Originally published February 21, 2007
Business performance management (BPM) has gone, in just five short years, from a silo of data in the office of finance to an enterprise-wide application that has proven to have a fundamental impact on the overall performance of an organization. As we watch its widespread adoption and the importance it quickly takes on for end users, along with the strong return on investment (ROI), BPM combined with existing BI (business intelligence) initiatives can be every bit as critical as transactional enterprise resource planning (ERP).
BPM more important than ERP? It makes sense when you look at what they actually let you do and consider the penalties for not doing those things. ERP lets a company count and track its activity. The penalty for not counting and tracking accurately in today’s corporations is serious, with lesser results contributing to inaccurate accounting and unplanned delays in a financial closing cycle, and extreme results including delisting from the stock exchange or even a trip to prison.
BPM helps executives accomplish what they have struggled to do for quite some time: figure out what works, what does not work and what to do next. The penalty for failing to “figure out” is less clear cut: employees guess more or just avoid making decisions, performance is lackluster and shareholders are frequently disappointed. It is in companies where BPM and BI are more fully integrated – with many employees analyzing, predicting, and making more finely tuned decisions – that you can see the true impact of business performance management.
ERP came to be seen as the bedrock of enterprise IT by handling the functions of tracking and control. With its report extensions, ERP also takes on some reporting and planning functions. Today, the popular view of the key ERP software functions of a company include:
However, that is an incomplete picture of what companies need to do every day and what their systems must help them do. Today’s essential business functions are more extensive:
By understand, we mean the ability to discover causes of good and deficient performance, and the ability to gauge future results of decisions made today.
By forecast & plan, we mean the ability to make projections based on your company’s results and existing market data. However, there’s more to it; with predictive analytics, you can gauge the reliability, the risk and the likelihood of those projections. Based on those predictions, you can make better plans.
By improve, we mean the ability to directly and purposefully affect business performance and profitability, and this function is provided by the comprehensive functionality of a broad BPM solution that offers real-time monitoring and multidimensional analysis. Improve is what’s meant by “M” in BPM: management.
When reviewing the full set of processes – Track/Control/Report/Understand/Forecast & Plan/Improve – keep in mind that ERP covers the first two-and-a-half of these. Report and everything following it is what can be addressed by the combination of BI and BPM. If you accept that the combination of BI and BPM is already one of the two pillars of enterprise IT, there are serious implications for establishing the full scope of your BPM initiative and selecting your BPM vendor. Following this logic, a well integrated BI and BPM initiative would enable an organization with an established ERP infrastructure to leverage that investment to deliver enhanced results.
Companies need to project forward five years to see that BPM’s functions for monitoring, reporting, planning and forecasting, analysis and real-time management will be as critical as their ERP functions are today. That view should heavily impact their choice of their BI/BPM vendor. The BPM vendor that will take them efficiently to “BPM + ERP” must have proven stability; a long-term product vision; an integrated platform or unified solution delivering the broad suite of BPM functions including advanced analytics; data visualization; and ease of use for broad user adoption.
Recent articles by John Colbert