How to Increase Your Performance Management Risk, Part 1
by Craig Schiff
Originally published July 18, 2007
Before we discuss how to increase your performance management risk, let’s look at why you would want to do this. Well, the true answer is that you probably would not want to increase your performance management risk. You might think most people would want to lower their risk of failure and increase the odds of project success. However, recent field data suggests that some organizations are intentionally taking deployment steps that our research and experience indicates will increase the risk of not achieving complete performance management success. Let’s look at what they are doing and why, so you can potentially avoid these same pitfalls.
Only Looking at a Single Vendor
Our most recent research indicates that there are well over one hundred vendors offering performance management components. Yes, this is after taking into account the latest merger and acquisition activity. How do they all survive? By meeting the needs of specific market segments. In the case of performance management, one size definitely does not fit all. You probably haven’t heard of many of them because they allocate the bulk of their budgets to product development and customer service, not marketing. Still, it is worth the effort to seek them out since one of them may be much better at meeting your specific requirements than the vendors you already know. Many of them will also be less expensive.
Even if you are set on going with one of the more well-known solutions, you still should compare a handful of alternatives. They may look the same and the marketing may sound the same, but they are very different under the surface. Everything from ease of maintenance to performance during large or complex calculations and consolidations varies widely among the market share leaders in performance management. The integration of various components and pricing can also be quite different. For a mission-critical system with a six-figure (or more) cost that you will be living with for an average of 5 to 7 years, you owe it to yourself to compare the viable alternatives.
Why then are some companies today only looking at a single vendor when considering performance management? There are two primary reasons. The first has been around for a while: IT wants to expand on existing in-house systems. This typically means going to their current ERP or business intelligence provider and purchasing their performance management modules. On the surface, this makes good sense. It is consistent with corporate standardization initiatives to stabilize or reduce the number of different systems and vendors they rely on. It leverages, to some extent, existing training, contracts and relationships as well as underlying data structures. However, performance management is not just another system. It is of utmost importance to the company and its long-term health and success to get the best performance system available.
A suboptimal system can put you at a competitive disadvantage. So what should you do? Find the solution that best meets your needs by comparing the entrenched vendors’ offerings in this area with several other options. It may be that the existing vendor is only marginally weaker than some of the alternatives, but wins out anyway because of the reasons stated earlier. It may also be that they are, in fact, the best solution for your business needs. In both instances, doing a vendor comparison would only serve to get more buy-in from the team and shut down any naysayers. It can also be the case, though, that the incumbent vendor’s functionality in the areas that matter most to your company is far off the mark when compared to other vendors. In this situation, it is of critical importance to do the appropriate comparisons because otherwise you might saddle your organization with the wrong solution for many years to come. Let’s not forget the personal risk as well. When the new performance system that you purchased for the company doesn’t deliver as expected, someone will have to take the blame. That person will probably be you, especially if you dictated the solution to the company without involving the team in vendor analysis.
The other reason some companies are only considering a single vendor relates to the tactics of the vendors themselves. It is obviously a highly competitive market out there. Everyone is fighting for new business. In many deals, we see five or six vendors directly competing. Of course, only one can win. Pre-sales activities can be costly, even more so if there are no resulting revenues to offset them. So, a number of leading vendors are trying to shortcut the process and shut out the competition early on. Good for them – not so good for you. To make it appealing, they will offer you a rock-bottom price and offer a free trial period so long as you don’t look at any other vendors. While that is an attractive offer, you should see it as the self-serving tactic that it is. As discussed earlier, how do you know a particular vendor is the best choice for you if you haven’t looked at any alternatives? Even a free trial period doesn’t help. You can see what their product does, but you can’t see what you’re missing. They may produce reports in 20 seconds, for example, and that may seem reasonable. But, how do you know that there isn’t a competitor who only takes 5 seconds to produce that same report? When you roll this out to hundreds of users who will run reports regularly, those 15 seconds will make a big difference. The point is, you need to do your homework and compare vendors. What about that rock-bottom price they offered? Believe me, it will still be there when they are trying desperately to win your business while competing against your final list that includes four or five other vendors.
In future articles in this series, we will look at other activities that can increase your performance management risk: going it alone and working with tools-only vendors.
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