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Business Performance Management in 2010, Part 1

Originally published December 8, 2009

Business performance management (BPM) has come a long way in the past several years. If someone took a look at BPM five years ago and again today, they probably wouldn't recognize it. As is often the case though, as much as things change, there are also many aspects that remain the same. In the case of business performance management, many of the same challenges that have existed from day one are still with us. Let's took a look at the state of BPM as we enter 2010.

What is business performance management? Five years ago BPM was primarily focused on addressing the budgeting and planning needs of the finance department. For information technology (IT), business performance management meant graphically displaying information from a data warehouse in a performance dashboard. While BPM has grown significantly beyond its humble beginnings, some in finance and IT still view it as budgeting and/or dashboards.

The fact of the matter is that business performance management has become much more than that. In effect, it has become the primary front-office strategic decision-making tool. To deliver on this promise, BPM utilizes business intelligence (BI) tools to convert data from transactional systems into meaningful and actionable information for management decision making. This should be great news for all concerned. For end users, it leverages the sizeable investments they have made in back-office transactional systems over the years to provide potentially large returns. For vendors of enterprise resource planning (ERP), customer relationship management (CRM), supply chain and other transactional systems, it provides a strategic use of their data beyond the automated collection and storage of large volumes of information. For the BI vendors, it gives their tools a key business purpose that will bring them into management offices across the enterprise. For the BPM vendors themselves, they are now positioned as providing the key set of applications that leverages and makes sense of all that has gone before. As a matter of fact, the so-called “BPM mega-vendors” provide solutions in all three areas: transactional systems, business intelligence tools and business performance management applications.

So, more specifically, what comprises business performance management today? Well, budgeting, planning, forecasting and strategic planning are still part of the core foundation. You need to know where you are planning to go before you can tell if you got there. Most BPM application vendors provide some or all of these capabilities. Performance dashboards displaying scorecards containing an organization's key performance indicators (KPIs) are still one of the main ways BPM data is made available for decision making. Many BI vendors offer performance dashboards, and most BPM application vendors have added this component over the years. Financial consolidation is a more specialized BPM application that only a handful of vendors address. It is important when there is the need to combine and reconcile data from multiple general ledgers. When the U.S. moves forward with International Financial Reporting Standards (IFRS), it will become a critical component for many companies as a way to handle the transition.

While all that we have discussed so far has been part of business performance management from early on, there are many recent additions. Financial reporting, particularly management reporting, has grown in importance. There are many business intelligence vendors that provide reporting tools; but when combined with BPM applications, such as consolidation systems, they can address financial reporting, legal reporting and management reporting. Predictive analytics was a buzzword a few years ago, but has now gone mainstream. Everyone is more concerned today about the accuracy of their forecasts. Systems incorporating predictive capabilities can help companies better understand the probability that a particular forecast will come to pass.

Another newer area of BPM is profitability analysis and optimization. Several vendors have been offering this for a while, but the tough economy we have been experiencing has really accelerated user adoption. Companies are looking to wring every dollar of profits out of their businesses that they can. Along with that goes risk reduction. Governance, risk and compliance has grown in importance as more companies try to get a handle on the quality of their investments, internal controls and external reporting. Of course, industries with increased government oversight are particularly focused on this.

Many companies have come to the realization that you really can't fully understand the business by just looking at the consolidated numbers at the top. You need to examine what is going on, on a daily basis, at the operational level. This has led to the use of operational analytics as part of BPM. As one of the newest areas, it is still sort of a “wild frontier.” That is, while there are well-developed and polished applications for most other aspects of business performance management, this is still one area that requires custom-built IT solutions. There is one exception – sales performance management. As one of the first operational areas to be targeted for this type of analysis by most companies, it is also the area the application vendors have tackled first as well.

As we enter 2010 this new, comprehensive business performance management has become a mission-critical initiative for many companies. For others though, it remains a back-burner item. Some have attempted BPM, but failed either fully or partially. Next month we will look at the challenges these companies have faced with business performance management and provide some thoughts on how to overcome them.


  • 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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Posted December 14, 2009 by Gary Cokins gary.cokins@sas.com

Craig,

It is heartening that you and other thought leaders are now expanding the narrow myopic view of BPM as just a CFO initiative with a bunch of dashboards and budgeting. I appreciate your provding this understanding that BPM is not just about monitoring dashboard dials but on moving them! Making decisions that improve performance. Nice piece.

Gary

Gary Cokins, SAS

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Posted December 8, 2009 by Anonymous

Craig

Thanks for a comprehensive overview of the BPM space and where it is heading.  I agree with the movement toward operational analytics and believe these capabilities can be applied to many different operational areas and deliver tremendous value in helping people make better decisions more quickly.

Wayne Morris, myDIALS

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