This past year was primarily a good one for business performance management (BPM). There were a few rough spots, but these will hopefully smooth out over time.

The Good
Adoption rates for business performance management continued to climb. Our BPM Pulse survey as well as vendor sales figures showed that most companies were either in the midst of or planning a BPM project. This year also saw more small and mid-size companies jumping on the bandwagon.

BPM success rates held steady. Unlike most over-hyped three-letter acronym initiatives, BPM projects have generally met expectations. There were exceptions, however, and you can read about these in “The Bad” section later in this article.

Business performance management took its first significant steps beyond finance. Operational analytics became an important project for organizations that had already completed the BPM basics. Established vendors such as Applix tuned their offerings to provide an optimized platform for this type of analysis. Smaller, newer vendors such as Varicent came to market with packaged analytics for particular operational areas (sales performance management, in their case).

Predictive analytics came into its own this year. While business performance management has primarily looked back and reported on historical information, predictive capabilities help business performance management to become more forward-looking. In the past, there had been some confusion about predictive analytics. This year, ISIS Solutions, a developer of predictive software, helped spread the word about the “12 Essential Analytics” required to do it right. OutlookSoft, which has been talking about predictive analytics for years, embedded predictive capabilities throughout their product offering.

As companies looked to prioritize their internal investments, profitability analysis and optimization became more important. To do this right, some form of activity-based costing (ABC) is necessary. Many vendors partnered with ABC software providers, and Business Objects went a step further and bought one – ALG Software.

Performance systems have generally focused on comparing actual results to budget or plan. While this is useful, it is also important to compare your performance to that of your peers. Cartesis made that easier this year by adding external benchmarking to its product and partnering with a data provider.

The technology evolved as well. Numerous BPM vendors moved to a service-oriented architecture (SOA). Longview went so far as to purchase an SOA platform developer. Open source came to business performance management through a partnership between Adaptive Planning and Pentaho.

Lastly, it became apparent to all concerned that business intelligence (BI) and business performance management were more closely tied than ever before and it would be desirable to purchase them from a single provider. This has led to continued consolidation in the space and strong interest in the larger players already providing a full BI/BPM suite such as Hyperion, Cognos, Business Objects and SAS.

The Bad
While there has been a good deal of beneficial consolidation in the space, we believe some vendors have “over-consolidated.” One example is Infor. In just the past year, the performance management products of the former Comshare have been part of Geac, then Extensity, and finally Infor. Not long after Geac/Extensity become part of Infor (which was historically a transactional ERP vendor), Systems Union was added to the mix. While some day this may turn out to be a great one-stop shop for software from transactions to BI tools to performance applications, right now it is a bit overwhelming. There is product overlap, technical and people integration challenges, and confusing marketing messages.

In some companies, IT and finance still don’t get along as well as they should. BPM projects tend to bring this to the fore. As they battle for the leadership role in the project, a couple of different scenarios can play out. In certain cases, there is a stalemate and the project simply never gets off the ground. If IT ends up the leader, they will often dictate that they are going with their ERP provider for performance management. While there are many benefits to this approach, it overlooks the fact that the applications provided by the BPM-focused vendors are better designed for end user self-sufficiency. The end result is business users who are unhappy with their continued dependence on IT and an overworked IT department. If finance wins the battle, the result is often a BPM system that focuses on addressing their greatest pain – budgeting – but little else. Clearly, the companies that have been most successful in 2006 had finance and IT working side by side on BPM.

In 2006, there were still quite a few companies that pushed BPM projects to the back burner. The reasons were usually that another project took priority (what could be more important than improving the performance of your business?), or they were having financial challenges and weren’t investing in new systems right now (sounds like they really could use a good BPM system more than most).

The companies that moved forward with BPM in the past year but did not achieve the success of the majority usually made one of two mistakes. The single biggest problem was a lack of due diligence. They often bought software based on the vendor’s marketing or reputation. In some situations, they expanded the use of software already in house for another purpose to address business performance management. What they should have done is developed a clear and detailed set of requirements, engaged an independent expert to help them match those requirements to the 100+ vendors offering BPM solutions, and then evaluated the solutions through custom demos or proofs of concept. This brings us to the second big mistake – choosing the wrong consultant. As business performance management has taken off, every consulting firm is trying to get a piece of the pie. Consultants that just learned of BPM this year are declaring themselves experts. Implementation firms partnered with vendors are calling themselves unbiased and objective. Just as with the software, due diligence is key when selecting a consultant.

2006 Trends
In summary, 2006 was one of the best years so far for business performance management in terms of sales, user success and evolution. Those buyers who went in with their eyes open and did their homework achieved the best results. The vendors who combined business intelligence and business performance management or offered some unique capabilities were most successful. As these trends continue, we expect 2007 to be even better.

Recent articles by Craig Schiff

• Overspending on Business Performance Management
• A Turning Point for Business Performance Management?
• Why Performance Management? Part 2
• Your Performance Management or Business Intelligence Platform – Is it Frozen in Time?