocation process. The company’s resources are consumed by its activities, so as a first step costs are allocated to those activities. Then, the company’s outputs consume the activities, so the second stage allocates the activities’ costs to the outputs. This reflects the idea that a product, for example, should be considered to cost more to produce if the company must do work in making it, selling it or supporting it.

PCM is built to support this methodology natively. It includes the allocation calculations so that all you have to do to build a simple model is set up the dimensions, link them together and enter the data. But it also includes other features like extract, transfer, load (ETL), configurable business rules, automation, scalability, and time and version dimensions, which allow you to build extremely sophisticated solutions, whilst the software manages the allocation methodology for you.

The history

The first seeds of PCM were planted back in the early 1990’s, when Armstrong Laing Group (later ALG Software) developed a successful series of activity based costing solutions that went under various names: ABCPower, HyperABC, Metify ABM, Activity Analysis and Enterprise Performance Optimisation. In 2006, ALG Software was acquired by BusinessObjects, and the software was rebranded as Profitability and Cost Management; in 2007, BusinessObjects was itself acquired by SAP.

The future

Ten short years on from that acquisition, and quarter of a century from when the first iterations of the product emerged, the end of the road is in sight. At the end of 2020, SAP will be ending mainstream maintenance for PCM. It will be possible to pay to have what’s called “Priority-One Support” for up to two years after this, but the only new issues that SAP will address are those with “very high” priority – usually defined as a production system being completely down, and there being no workaround. Apart from bug fixes for those “very high” priority issues, there won’t be any further software updates.

SAP has more information about the meaning of the different stages of maintenance on its Support Portal here.

PCM hasn’t had any major feature updates for a while. The most recent major release was 10.0 way back in 2010.  Since then there have been various Support Package releases to squash bugs, or to add relatively minor features. On the whole PCM is pretty much functionally complete, and stable; what few bugs there are typically minor annoyances in the user interface.

So, what to do?  This is what I’ll be discussing in the following couple of insights, but just as a taster, the options will be:

  • The “do nothing” option: continue to run PCM without support from SAP. 
  • Pay for priority-one support for two years; this extends your deadline, and kicks the can down the road. But you’ll still need to do something a couple of years further down the line, and during those two years you’ll be hoping that you don’t uncover a bug that nobody’s found before. You’ll also be making sure that you don’t update your technical environment. 
  • Build a bespoke replacement for PCM. This has been tried in the past by some customers, with less than satisfactory results. Remember that PCM has decades of development behind it and that developing your own replacement is going to be expensive, risky and time-consuming.  
  • Identify a replacement solution. 

In most cases, the last of these options is going to be the best, with priority-one support probably coming in second. Over the following instalments, I’ll discuss the options in further detail, and in particular look at SAP’s own offerings that might be capable of filling the PCM-shaped hole.

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