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Business Performance Management in 2010, Part 4 Cost-Effective Performance Management

Originally published March 9, 2010

In this series (Part 1, Part 2, Part 3), we have looked at the benefits of performance management and some of the primary challenges. Perhaps the biggest challenge of all may be the perception that your company simply can't afford it. This month we examine some ways you can minimize the long-term costs of performance management.

Cost-Effective Performance Management

That may sound like an oxymoron to some, but it really isn't. By now, most people appreciate the value of performance management, but there is a belief that it can be very costly and is only for the largest companies. While it is true that you can spend a lot on performance management, that doesn't have to be the case. Here are a few simple tips that can help reduce the costs associated with performance management (as well as many of the risks).
  1. Develop a performance management road map. Why? If you don't know where you are going, you will probably never get there. Also a road map helps you make sure that the solution you implement today will fit the needs of the organization for many years to come. Without a road map, you could end up with a one-off solution that addresses a pressing need today but gets tossed out when it can't meet next year's needs. In addition, if you are without a road map, you may be putting your technology vendor in the driver’s seat in determining what your scope could/should be going forward, which will likely align with the vendor’s strategic direction and can have a notable cost impact. Clearly, a partnership with your chosen vendor is of high value, but you need to have a plan for where you want to go.

  2. Put together detailed requirements. It seems obvious, but it's amazing how many companies skip this step, or stop at a high-level, one-page summary of requirements. Without a detailed list, you will not be able to easily distinguish between vendors. It is also likely that you will end up with a solution that only partially meets your needs. In addition, having detailed requirements allows you to establish a firm scope for your project phases – an important way to constrain your project, mitigate scope creep and be more cost effective with your deployment.

  3. Look beyond the usual suspects when considering vendors. The most famous (really the ones with the biggest marketing budgets) need to cover the cost of their marketing budgets in their price. In addition, these solutions may not fit your needs as well as some lesser known, less expensive, but very capable solutions. In your vendor evaluation process, you definitely want to include a larger vendor that aligns with existing IT/infrastructure investments. At the same time, you can also keep the bigger vendors thinking about cost moderation by bringing to the table smaller, more commercially aggressive vendors that are anxious to win your business.

  4. Create a cross-functional team to steer this project. First, you'll get some fresh new ideas from groups outside of finance and IT. Secondly, you'll be in a better position to make sure that the needs of all areas of the company are addressed by the solution you are contemplating. Lastly, it will help with buy-in and utilization once the system is in place. Under-utilization by groups that have had little input into the process is a common issue for company-wide performance management systems.

  5. Leverage existing knowledge and best practices. At this point in time, many companies have successfully implemented performance management. There is absolutely no reason to re-invent the wheel and suffer through the steep learning curve and costly pitfalls they’ve already experienced. Add a resource to the team that has been through performance management before, or engage an outside expert who has been involved with many performance management implementations. These resources more than cover their costs with significant time and dollar savings.

  6. Consider some of the quickly developing, cost-effective technology alternatives. There are really three parts to this:

    1. Consider cloud-based /SaaS (software-as-a-service) solutions. They require less IT resources and infrastructure, thus reducing the associated costs. They can also be considered as an operating cost versus a capital expense.

    2. Look for rapid implementations. Every vendor will say they offer the quickest implementations so you really need to check references on this. The cost savings here can be very significant. For some solutions, the implementation consulting costs can equal or surpass the cost of the technology itself (sometimes by several orders of magnitude!).

    3. Examine the total cost of ownership. There is the technology cost, of course, be it a license or subscription. Then there is the implementation consulting. For many solutions, there is also an annual license renewal and/or maintenance fee. Lastly, there is the cost of integrating this solution into your existing technology stack. Look for a system that works well with what you already have in place. This is another area where cloud computing will shine as more solutions are delivered on this platform.
With a little effort, most companies can do performance management cost effectively. Not doing performance management at all can be the most expensive option as you miss identifying revenue upsides and opportunities for cost savings. You also miss out on redeploying resources bogged down in the nuts and bolts of planning and reporting to more high value analytical areas. Our advice – invest in performance management, but make sure you invest wisely.

  • 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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