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The Investment in Performance Management

Originally published April 17, 2006

Most companies have now realized that business performance management (BPM) is a high-value initiative. The 2006 BPM Pulse Survey noted that the majority of companies either have a performance management project in progress or have plans to start one in the near term. What many companies seem to miss, however, is the significant investment required to carry out BPM correctly. To help set realistic expectations, it is helpful to review the BPM investment picture.

Resources, Time and Money
As with most major initiatives, the investment in performance management involves dollars, resources and time. Performance management is not “plug and play.” That should be obvious, but between aggressive marketing by vendors about ease of use and wishful thinking by novice purchasers, there is some expectation that a performance management project will be simple and straightforward. It will not be. A true performance management project needs to be totally aligned with corporate strategy. To fully understand that strategy and determine how it will map to a solution (usually in the form of key performance indicators) requires dedicated time commitment from senior people in the company. For example, the detailed implementation of the budgeting and consolidation modules necessitates a deep understanding of how various calculations and ratios are derived, the different allocation methodologies in use, currency conversions, intercompany eliminations and more. Because that knowledge usually resides with a few key (and probably very busy) people in the finance department, gaining access to and spending time with the experts in strategy and finance needs to be built into the project timeline.

The Performance Management Team
For the overall project itself, a team – typically with equal representation from IT and finance – needs to be assembled. The core team will probably include six people primarily dedicated to the project (actual numbers vary by project size and scope) and a project leader who will oversee the team and interface with the vendor and the internal stakeholders. There will be dozens of additional resources from business units across the enterprise that float in and out as needed. In addition to the internal team, there is almost always an external consulting team that helps with the implementation. These consultants may come from the vendor or a third party; but in either case, they help ensure that the products are correctly implemented in a timely manner. The project leader also needs to interface with these consultants and keep them on track. Companies commonly make the mistaken assumption that the project leader (who is often a finance manager) will have time for his regular day job during implementation. He or she probably will not.

Performance Management Expenditures
As you would expect, the 2006 BPM Pulse Survey also revealed that actual or planned dollar expenditures associated with performance management projects vary by company size. The survey’s nearly 500 respondents were equally dispersed among industries and companies from small to large. There was also a fairly equal mix of IT and business responses. The majority of the responses (about two-thirds) were from North America.

Small companies, defined as having less than 1,000 employees, are often looking at less than 50 users of the system overall. In the majority of cases, they expect to spend less than $100,000 for the software. However, about a quarter of the respondents expect to pay up to $250,000. On the services side, most are looking to spend less than $100,000.

Medium-size companies, defined as having between 1,000 and 5,000 employees, are often looking in the range of 50 to 250 users of the system overall. The majority expect to spend between $100,000 and $250,000, but there is a sizeable group looking to spend less than $100,000 and another group expecting to spend up to $500,000. For services, the medium-size companies expect to spend less than $250,000, with half of those respondents looking to spend less than $100,000.

Large companies, defined as having more than 5,000 employees, are often looking at more than 250 users of the system overall. The majority expect to spend between $250,000 and $500,000, with a sizeable group expecting to spend more than $1 million. There are also groups looking to spend less than $100,000, or at least less than $250,000. In the case of large companies, the services spend lines up on a one-to-one basis with software dollars.

The Key to Success
Performance management requires involvement from senior resources, dedicated time from mid-level finance and IT resources, and a significant dollar investment. Is it worth it? Based on the feedback from those that have implemented performance management: absolutely. The key to succeeding with performance management is knowing what to expect before beginning, planning resource utilization appropriately and making sure the right level of funding is in the budget.

  • 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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