A Turning Point for Business Performance Management?

Originally published April 15, 2009


Business performance management (BPM) has had a long and successful run. Is that about to change? Business performance management may become a victim of its own success if purchasers are not more thorough in the planning of their initiative.

It Starts with Prospective Purchasers

Due to the general success of business performance management so far, some prospective users of BPM are treating it as just another commodity. Business performance management deals intimately with the way a business is run and the decisions that are made. What product is used, how it’s implemented and what it measures are unique to every business. Treating it like the office copier (just go buy the leading brand, or find the cheapest one) is very shortsighted. Some companies are doing research, but in name only. In many cases, ill-informed junior analysts are assigned to do the research. They don’t know what they don’t know and end up buying into marketing hype. They are also impressed with all the information they can get at no cost, downloading every free document they can find. We all know what you get for free – sales pieces or high-level overviews, not the appropriate depth you need to make the informed business decision that is required for business performance management. In some instances, these very same people spend money on vendor conferences that are either too sales-oriented or too generic to really tell them what they need to know.

In addition, there are important steps being skipped. Many companies do not have a road map in place for performance management. Hard to believe, but true. They know the problem they are trying to address today, but there is no vision for tomorrow. The result – buying a solution that they outgrow very quickly and/or a BPM initiative that never moves beyond the basics. What about requirements? Some organizations think a single page high-level list is all they need. With the aggressive marketing going on today in business performance management and dozens of vendors to choose from, that list will fall far short of enabling anyone to tell the vendors apart. For example, almost all BPM products work with Excel; how they actually utilize spreadsheets will vary by vendor. Just having “must work with Excel” as a requirement will not be of much help. Lastly, since performance management is the focus, key performance indicators (KPIs) are critical. More specifically, what is the system in fact going to measure? What is strategically important to our business today? Most companies simply automate existing reports and ratios. That is not going to give them the real benefits of business performance management.

We have seen many instances where the CFO will either not fund the project as they focus on more pressing priorities, or just dictate the solution to be selected based on prior relationships or familiarity from a prior (perhaps very different) job. It’s amazing that anyone ends up with the right solution.

The Vendors Play a Role

The vendor situation is adding to the confusion. There are a handful of very large vendors in this category. There are multiple impacts resulting from this situation. It lends itself to the offhanded “let’s just consider vendor A, B, or C – they’re the biggest” comment. Also, while being functionally rich, these large-scale solutions can be costly and complex, causing all but the largest enterprises to believe business performance management is not for them.

Smaller vendors have significant challenges and resulting financial performance pressures. This tends to stifle innovation and sometimes price competition. The big guys can do and charge what they want. They have significant leverage and can set direction and tone. There is also a herd mentality. “We haven’t really evaluated this solution, but everyone else is going with them.” Let’s not forget what happened with ERP (enterprise resource planning) initiatives. Projects took much longer and were much more expensive than expected. Companies modified their business to fit the product instead of the other way around. There are the beginnings of some of those same potential issues coming up in BPM implementations today.

Expert Consultants?

Expert consultants should be able to help companies do BPM right and avoid some of the mistakes previously outlined.  However, they have their own challenges. As this is one of the few growing software categories, everyone is looking to get on the BPM bandwagon. BI technology experts and data warehouse designers are starting to pass themselves off as performance management experts. BPM is as much about business as it is about technology, and some of these consultants do not have the appropriate background or skills. Of course, there are also the hundreds of BPM implementation consulting firms that partner with one or more vendors. Although many are expert and do a good job implementing the software they know best, some are pretending to be independent and unbiased BPM experts that can help companies with their entire project from start to finish. Their underlying goal is to see that their partners’ products are purchased and they get the big dollar implementation work.

Coming back to the prospective BPM purchaser – many don’t think they need expert guidance. “BPM is proven and successful, and the vendors will help me through my implementation. What more do I need?” Of course, if they want to leverage the learning that made those that have gone before so successful, new purchasers need to employ best practices and the shared knowledge of hundreds of similar companies that consultants can bring to the table.

With these trends I see a higher risk for BPM projects – and a higher percentage of failed implementations or, even worse, implementations that only meet 50-70% of their goals.  In the latter case, organizations will often stick with the sub-optimal system for 5-7 years, operating less efficiently than their competitors. I fear that once the full failures start to increase, it will have a snowball effect. Business performance management will be viewed negatively and projects will be cancelled.

Conclusions

The good news is that those who are falling victim to the above issues are still in the minority (although growing).  It is important to step back, develop a vision and a prioritized road map of where you want to go, create a detailed requirements list that supports your existing business processes, consider a full range of vendors that can meet your requirements, and have a short list of vendors do at least a small proof of concept during the evaluation process. Next, assure that the implementation firm you select is truly expert at the technologies selected by not selecting them until after you have gone through your full evaluation of alternative technologies.  Finally, confirm that you have the right expertise on your team – either in-house staff or leverage external experts.  Working with someone with the experience of multiple prior BPM engagements can definitely create huge value in the process.


SOURCE: A Turning Point for Business Performance Management?

  • 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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Comments

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Posted April 16, 2009 by Mark Conway mark.conway@oracle.com

Craig – always enjoy your articles and insights.

 

Oracle just completed an 800 firm research project on the “state of performance management” and some of the findings would support several of your points. Bottom-line though, that while BPM/EPM has had a successful run, the findings of the EPM Index research would indicate that firms in general, still have a ways to go to fully leverage the potential of performance management.  On a scale of 1-10, the average rating for where these firms were in successfully deploying performance management practices was 5.13.

 

Our experience would indicate that many of the “enterprise-scale” performance management projects we end up in are still assessed and signed off on by C-level execs.  Some departmental initiatives may be reviewed at a lower level but for major engagements, there still seems to be a rigorous assessment and due diligence being done.  We’d certainly agree though that most companies don’t have a performance management roadmap, and your point around KPIs and “what is going to be measured” is spot on. We’d even contend (to a point) – that this discussion is more important than the technology that gets selected!

 

We do hear smaller firms asking about costs and the scope of these projects – are they just too costly and complex. However, at a CIO Summit that Oracle hosted last month we had five CIOs in roundtable session discussions about their EPM/BI projects – and one common suggestion was to start small, look for the quick wins, show business value or impact quickly. This “modular”, build the momentum and success model could work well for any size company.

 

You captured the essence of what we heard from the CIOs and saw in the research project with “BPM is as much about business as it is about technology”.  As a technology vendor prospects expect us to come in with a bias toward technology – however it’s clear to us, than unless the business processes, workflow, data quality and governance and change management issues, etc., are all addressed, the project will not succeed.

 

Here is a link to a summary of the Oracle EPM Index findings and study:

http://emeapressoffice.oracle.com/Content/Detail.asp?ReleaseID=2549&NewsAreaID=2

 I think that you’ll find some of the findings of interest. Enjoy!

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