Performance Management Is Build now Bigger than Buy?
by Craig Schiff
Originally published July 10, 2006
Most of the data we see indicates a continuing demand for pre-built business performance management (BPM) applications, as opposed to in-house development of customized BPM applications. You would expect to hear that observation from the application vendors, but it’s backed up by our clients and again by our annual BPM Pulse survey. There is also a sizeable group that likes to see the application vendor provide a supplementary set of business intelligence (BI) tools to customize and expand their application's capabilities. Our information shows a shrinking minority looking to reinvent the wheel and build performance management solutions on their own. However, some people have different beliefs, and not everyone agrees with our view. For example, former Gartner analyst Erik Keller, now of Wapiti LLC, gets credit and appreciation for his opposing view. He recently wrote that in the enterprise application space (where business performance management resides) the pendulum is swinging back from “buy” to “build.”
Keller cites several reasons for the “death of packaged applications”: the adoption of service-oriented architectures (SOA), the availability of open source and the ability to develop your own applications offshore with high-quality, lower-cost results. He also points to the “typical level of customer dissatisfaction with software vendors” and finds the case against buying to be compelling.
Keller places part of the blame on integrators: “Internal IT groups often used to fail when they attempted large, complex projects. Over the last 15 years, buyers have found that most enterprise software vendors and systems integrators are no better and actually less accountable than their internal capabilities.”
We’ll chime in here with a dissenting opinion. When it comes to business performance management, we believe implementers with specialized experience in BPM will typically achieve a better result than an internal group that lacks an extensive BPM background.
Finally, Keller notes that with upfront license charges and ongoing maintenance fees that hover around 20 percent of list price, enterprise software has “taken on the same bad characteristics of inefficiently managed internal IT staffs.”
Again we disagree because what may be true for the broader enterprise applications market does not necessarily hold for performance management where “buy” is strongly entrenched and will remain so. In performance management, the vendors still know better than most users when it comes to creating applications.
Perhaps larger companies using BPM are more qualified than small vendors to develop performance management in house? Our most recent Pulse survey contradicts this squarely: When it comes to BPM, it’s the smaller companies that lean toward tools (expecting a lower out-of-pocket cost), while the large users overwhelmingly prefer packaged applications.
Build, Buy or Assemble
The technology changes that make it much easier to assemble composite applications from services are more important in established enterprise functions such as enterprise resource planning (ERP) and customer relationship management (CRM).
Business performance management has a high complexity level, relative to the size of most BPM projects. Size influences the budget, and the budget often influences the headcount dedicated to the BPM initiative. That makes a “build” approach quite challenging. In the build-versus-buy decision as it pertains to BPM, the one factor that unquestionably outweighs others is simply the availability of employees. We’re referring to employees with the deep domain expertise who really understand performance management functionality and the challenges of integrating data from different sources.
Until companies have that expertise on board, in adequate numbers, and the required components required for assembly are readily available, we believe that wise organizations will continue to buy applications with business performance management functionality, rather than attempt the arduous task of building this functionality on their own.
SOURCE: Performance Management
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