The Pulse of Performance Management

Meg Waters — Fri, 25 Apr 2008 16:06:19 +0000

Every year, advisory firm BPM Partners conducts a “BPM Pulse” survey in order to, well, take the pulse of the marketplace for business performance management (BPM) products. Are companies working on improving their performance management processes and systems? If so, where are they in the initiative? And if not, why not?
The results usually present a telling picture of the state of corporate planning and reporting. But this year, they provide additional insights — into trends in enterprise software spending that likely extend beyond the realm of BPM. The survey’s 1,951 valid respondents indicated both an increased openness to the idea of purchasing performance management from an ERP vendor and an increased struggle to find funding for BPM upgrades.

BPM Pulse survey results usually show increases in the proportion of respondents who are planning performance management improvement projects for the short term and in those actually undertaking BPM initiatives. The proportion of respondents who have already completed their projects also generally rises, while those with no plans falls. However, this year’s survey reverses most of those trends; it seems that many companies have shelved their BPM improvement initiatives. Most notably, the proportion of respondents with a BPM project in progress dropped from 50 percent in 2007 to 36 percent in 2008; the proportion with an expectation to improve performance management, but only in the long term, rose from 10 percent to 23 percent; and the proportion with no plan to improve BPM at all jumped from 16 percent to 23 percent.

The state of the economy as a whole is undoubtedly one driver of these changes. Among companies that have no plans to upgrade performance management, 32 percent cited lack of funding as a reason, compared with 22 percent in 2007 and only 13 percent in 2006. Thirty-two percent this year cited “other priorities” as their reason, up from 26 percent in 2007.

Equally informative (and a cause for optimism about the future of performance management once the economy improves) are the declines in several other explanations for companies’ lack of a BPM improvement plan. “ROI justification not clear” declined from 22 percent in 2006 to 17 percent in 2007 to 15 percent this year. Over the same time period, “benefits not clear” fell from 41 percent to 35 percent, down to 24 percent this year. And “lack of executive sponsorship,” which was on the rise through 2007, fell from 38 percent last year to 24 percent this year.

As companies have begun to realize the benefits of improving performance management, they have also begun, it seems, to appreciate the ongoing nature of performance management improvements. The proportion of respondents claiming to have completed their BPM initiatives was on the rise, from 12 percent in 2006 to 14 percent in 2007 — but this year that number dropped back to 8 percent, a decline by almost half. Explains John Colbert, BPM Partners’ vice president for research and analysis, “People are beginning to realize that improving performance management is an ongoing process, not a one-shot project. There aren’t a lot of companies that have reached the nirvana of BPM — where financial and operational strategies are measured against actual performance on an automated basis.”

Another “big nugget,” as Colbert puts it, is the BPM Pulse survey’s revelation this year of a greatly increased interest in purchasing performance management software from ERP vendors. When asked “Where did you/will you get your BPM solutions?” 36 percent of all respondents, and 42 percent of those from companies with 5,000 or more employees, selected “our current ERP provider.” Even more surprising, 18 percent of all respondents — and nearly a quarter of those in companies with between 1,000 and 5,000 employees — said they would buy BPM from an ERP vendor other than their own ERP provider. Last year only 10 percent were interested in buying their performance management functionality from an ERP vendor.

This shift must stem in part from the fact that ERP vendors have bought up many of their BPM competitors over the past year. A company that wants to buy from Hyperion is now buying from an ERP vendor. Still, the leap is remarkable. Last year, performance management software from the vendor category BPM Partners terms “tools and applications” — i.e., those that offer both business intelligence tools and specific performance management applications, but not ERP suites — appealed to around 40 percent of respondents. This year that number was 26 percent. Vendors of only packaged applications appealed to 30 percent of respondents last year but 11 percent this year (and only 9 percent of respondents from companies with more than 5,000 employees).

What does all this mean? This year’s economic climate has robbed the entire market of steam. Some companies actually seem to be taking on performance management improvement projects because of financial challenges — among large companies, reducing labor and other costs was cited by 34 percent of respondents as a driver of their BPM projects today. But overall the economy has put a squeeze on funding for this type of initiative, and many projects have been tabled for the time being.

That said, it appears that when the market rebounds the ERP vendors’ major M&A play over the past year will bear fruit. Companies that are planning or undertaking performance management improvement projects now are much less sold than they were in the past on the need to purchase BPM software from a vendor specializing in it. There is certainly still a market for niche players, but the niche has shrunk dramatically over the past year.

The full BPM Pulse survey results provide much more insight into these and other trends in the market. Anyone who’s interested can request a summary from BPM Partners’ white paper page, and BPM Partners will send a summary when it is ready.

How’s Your Decision-Making? Participate in Benchmark Research

Meg Waters — Fri, 25 Apr 2008 16:05:22 +0000

Get a $5 Starbucks Card and qualify to win an American Express Gift Cheque when you participate in Ventana Research’s survey on Decision-Making and Performance! Click here to begin.

Driving Top-Line Performance Through an Integrated Finance Organization

Meg Waters — Fri, 25 Apr 2008 16:04:51 +0000

Sponsor: IBM
May 6, 2008
Attend this webcast and learn how 1200 senior finance executives from 79 countries view their organizations today, and the types of performance measures they now need to compete globally. Hear what the priorities of top finance executives are, and how they are overcoming obstacles along the path to stronger top-line performance. Register here.

Solving the Strategy Puzzle: A Strategic Framework for IT Financial Management

Meg Waters — Fri, 25 Apr 2008 16:04:04 +0000

Sponsor: Planview
April 29, 2008
This webcast will explore how IT financial executives can use the discipline of portfolio management to achieve the alignment and transparency required to drive strategy throughout their organization. Register here.

Vanguard Graphical Performance Series (GPS)

Meg Waters — Fri, 25 Apr 2008 16:03:28 +0000

Vanguard Business Analytics (a division of Exact Software) is offering a new version, 4.6, of its Vanguard Graphical Performance Series (GPS). This release includes an express user interface, a low-cost option for users who don’t need the full, multidimensional analysis capabilities of GPS’s business user or power user interfaces. Version 4.6 also includes a financial reporting and consolidation module, which simplifies the process of creating financial reports that involve consolidations.

WebFOCUS Performance Metrics Manager

Meg Waters — Fri, 25 Apr 2008 16:02:43 +0000

Information Builders has released a new product called WebFOCUS Performance Metrics Manager (PMM); it is designed to give organizations a low-cost solution for defining, tracking, and organizing their performance metrics. PMM provides data analysis, collaboration, and alert capabilities, and it enables users to monitor metrics through role-based dashboards. It comes with industry- and function-specific “starter kits” that are prepopulated with metrics in the areas of health care, banking, HR, IT, call center, and the supply chain.

ActiveStrategy Enterprise

Meg Waters — Fri, 25 Apr 2008 16:02:14 +0000

Late last month, ActiveStrategy released version 7.0 of its ActiveStrategy Enterprise Balanced Scorecard software. This version overhauls the software’s Personal Goal Management feature, which explicitly ties employee goals to corporate strategy, and its Stoplight Charts, one of its data-visualization features. Version 7.0 also includes a new feature called Visual Maps, which enable users to upload images in jpeg, gif, or bitmap format and then populate those images with ActiveStrategy Enterprise objects. This means, for example, that a user could upload a graphic of a strategy map, then populate it with performance data that updates regularly. Plus, the software’s visual maps can link not only to Balanced Scorecard metrics, but also to processes, program groups, complete scorecards, or even other visual maps.

Value Management Raises Value

Meg Waters — Fri, 25 Apr 2008 16:01:46 +0000

That may well be bad news for the bottom line. A study by the Hackett Group suggests that organizations that score well on Hackett’s evaluation of their IT business value management (BVM) processes perform much better than their peers across a range of financial metrics, including net profitability, return on assets, and return on equity. Perhaps most striking is the Hackett revelation that organizations in the Global 1000 which are best at IT BVM generate an annual operating profit $1.07 billion higher than that of their peers.

Big News(?): Budgets out of Control

Meg Waters — Fri, 25 Apr 2008 16:01:17 +0000

Board members may find alarming the results of a recent study conducted by Ventana Research — but the findings may not surprise finance professionals. Ventana’s survey found that only half of organizations’ financial plans are accurate, presumably due at least partly to the ineffectiveness of the companies’ budgeting and planning processes and the supporting software. Two-thirds of organizations are unable to delve into the details of their budgets in real time, and 59 percent of respondents reported using spreadsheets “heavily” in the budgeting process.
Along the same lines, a study conducted by the BPM Forum reveals that only 16 percent of companies find that their budgeted expenses come in on target, and that number drops to just 11 percent for budgeted revenues. Seventy-five percent of this survey’s respondents are still mired in spreadsheets, and more than 70 percent of respondents spend “inappropriate” amounts of time on budgeting.

This is the same story I’ve been reporting since the very beginning of this newsletter. Although more companies adopt sophisticated BPM processes and technologies every year, many continue to lag in their ability to manage their own performance.

Directors Need Better Direction

Meg Waters — Fri, 25 Apr 2008 16:00:21 +0000

A McKinsey global survey conducted in February reveals that corporate directors don’t feel they spend enough time developing the long-term strategies of their companies, and that they spend too much time dealing with issues such as compliance. They spend 24 percent of their time on strategic planning, 24 percent on execution in areas such as approval of mergers and acquisitions, 20 percent on performance management, and 11 percent on talent management. Yet boards spend 17 percent of their time on governance and compliance activities.
When asked whether they would like to increase or reduce the proportion of board time spent on specific strategy-related activities, 21 percent of respondents indicated that they’d like to increase the percentage of time they spend monitoring performance against strategy, while 29 percent would like to decrease it. Sixty-one percent feel they get good access to information about the company’s key performance indicators linked to strategy, while 19 percent feel information in this area is lacking.

At the same time, 53 percent of respondents would like to grow the proportion of time they spend developing long-term strategy, and 40 percent would like to increase the time dedicated to challenging their existing strategy. However, only 45 percent feel they have good access to information on leading indicators for the company and its competitors; 26 percent feel this information is inadequate.