Picture 1. End-to-end profitability and performance management
MOTIVATION
In today’s fast-paced business world, the ability to effectively steer and lead an organization is fundamental for achieving strategic goals and maintaining a competitive edge. A key success criterion is the capacity to fully harness and derive value from organizational data. Many companies struggle with data problems, such as fragmented information, outdated systems, and the super important task of preparing data for emerging technologies like AI. Recognizing these challenges, we are excited to introduce a blog series dedicated to showcasing the substantial business value of SAP Business Data Cloud (BDC) in the context of planning and analytics.
The motivation behind this initiative is to provide a comprehensive exploration of how SAP BDC capabilities as essential instruments, facilitating robust strategic alignment and guiding effective decision-making processes across diverse organizational requirements. We aim to illustrate how SAP BDC, equipped with powerful data management, planning, analytics and innovative AI capabilities, empowers organizations with enhanced business steering agility by providing real-time insights, streamlined data management, and automated decision support – going from insights to action, helps mainly leaders guide their businesses with precision.
Our blog series will provide valuable insights for decision-makers seeking to harness SAP Business Data Cloud (BDC) to enhance operational efficiency, optimize resource allocation, and achieve long-term objectives. By featuring detailed planning & analytics topics, the series will illustrate the transformative impact of SAP BDC in addressing the operational complexities of today’s business environment. This first introductory blog post will spotlight the strategic advantages of SAP BDC, particularly in the context of Business Steering, setting the stage for a deeper exploration of its benefits throughout the blog series.
There are several blog posts in the series that will cover advantages of SAP BDC in the context of business steering, so please stay tuned for the upcoming blogs:
The Value of SAP BDC in the context of business steering Planning & Analytics is an essential part of SAP BDC Key Planning & Analytics components of SAP BDC Is AI going to “retire” a dashboard?Simulations, a game changer in today’s volatile worldExtend existing planning scenarios of SAP BPC/BW-IP in SAP BDC Real-time steering with LIVE planningSAP PaPM – The role of business calculation engine in business steering (THIS BLOG POST)Self – service analytics and real time business steeringBusiness steering powered by AI agentsLeverage data products in the context of planning & forecastingIntroducing AI/ML capabilities by SAP Databricks
INTRODUCTION
In today’s fast-paced business environment, enterprises must be flexible and adaptable to evolving market conditions and customer expectations. As a result, companies are developing strategies focused on innovation, digital transformation, and sustainable growth. However, when it comes to execution, the benefits of these strategic initiatives often fall short of expectations.
Why the Gap?
Several factors contribute to the disconnect between strategy and execution:
Insufficient analysis and adaptation to business changes, making strategies difficult to execute in real-world conditions.Weak integration between financial and operational models, leading to misaligned decisions.Lack of trust in the numbers due to data silos and overly complex reporting models.Poor visibility into root causes of performance, whether underperformance or overachievement.
This is where the concept of Enterprise Performance Management (EPM) becomes critical. EPM serves as the bridge between strategic goals and day-to-day execution. SAP offers a comprehensive, end-to-end EPM framework that spans planning, consolidation, tax, and sustainability management.
Despite advancements, organizations still face hurdles in their EPM processes, that are highly connected to the reasons for the gap between strategy and execution:
New regulations and market dynamicsData silos and disconnected processesLimited business context in performance reporting
To address these, companies increasingly need a business semantics calculation engine as an important part of their EPM framework —a solution that connects transactional and planning data to management reporting in real time. Such an engine should enable:
Business-user-driven modeling through a no-code/low-code environmentIntegration of business semantics (e.g., cost allocations, profitability logic) into real-time calculations, powered by solutions like SAP Business Data CloudSimulation and scenario analysis without IT dependency
Let’s explore how a business semantics calculation engine can bring value across different scenarios not only for actuals, but also for planning data:
Regulatory reporting: Ensure compliance with traceable, rule-based calculations.Profitability analysis: Evaluate performance by customer segment, region, channel, or product line.Bill of Materials (BOM) simulation and explosion: Assess the impact of changing prices or quantities on semi-finished and final products.Operational transfer pricing: Maintain compliance and transparency in cross-border pricing models.Group cost calculations: Enable unified and transparent cost modeling across entities.
For instance, in a BOM simulation, users can assess how price or quantity changes at the component level affect the cost of the final product. This often involves recursive, high-volume calculations. By using SAP S/4HANA for transactional data, enriching it with SAP Profitability and Performance Management (SAP PaPM), and feeding the results into SAP Analytics Cloud, businesses can maintain full transparency, auditability, and planning granularity.
Another example: planned profitability calculations at the SKU level. While this level of detail may be unnecessary in the core budgeting process, it’s critical for management reporting. Rather than overburdening the core planning system, businesses can offload these complex calculations to a dedicated engine and integrate the results seamlessly.
Last but not the least example to illustrate the need in business calculation engine is a group costing calculation. Let’s say the company has many intercompany relationships, products and services are going through various steps between companies in this process. SAP PAPM delivers real-time insights into group margin, through segmented profit and loss reports according to key transfer pricing dimensions, providing needed data to manage and analyze tax costs and revenues, markups and markup costs, production and services costs and third-party revenues.
Benefits of Embedding a Calculation Engine into the Planning Process
Automate complex allocations and business logicEnsure full transparency and auditabilityEnable granular planning and analysis—by customer, product, channel, etc.Increase compliance by following new regulations
From the business user’s perspective, this process should be seamless. As a planner, you simply run the calculation and see results immediately integrated into your planning reports. This is precisely the kind of user-centric experience enabled by the SAP EPM framework—combining SAP S/4HANA, SAP Analytics Cloud, and SAP Profitability and Performance Management (SAP PaPM).
Picture 2. Detailed Profitability analysis powered by SAP Analytics Cloud and SAP PAPM
WHAT IS SAP PAPM?
SAP PaPM Cloud is a no-code calculation engine that empowers business users to model and execute complex logic without IT intervention. It processes large data volumes at high speed and supports a wide range of EPM scenarios.
Key capabilities include:
Extending standardized processes in SAP S/4HANA with custom logic and allocationsEnabling business users to model complex rules without codingProcessing massive data sets in-memory via SAP HANAIntegrating data from SAP and non-SAP sources, hosted on SAP Business Data CloudCreating financial documents, postings to general or group ledger, and more in SAP S/4HANA enabling an end-to-end process, and not just running as a disconnected calculation engineEnsuring full traceability from results to source data
Picture 3. SAP Profitability and Performance Management
SAP PAPM and SAP BUSINESS DATA CLOUD
SAP PAPM can on top of BDC, in this case data persistency and processing happens on the SAP Datasphere level in SAP BDC. With SAP BDC Data products we can ensure context-rich data from SAP and non- SAP sources being available for PAPM calculations, building a foundation for detailed transparent analysis and also providing even more data for AI-powered insights. Another benefit of placing SAP PAPM on top of SAP BDC is that with SAC being also part of the platform, we can really ensure end-to-end EPM processes without data replication, leveraging seamless planning and when needed extending calculations with SAP PAPM engine to achieve even greater transparency and performance. Ream more about BDC components in our previous blog “Key Planning & Analytics components of SAP Business Data Cloud (BDC)“
Picture 4. SAP Business Data Cloud components
Let’s take a look at the data flow for a corporate profitability analysis within an SAP landscape.
The initial data originates in the transactional system or system of record, SAP S/4HANA. While S/4HANA already provides capabilities for cost calculation and allocation, we can further enrich this data with performance results and details—such as customer segment, region, channel, or product line—and incorporate simulations.
To achieve this, we introduce an additional BDC-based layer that leverages BDC data products and SAP Datasphere to connect to S/4HANA, as well as other potential data sources and prepare the data. SAP PaPM then performs the calculations, and SAP Analytics Cloud (SAC) visualizes the results and provides a planning-process framework for end users.
Picture 5. Corporate profitability analysis with SAP solutions
Conclusion
A business semantics calculation engine is a powerful tool in enhancing the efficiency and effectiveness of EPM processes. Whether it’s for tax, transfer pricing, profitability modelling, or planning enhancements, SAP Profitability and Performance Management plays an important role in bridging the gap between transactional data and reporting requirements.
By embedding SAP PaPM within your EPM architecture, you can equip business users to act even faster, have greater insights, and align execution more closely with strategic intent. SAP Business Data cloud will provide a proven semantically reach data foundation and AI tools to simplify analysis, we will be giving more detailed examples in our next articles.
Looking to take the next step? Connect with your SAP representative to register for an SAP BDC Discovery Workshop.
To expand your expertise in SAP PaPM, consider exploring the related blog series published within the SAP Community and stay tuned for more.
Picture 1. End-to-end profitability and performance managementMOTIVATIONIn today’s fast-paced business world, the ability to effectively steer and lead an organization is fundamental for achieving strategic goals and maintaining a competitive edge. A key success criterion is the capacity to fully harness and derive value from organizational data. Many companies struggle with data problems, such as fragmented information, outdated systems, and the super important task of preparing data for emerging technologies like AI. Recognizing these challenges, we are excited to introduce a blog series dedicated to showcasing the substantial business value of SAP Business Data Cloud (BDC) in the context of planning and analytics.The motivation behind this initiative is to provide a comprehensive exploration of how SAP BDC capabilities as essential instruments, facilitating robust strategic alignment and guiding effective decision-making processes across diverse organizational requirements. We aim to illustrate how SAP BDC, equipped with powerful data management, planning, analytics and innovative AI capabilities, empowers organizations with enhanced business steering agility by providing real-time insights, streamlined data management, and automated decision support – going from insights to action, helps mainly leaders guide their businesses with precision.Our blog series will provide valuable insights for decision-makers seeking to harness SAP Business Data Cloud (BDC) to enhance operational efficiency, optimize resource allocation, and achieve long-term objectives. By featuring detailed planning & analytics topics, the series will illustrate the transformative impact of SAP BDC in addressing the operational complexities of today’s business environment. This first introductory blog post will spotlight the strategic advantages of SAP BDC, particularly in the context of Business Steering, setting the stage for a deeper exploration of its benefits throughout the blog series.There are several blog posts in the series that will cover advantages of SAP BDC in the context of business steering, so please stay tuned for the upcoming blogs:The Value of SAP BDC in the context of business steering Planning & Analytics is an essential part of SAP BDC Key Planning & Analytics components of SAP BDC Is AI going to “retire” a dashboard?Simulations, a game changer in today’s volatile worldExtend existing planning scenarios of SAP BPC/BW-IP in SAP BDC Real-time steering with LIVE planningSAP PaPM – The role of business calculation engine in business steering (THIS BLOG POST)Self – service analytics and real time business steeringBusiness steering powered by AI agentsLeverage data products in the context of planning & forecastingIntroducing AI/ML capabilities by SAP DatabricksINTRODUCTIONIn today’s fast-paced business environment, enterprises must be flexible and adaptable to evolving market conditions and customer expectations. As a result, companies are developing strategies focused on innovation, digital transformation, and sustainable growth. However, when it comes to execution, the benefits of these strategic initiatives often fall short of expectations.Why the Gap?Several factors contribute to the disconnect between strategy and execution:Insufficient analysis and adaptation to business changes, making strategies difficult to execute in real-world conditions.Weak integration between financial and operational models, leading to misaligned decisions.Lack of trust in the numbers due to data silos and overly complex reporting models.Poor visibility into root causes of performance, whether underperformance or overachievement.This is where the concept of Enterprise Performance Management (EPM) becomes critical. EPM serves as the bridge between strategic goals and day-to-day execution. SAP offers a comprehensive, end-to-end EPM framework that spans planning, consolidation, tax, and sustainability management.Despite advancements, organizations still face hurdles in their EPM processes, that are highly connected to the reasons for the gap between strategy and execution:New regulations and market dynamicsData silos and disconnected processesLimited business context in performance reportingTo address these, companies increasingly need a business semantics calculation engine as an important part of their EPM framework —a solution that connects transactional and planning data to management reporting in real time. Such an engine should enable:Business-user-driven modeling through a no-code/low-code environmentIntegration of business semantics (e.g., cost allocations, profitability logic) into real-time calculations, powered by solutions like SAP Business Data CloudSimulation and scenario analysis without IT dependencyLet’s explore how a business semantics calculation engine can bring value across different scenarios not only for actuals, but also for planning data:Regulatory reporting: Ensure compliance with traceable, rule-based calculations.Profitability analysis: Evaluate performance by customer segment, region, channel, or product line.Bill of Materials (BOM) simulation and explosion: Assess the impact of changing prices or quantities on semi-finished and final products.Operational transfer pricing: Maintain compliance and transparency in cross-border pricing models.Group cost calculations: Enable unified and transparent cost modeling across entities.For instance, in a BOM simulation, users can assess how price or quantity changes at the component level affect the cost of the final product. This often involves recursive, high-volume calculations. By using SAP S/4HANA for transactional data, enriching it with SAP Profitability and Performance Management (SAP PaPM), and feeding the results into SAP Analytics Cloud, businesses can maintain full transparency, auditability, and planning granularity.Another example: planned profitability calculations at the SKU level. While this level of detail may be unnecessary in the core budgeting process, it’s critical for management reporting. Rather than overburdening the core planning system, businesses can offload these complex calculations to a dedicated engine and integrate the results seamlessly.Last but not the least example to illustrate the need in business calculation engine is a group costing calculation. Let’s say the company has many intercompany relationships, products and services are going through various steps between companies in this process. SAP PAPM delivers real-time insights into group margin, through segmented profit and loss reports according to key transfer pricing dimensions, providing needed data to manage and analyze tax costs and revenues, markups and markup costs, production and services costs and third-party revenues. Benefits of Embedding a Calculation Engine into the Planning ProcessAutomate complex allocations and business logicEnsure full transparency and auditabilityEnable granular planning and analysis—by customer, product, channel, etc.Increase compliance by following new regulationsFrom the business user’s perspective, this process should be seamless. As a planner, you simply run the calculation and see results immediately integrated into your planning reports. This is precisely the kind of user-centric experience enabled by the SAP EPM framework—combining SAP S/4HANA, SAP Analytics Cloud, and SAP Profitability and Performance Management (SAP PaPM).Picture 2. Detailed Profitability analysis powered by SAP Analytics Cloud and SAP PAPMWHAT IS SAP PAPM? SAP PaPM Cloud is a no-code calculation engine that empowers business users to model and execute complex logic without IT intervention. It processes large data volumes at high speed and supports a wide range of EPM scenarios.Key capabilities include:Extending standardized processes in SAP S/4HANA with custom logic and allocationsEnabling business users to model complex rules without codingProcessing massive data sets in-memory via SAP HANAIntegrating data from SAP and non-SAP sources, hosted on SAP Business Data CloudCreating financial documents, postings to general or group ledger, and more in SAP S/4HANA enabling an end-to-end process, and not just running as a disconnected calculation engineEnsuring full traceability from results to source dataPicture 3. SAP Profitability and Performance ManagementSAP PAPM and SAP BUSINESS DATA CLOUDSAP PAPM can on top of BDC, in this case data persistency and processing happens on the SAP Datasphere level in SAP BDC. With SAP BDC Data products we can ensure context-rich data from SAP and non- SAP sources being available for PAPM calculations, building a foundation for detailed transparent analysis and also providing even more data for AI-powered insights. Another benefit of placing SAP PAPM on top of SAP BDC is that with SAC being also part of the platform, we can really ensure end-to-end EPM processes without data replication, leveraging seamless planning and when needed extending calculations with SAP PAPM engine to achieve even greater transparency and performance. Ream more about BDC components in our previous blog “Key Planning & Analytics components of SAP Business Data Cloud (BDC)”Picture 4. SAP Business Data Cloud componentsLet’s take a look at the data flow for a corporate profitability analysis within an SAP landscape.The initial data originates in the transactional system or system of record, SAP S/4HANA. While S/4HANA already provides capabilities for cost calculation and allocation, we can further enrich this data with performance results and details—such as customer segment, region, channel, or product line—and incorporate simulations.To achieve this, we introduce an additional BDC-based layer that leverages BDC data products and SAP Datasphere to connect to S/4HANA, as well as other potential data sources and prepare the data. SAP PaPM then performs the calculations, and SAP Analytics Cloud (SAC) visualizes the results and provides a planning-process framework for end users.Picture 5. Corporate profitability analysis with SAP solutionsConclusionA business semantics calculation engine is a powerful tool in enhancing the efficiency and effectiveness of EPM processes. Whether it’s for tax, transfer pricing, profitability modelling, or planning enhancements, SAP Profitability and Performance Management plays an important role in bridging the gap between transactional data and reporting requirements.By embedding SAP PaPM within your EPM architecture, you can equip business users to act even faster, have greater insights, and align execution more closely with strategic intent. SAP Business Data cloud will provide a proven semantically reach data foundation and AI tools to simplify analysis, we will be giving more detailed examples in our next articles. Looking to take the next step? Connect with your SAP representative to register for an SAP BDC Discovery Workshop.To expand your expertise in SAP PaPM, consider exploring the related blog series published within the SAP Community and stay tuned for more. Read More Technology Blog Posts by SAP articles
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