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Performance Management: Myths vs. Reality, Part 2

Originally published November 30, 2010

This month we continue the performance management myth-busting we began with Part 1.

Myth #3: Performance management initiatives are very costly and are really only for big companies.

This is really two myths in one – first, that doing performance management has to be expensive, and second that only big companies can benefit from it.

Reality: Every organization should be able to afford and benefit from performance management.

Sure, if you just look at the fully loaded suites from the high-end vendors, the costs can run into the hundreds of thousands of dollars, if not millions. To the companies that need all that they offer, they are worth every penny. It's true though that not every company can afford this, nor do they need it. That's why even the top-tier vendors have secondary offerings that target the mid-market with lower cost products and reduced implementation requirements. In addition, there are many, many vendors to choose from today beyond the Big 3 (see myth #4 below) that generally have very price competitive offerings. We have worked with companies implementing business performance management (BPM) on a budget of $ 50,000. How do they accomplish this? Usually, these tend to be smaller companies focusing on something less than a full suite, and by the very nature of their size requiring fewer user licenses. In addition, they seek out newer, smaller or more specialized vendors that tend to offer very aggressive pricing.

There are two other ways to keep the costs down: SaaS (software-as-a-service) and industry-specific packages. If a company is cash-strapped, an on demand SaaS solution might be the answer. Let's say they have 10 users. At a typical on-demand price of $50 per user per month, that would amount to just $6,000/year. Of course, that adds up over time, but don't forget the reduced IT and infrastructure requirements of such a solution as well. For companies where SaaS is not a fit, a vertical solution can help keep costs down. Keep in mind that for many customers, the cost of the software is 50% or less of the total cost of ownership. The other big cost is implementation and rollout. When using a solution customized for your industry, these cost can be reduced significantly. Training of your end users as well as your system administrators becomes much easier when the software already speaks their language. In addition, these packages come with built-in functionality and templates that reduce the time your team or outside consultants need to spend customizing it for your business.

Now let's talk about benefits. Are they really just for large corporations? Doesn't every company need to have a revenue and spending plan (budget) to track against? Yes, they do. We have worked with not-for-profits, healthcare providers, universities, and municipalities on BPM projects. Not every BPM adopter is focused on maximizing corporate profits. In addition to budgets, almost every organization also wants to track, ideally through a dashboard, the most important aspects of their business. What a hospital tracks, for example, will be very different from a large manufacturer, but BPM can accommodate both of them. One of the less tangible benefits of BPM is "better decision making." Is this any less important for a smaller organization? I would argue it is more important for them than for larger companies. A bad decision at a large corporation may lead to a dip in profits, but an ill-informed decision at a smaller operation could potentially put them out of business.

Myth #4: There are really only 3 BPM technology providers from which to choose.

Those that subscribe to this belief are usually referring to IBM/Cognos, Oracle and SAP.

Reality: There are more than 100 BPM application vendors to consider.

While those big 3 names do provide robust performance management solutions, often coupled with their own ERP and/or business intelligence offerings, they are not the only BPM application games in town. In fact, in our research we track more than 100 vendors that deliver one or more BPM applications. Many of these vendors are less expensive and more focused than the big guys and might be a better fit for your unique requirements and budget. Some examples of vendors you may be less familiar with include specialized vendors, such as Acorn Systems, that are focused on profitability optimization. Then there are many vendors concentrating on offering a financial performance management suite (budgeting, forecasting, consolidation, and reporting) including Longview, Prophix, and Tagetik. Some vendors couple a SaaS delivery approach with their suite. Adaptive Planning and Host Analytics are two examples of this. Lastly, there are newer vendors coming to market with fully fleshed-out products that are just beginning to get their word out, such as Cogniti. Which one is right for you really depends on your requirements and budget. Maybe one of the big guys is, in fact, the right answer for your company, but you can't be sure until you have looked at the current crop of viable competitors. For a more complete list of BPM vendor choices you can use our unbiased vendor search tool.

If you have any BPM myths you would like us to investigate in a future article, send them to me at cschiff@bpmpartners.com.
  • 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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