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What’s Ahead for Performance Management in 2009?

Originally published enero 14, 2009

Performance management has been growing in popularity and expanding in functionality for several years now. We see that continuing into the new year. For some vendors, however, it may not be smooth sailing. Based on conversations with vendors, customers and early feedback from the 2009 BPM Pulse Survey of performance management and business intelligence end users, here are our predictions for 2009.

Companies will continue to invest in performance management.

In a typical year, that would not be saying much; but in the current economic climate, there are some who believe that most technology investments will be reduced. It is our belief that business performance management (BPM) becomes even more critical when times are tough. Companies need accurate data to make critical decisions on a more frequent basis than usual. As financial conditions continue to deteriorate, executives need to look for more ways to minimize costs and attempt to maximize profits. BPM is one of the easiest ways to do that. The preliminary data from the 2009 BPM Pulse confirms our feelings. While only 9% said the economy is causing them to reduce their focus on BPM, more than 51% of the respondents so far agree that BPM is more critical than ever and are increasing their efforts in that area (the remainder say their BPM plans have not been impacted one way or the other by the current economy). By the way, it’s not too late to have your voice heard in the 2009 BPM Pulse Survey.

BPM will expand to become the key front-office decision system company-wide.

Performance management systems already contain most of the key summary data needed for management decision making. Unlike the underlying transactional systems that provide the source data, BPM systems provide easy access to the data for both the casual viewer and the experienced analyst. Most managers in the company are already familiar with the system’s user interface from using either its performance dashboard or budgeting capabilities. The entities, line items and reports in the system can be maintained by business end users with minimal IT support. Why shouldn’t this investment be leveraged for more than just budgeting and monthly reporting? With new technology investments being closely scrutinized, adding additional seats or capabilities to an existing BPM system may prove to be a more palatable incremental cost. The reality is that this trend is not new. The vendors have been adding functionality to “core” BPM for years. Predictive analytics, sales performance management, profitability optimization, governance, risk and compliance are just a few areas that some of the leading BPM vendors have addressed in recent years. We see this functionality being picked up by more vendors while new capabilities are introduced as complementary applications. What we could use more of are pre-packaged operational analytics targeting specific areas of the business, much like the way sales performance management has provided new insight into that part of the organization.

IFRS will drive more interest in BPM’s financial consolidation capabilities.

Financial consolidation is one of those areas that either you don’t need or it is so challenging that you have already addressed it with a technology solution. The companies that fall into the latter category tend to be large multinationals with complex ownership structures, significant currency conversion requirements and large intercompany transaction matrices. That group is only a small part of the overall prospective BPM customer population, however. The majority of companies have not had the need for such a sophisticated consolidation system and are getting by with basic tools. We believe that the adoption of IFRS (International Financial Reporting Standards) is about to change all of that. For all companies that need to transition to IFRS, a performance management consolidation system is one of the most straightforward ways to make the move. With such a system in place, it becomes a relatively simple matter to change roll-ups, calculations and classifications to fit the needs of IFRS. During the initial transition period, these systems can also support and reconcile both IFRS and U.S. GAAP. Therefore, as more companies become aware of the reality of IFRS and the effort it will take to transition over, we expect to see an uptick in the deployment of consolidation systems. That’s not to say that budgeting systems will be toppled from the top of the BPM heap anytime soon, but change is in the air.

Some smaller vendors will disappear.

Unfortunately, not all of our 2009 predictions are good news. We expect to see some of the smaller vendors either get acquired or, more likely, simply run out of cash. With funding tight and many potential purchasers more risk-averse than ever, it may be a rough road ahead if you are not one of the established BPM vendors. We have seen prospects focus their vendor evaluations on the largest vendors as well as on some of the smaller, but well-established second-tier vendors. The risk of going with a vendor that does not have a significant track record, or that could conceivably fold in the next 12 months, is just too great. Unless that vendor has functionality that is truly unique, or a price point that is hard to beat, it’s going to be a struggle for them. One approach they might consider is a subscription pricing model, even if they are not using a SaaS model for their product. Subscription pricing greatly reduces the risk as well as the cash outlay for prospective purchasers. Instead of paying in full for the software with a sizeable upfront license fee, they pay over time. If the company doesn’t exist next year, they don’t have to pay and have only paid for their use to that point. If the software isn’t all they expected it to be, they could stop paying next year even if the company is still around. The cash outlay for the year 1 subscription fee would probably only be about one-quarter of the price of an equivalent license fee. From the vendor perspective, this will impact cash flow in a negative way, but certainly not as negatively as the impact of no business. If they stay in business and their product is good, they will have a recurring revenue stream they can build on.

Conclusion

Overall, 2009 looks like another great year for BPM, the established vendors, consultants and, most importantly, the end users of performance management and business intelligence solutions. But don’t forget to establish your business requirements before diving in, don’t allow the vendors to steer your buying decision and leverage the experience of performance management experts either in-house or from third-party advisors. In today’s economy, hoping for a successful implementation is one risk you should not have to take.

SOURCE: What’s Ahead for Performance Management in 2009?

  • Craig SchiffCraig Schiff

    Craig, President and CEO of BPM Partners, is a pioneer in business performance management (BPM). Craig helped create and define the field as it evolved from business intelligence and analytic applications into BPM. He has worked with BPM and related technologies for more than 20 years, first as a founding member at IMRS/Hyperion Software (now Hyperion Solutions) and later cofounded OutlookSoft where he was President and CEO.

    Craig is a frequent author on BPM topics and monthly columnist for the BeyeNETWORK. He has led several jointly produced webcasts with Business Finance Magazine including "Beyond the Hype: The Truth about BPM Vendors," the three-part vendor review entitled "BPM Xpo" and "BPM 101: Navigating the Treacherous Waters of Business Performance Management." He is a recipient of the prestigious Ernst & Young Entrepreneur of the Year award. BPM Partners is a vendor-independent professional services firm focused exclusively on BPM, providing expertise that helps companies successfully evaluate and deploy BPM systems. Craig can be reached at cschiff@bpmpartners.com.

    Editor's Note: More articles and resources are available in Craig's BeyeNETWORK Expert Channel. Be sure to visit today!

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