Cost Allocation Tools Compared
Cost Allocation is a big deal in financial management. Which cost allocation tool is best? Do I need specific software for time-driven activity based costing? Is cost modeling software an alternative to FP&A software? These are just some of the questions asked in this area. The tools most often considered in cost allocation software include:
- SAP PCM
- CostPerform
- Acorn
- Apptio
- Oracle HPCM
- Nicus
- Magic Orange
- SAS CPM
- Custom-built solutions
1. SAP PCM (Profitability and Cost Management)
- Strengths: SAP PCM is integrated into the SAP ecosystem, a good choice for companies already with the SAP ERP. It excels in handling large datasets and performing profitability and cost analyses within the SAP suite.
- Weaknesses: SAP PCM is no longer actively supported. Existing SAP PCM clients may find it lacks flexibility when things go wrong. It requires significant expertise to manage effectively compared to CostPerform.
- SAP PCM vs CostPerform: CostPerform provides more flexibility and ease of use in model building and customization. Unless you’re a pre-existing user of PCM, you should choose one of the other tools on this list due to its discontinuance.
2. CostPerform
- Strengths: CostPerform is known for its transparency and flexibility. It is often the end-user’s preferred solution. Its implementation process is agile and the solution can be brought to value quickly. CostPerform has a tiered pricing model with lower pricepoint than competitors.
- Weaknesses: Other tools may better integrate data, companies using SAP and Oracle will find value in using solutions within the same ecosystem.
- Comparison to other tools: Unlike other tools that may lead to black box thinking, CostPerform provides more freedom and flexibility. Other solutions are more firmly mapped out and rigid, while CostPerform allows for more moveable parts and evolution over time.
3. Acorn
- Strengths: Acorn is known for its time-driven activity-based costing (ABC) model and is designed for organizations seeking granular insights into operational costs. It’s effective for companies with complex operations and high-cost variance.
- Weaknesses: Implementation can be intensive, requiring substantial data integration efforts. Acorn may be limited in scope when compared to broader profitability management tools.
- Acorn vs CostPerform: CostPerform supports ABC but also integrates with other costing methodologies, allowing users to blend approaches in one model. CostPerform’s intuitive design makes its implementation time much more deadline friendly than Acorn.
4. Apptio
- Strengths: Apptio is tailored primarily for IT financial management and Technology Business Management (TBM). It provides insights into IT costs and financial metrics and is highly specialized in helping IT organizations optimize their technology investments.
- Weaknesses: Apptio’s focus on IT makes it less suitable for organizations seeking cost allocation solutions for non-IT domains. Customization options outside of IT financial management are limited. Costs are higher than other tools.
- Apptio vs CostPerform: CostPerform is broader in its application and can manage a wide range of cost allocation use cases across industries, including ITFM and TBM. CostPerform provides a clearer path to value through its lower recurring costs and offers better flexibility.
5. Oracle HPCM (Hyperion Profitability and Cost Management)
- Strengths: HPCM is part of Oracle’s Hyperion suite and is optimized for high-volume data and complex cost and profitability models. It’s well-suited for large enterprises already invested in the Oracle ecosystem.
- Weaknesses: Like SAP PCM, it is complex to implement and operate, requiring specific technical skills. The total cost of ownership can be high, and updates or customization needs often require specialized support.
- Oracle HPCM vs CostPerform: CostPerform’s flexibility in implementation, model adaptability, and ease of use make it a good alternative to HPCM for organizations needing lower complexity and cost. CostPerform also provides more transparency, while HPCM is more of a black box solution.
6. Nicus
- Strengths: Nicus is a cost management and Technology Business Management (TBM) solution, primarily focused on ITFM. It specializes in IT cost transparency, chargebacks, and budgeting, making it well-suited for managing IT costs across multiple departments or business units.
- Weaknesses: Nicus is tailored to IT and technology-focused cost allocation, so it may be less effective for companies needing broader, non-IT-focused cost allocation capabilities.
- Comparison with CostPerform: While Nicus is strong in IT cost management and chargebacks, CostPerform offers a more generalized solution for broader industry applications and cost methodologies beyond IT.
7. MagicOrange
- Strengths: MagicOrange is another cost transparency and allocation tool designed for organizations focusing on ITFM, Technology Business Management, and service cost modeling. It emphasizes ease of use and rapid implementation, with a strong focus on business-friendly visualizations and cloud capabilities.
- Weaknesses: MagicOrange’s focus on IT financial transparency may limit its effectiveness in non-IT areas, and it does not offer the same level of customizability for complex, non-IT cost models.
- Comparison with CostPerform: MagicOrange offers quicker implementation and is cloud-based, which can benefit fast-growing IT-focused businesses. However, CostPerform provides greater flexibility across a range of industries and complex costing needs, with superior customization options for various allocation methods.
8. SAS CPM (Cost and Profitability Management)
- Strengths: SAS CPM is known for its advanced analytics and integration with the broader SAS suite, making it a strong choice for enterprises seeking predictive analytics and data-driven insights in cost management.
- Weaknesses: SAS CPM can be overly complex for companies that don’t need advanced statistical analysis. The tool’s data integration requirements may present a high barrier for organizations without existing SAS infrastructure.
- SAS CPM vs CostPerform: CostPerform offers a simpler, more intuitive setup, while still allowing comprehensive costing and profitability analysis. Unless you already know you’ll benefit from the advanced analytics offered by SAS, CostPerform provides a sweet spot of complexity vs ease.
9. Custom-built Solutions (Spreadsheets)
- Strengths: Custom-built solutions provide ultimate flexibility, as they are designed to meet the specific requirements of an organization. They can be tailored for any industry and integrate seamlessly with existing systems.
- Weaknesses: A lot can go wrong developing a customized solution. CostPerform has previously outlined the risks of building a cost allocation tool. The time to value can be enormous, and it can create a single point of failure, when a model is only used and understood by a small group of employees.
- Spreadsheet Costing vs CostPerform: Creating your own model is easy to get started, but very difficult to sustain value from in the long run. For an organization with more than a few hundred employees, you should always use a pre-designed tool for cost modeling.
Cost Allocation Tools Compared
Choosing an enterprise software is a complex process. Options are numerous and it can be time-consuming to look into each tool in detail while a high number of stakeholders are involved. It’s best to have a clear process in place, and gain an understanding of what you want to accomplish in advance.
To help you in this journey, download CostPerform’s “How to Buy Software” Enterprise Guide, outlining to-the-point practical advice, in collaboration with industry leaders. Click here for a free copy.
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