It's no wonder, then, that AMR Research reports Enterprise Performance Measurement -systems for benchmarking performance and measuring progress on a wide range of corporate initiatives - are top of mind among business executives. And, given the stakes, it's also not surprising that, in an era when other IT projects are going begging, EPM is being funded despite the difficulties and high costs of making it work and the easy-to-demonstrate ROI.

"Executive or board-level mandates take care of many ROI questions, simply because the governance pressure on these people is unprecedented," AMR Analysts Dana Stiffler and John Hagerty observe in their report "Quantifiable EPM Benefits Emerge." "One of the most ambitious (and expensive) projects we looked at was justified by the decree of a single individual. 'I want this thing and I don't care what anyone says. We're doing it.' His role? Chairman and CEO of a Fortune 500 company."

On the surface, AMR reports, EPM sounds like a simple, straightforward proposition. Define the metric. Set the goal. Monitor the process/measure performance. Watch for metrics that go out of alignment. Adjust the process. Repeat. But the fact is that achieving this simplicity can be extremely complicated, requiring massive architecture overhauls and the creation of sophisticated data warehouses to provide consistent, high-quality data. With such a warehouse in place, AMR found, EPM can be accomplished for as little as $500,000 (the experience at one chemical company included in the study). Without it - especially if multiple lines of business are involved - the cost can soar; one global financial company the firm in the study has spent $80 million to date.

"At the outset, EPM projects often run up against a brick wall," according to the report. "Disparate systems and data combine to ensure that even if an EPM tool or application is applied, all that will come out the other side is rubbish."

As examples, AMR cites the case of a company that had to spend two years on a data warehouse project before it could reconcile the 17 separate pools of supply chain data needed to install supply chain performance management software. Similarly, a company that used a single enterprise vendor but that had several highly customized instances of its software found itself enmeshed in a lengthy data warehouse project as well.

Still, those companies that have managed to endure the pain of an EPM implementation are emerging on the other side with impressive results. AMR found the logistics branch of a transportation company that spent $3 million on an EPM project and is well on its way to realizing returns projected at more than $252 million. $1.2 million came in the form of recovered revenue from driving down customer costs, but the bulk -- $250 million - is in the form of savings generated by improved visibility into third parties' rates and a reduction in double payments. An automotive manufacturer, meanwhile, spent $2 million but reduced inventory by 18% in 2001 and another 15% in 2002 while reducing decision cycle times from months to days. A wholesale distributor, meanwhile, spent $700,000 but reduced inventory by 40%.

Still, getting your system built and cranking out meaningful, accurate metrics is only half the battle, AMR found. "With improved visibility into business and operations, users are able to identify issues and, with luck, root causes. However, being able to quickly and consistently react remains a challenge. The policies and procedures that support this need must be embedded in your EPM initiative - meaning that change management becomes a major requirement.

Resistance from within the ranks can be formidable, AMR warns, but "aligning incentives aids adoption. If the identification and root causes of Key Performance Indicators (KPIs) are properly achieved, linked to individual incentives and broadcast to users, usage is improved. One of the most effective incentives occurs by default: business users are responsible for inputting and managing their data, not IT. The adoption and subsequent success of EPM initiatives in these situations is much more likely.

So, if a company is interested in pursuing EPM (or has a CEO that orders it to do so), how should it start? AMR has six recommendations:

• "Be ready. Use analytics as a catalyst for business process change within the company. Be as ready as you can to execute once you identify issues.
• "Start small. If data from a Line of Business is in relatively decent shape and KPIs (Key Performance Indicators) can be identified, start there.
• "If data warehousing is already underway in your company, performance management can and should be implemented in tandem.
• "Don't shortchange yourself on EPM, especially the initial project. Use your very best people both on the business and IT sides. Do not rely on what are considered 'surplus' resources for these initiatives.
• "Firms using global IT services firms are spending at the top of the EPM budget range. Use outside services firms for tactical technology and/or domain expertise sparingly to reduce project costs.
• "There is the potential for overconfidence in users that have already implemented a data warehouse or universal ERP system. While these give you a leg up, EPM process challenges are still tricky."