Based on our consulting work with clients and vendors in 2013, as well as the results of the most recent BPM Pulse survey, we believe the following are the most likely next steps for performance management in 2014.
#1: Cloud becomes the dominant solution approach for Performance Management
This is a logical extension of what we are seeing today. The number of companies saying no to cloud are few and far between. Many companies, particularly in the midmarket where they are resource constrained, have a preference for cloud. The rest are indifferent. In those cases cloud often wins simply based on cost as opposed to the technology itself. The main hold outs still appear to be the largest companies. While security is still an issue (more perception than reality) for some, it is really the need for robust functionality that until recently was lacking in the cloud-based solutions. That issue is going away as the cloud vendors have been aggressively working to close the features/functions gap. The on premise vendors are also working hard to cloud enable their solutions. The end result is that finding a cloud based solution that meets the needs of the largest companies will become a non-issue over time.
#2: Mobile becomes an important differentiator
In our work today we are seeing a mobile access capability as a 'must have' for a handful of companies. It is usually a senior executive that wants/needs access to the latest reports on his tablet. In those situations mobile capability becomes a hard and fast requirement and vendors without it are excluded. For most though, mobile is still a nice to have capability. The focus is also still heavily on consumption of data, not creation. All other things being equal, offering a mobile capability is a way to stand out from the pack.
#3: Vertical solutions will be included in more evaluations
We say this every year and each year we are closer to being right. Customers always want a product and vendor that speak their language and understand their business. The benefits are many - reduced learning curve, industry-specific functionality, reduced customization required/reduced consulting cost. This past year we have seen this more than ever. Companies that were looking for and/or selecting industry-focused solutions came from manufacturing, retail, insurance, healthcare, utilities, and banking. Prospects are also willing to overlook quite a bit if the vendor focuses on their industry. They will look at smaller vendors they never would have otherwise considered. In addition, they will accept less than state of the art solutions (i.e. out dated user interface, older technologies, etc.). Holding back this trend has been the limited availability of solutions for a wider range of industries. We are now seeing vendors that have had success in one or two industries branching out to new sectors. In addition, some of the more established vertically focused vendors are updating their products to make them more competitive.
#4: Growth of packaged operational analytics
Operational analytics is a major area of potential growth for performance management. Once you have tackled corporate budgeting, consolidation, and reporting, the next step is to bring the pillars of performance management: strategize, plan, measure, act to each area of the business. This enables tighter management of the core business functions, and also results in a more holistic view of the entire business and cross-departmental impacts. The challenge has been that for many years you had to build these solutions yourself from business intelligence toolsets. We have seen significant growth recently in packaged analytics applications for one area in particular - sales performance management. This is also the area most in demand from prospects so it makes sense. There are now a wide range of solutions available that focus on revenue recognition, incentive compensation management, forecast accuracy or some combination. We expect this segment of the market to grow and perhaps branch out to other areas of the business beyond Sales.
#5: Predictive analytics will continue to slowly gain steam
We know that predictive capabilities could add tremendous value to performance management solutions, but it still seems a little early in terms of acceptance. The prospects are still a little confused as to how it works and what the value is, while the vendors themselves offer an inconsistent range of functionality under the predictive analytics banner. The result is a missed opportunity for all. It is a sophisticated and powerful tool that involves complex mathematical algorithms which is part of the reason it is not well understood by the average prospect. Predictive analytics can lead to more accurate forecasts, or at least a better and more realistic understanding of the probability of a forecast coming to pass. What is needed is some degree of standardization - a consistent definition of what is included in this module or feature, regardless of vendor. In addition there needs to be clear messaging and education as to how it is used and what the real benefits are. This is exactly the situation that performance management itself was in about 10 years ago until a group of us (consultants/vendors/analysts) came together to address this challenge. The results were dramatic and led to the successful and mainstream performance management market we have today. This area could use the same kind of focused attention to increase the rate of adoption.
#6: Big Data will not have a major impact on Performance Management
You can't read an IT article or blog without some mention of Big Data and related analytics. There's no question that this is an important area that can provide real value to most companies. The question is, how does this relate to performance management? Most data tracked by performance management systems is financial in nature. There may be a lot of numbers but this data does not usually fit the definition of 'Big Data' - a tremendous volume of semi-structured and unstructured data from inside and outside the company that is too large for traditional databases and analysis tools. There is a role for Big Data to play though: as a leading indicator. For example analyzing social media data may indicate customer dissatisfaction that can translate into fewer renewals or reduced new sales. How this analysis makes its way into the performance management system can vary. For most, this analysis will take place in a separate system designed to handle this type of data. This will then become another source system, much like ERP or CRM systems, for the performance management system. Alternatively some performance management vendors, particularly the newer cloud-based vendors, can provide built-in Big Data analytics capabilities.
#7: There will begin to be a focus on execution
At this point in time most performance management solutions do a solid job of measuring performance. They allow you to define strategic objectives, put together a long-range plan to achieve those objectives, and create detailed budgets and forecasts to measure progress against. As actual data comes in from source systems the performance management systems tracks performance and highlights significant variances. Taking action to address those variances usually takes place outside of the performance management system. There are two reasons for this. First of all, more detailed operational data is usually required to determine the appropriate course of action, and that data is contained in other systems. Secondly, other than sharing a common view of the results it is still cumbersome to have a group of people discuss what action to take from within the performance management system. As we monitor the vendor landscape we are seeing newer solutions that attempt to tackle both of these areas. These new solutions include more detailed monitoring of operational activities (down to the plant floor level), as well as tools to facilitate collaborative decision making. As these solutions mature they should be able to address the last big missing piece of performance management, and possibly the most important, helping a company successfully execute on its strategy.