Business Performance Management

You’ve likely heard by now about the sharp rise — and subsequent fall — of Nancy Killefer’s career trajectory in the Obama administration. The McKinsey & Co. consultant was nominated by President Obama to fill the role of chief performance officer (CPO) for the federal government, but she withdrew her name from contention amid controversy about her payment of taxes. Although she has disappeared from the spotlight, the position remains. Gary Cokins, the global product marketing manager for performance management at SAS, argued online last month that not only is “CPO” a position worth filling, but its existence at such a high level in the U.S. government gives the entire discipline of performance management a certain validation. “Some may argue,” Cokins says, “that creating one more C-suite position excessively distributes the responsibilities of the existing executive team.” However, research suggests that those companies which excel at performance management tend to implement offices of performance management and institute positions such as chief performance officer. Cokins and Bob Paladino — who at one time headed up the office of global performance for communications system provider Crown Castle International — explored this research in an August 2007 article for BPM Magazine. Today Cokins says that the research indicates “the … practice of establishing an OSM [Office of Strategy Management] and CPO is an accelerator to successful strategy achievement” — which he takes to mean that “President Obama’s approach by naming a CPO is effective.” If only the president could find someone with no tax problems to fill the job!

Avid readers of BPM Express will recall that in the fall of 2007 Microsoft debuted PerformancePoint Server amid much fanfare. The business performance management (BPM) market was roiling from the year’s rampant M&A activity, and the entry of behemoth Microsoft got a lot of attention.

The company seemed to be serious about becoming a player. Even in its first version, PerformancePoint encompassed a comprehensive approach to BPM. It included data visualization and dashboard functionality, which Microsoft purchased through its acquisition of ProClarity, and it included a planning and reporting platform that Microsoft spent several years developing. The company sounded a populist note in its PerformancePoint promotions. It claimed that the BPM suite, which fell under the wide Office umbrella, would expand the scope of BPM beyond finance, bringing it to desktops throughout the organization. That was an attractive idea, but the shine wore off pretty fast.

In late January, Microsoft surprised almost everyone by announcing that it was going to roll PerformancePoint’s scorecard, dashboard, and analytics functionality into SharePoint Server and rebrand those capabilities “PerformancePoint Services for SharePoint.” Kurt DelBene, senior vice president of the Office business platform group at Microsoft, said that the change helps Microsoft fulfill PerformancePoint’s original mission of “bringing BI to the masses.” At the same time, the company announced that it is discontinuing PerformancePoint Planning, rolling features into Microsoft Dynamics.

No longer will PerformancePoint be sold as an independent piece of software. Microsoft does intend to release an Office PerformancePoint Server 2007 Service Pack 3 later this year to fix bugs in the planning module, and it claims that it will continue providing support for the BPM suite for the next decade. Clearly, though, PerformancePoint did not live up to the initial hype.

By the end of last year, Microsoft’s product road maps lacked information about substantial new investments in PerformancePoint functionality. Still, most watchers of the BPM market (myself included) were surprised that the product was essentially killed. What happened?

John Colbert, vice president of research and analysis for BPM Partners, sees two primary factors as driving the product’s demise. First, he says, although Microsoft claimed to target both business and IT professionals, ultimately PerformancePoint was an IT platform and was not a particularly business- or finance-friendly product. “Microsoft clearly tried to commoditize performance management and business intelligence in a single platform, which they did by empowering the IT department to develop a wide range of capabilities on the PerformancePoint platform,” Colbert says. “But we at BPM Partners feel performance management and business intelligence applications aren’t successful if they can’t support the business user in some capabilities, independent of IT.”

In addition, Colbert says that Microsoft turned out to be impatient. Their version 1 product took on much more mature products — even as economic crisis hit the nation — and it seems that it did not generate the results Microsoft wanted as quickly as it expected.

Colbert’s explanation echoes comments Nigel Pendse, of the OLAP Report, made in September 2007, after receiving a preview of the exciting new BPM suite: “Both building and using models are more technical than we would like. The clunky user interface certainly requires more work. Application development with PerformancePoint may be more laborious and hit-or-miss than with more mature products.”

Pendse now reflects that the complex PerformancePoint Planning needed quick follow-up releases to incorporate early customer feedback, but Microsoft unwisely tied the releases beyond version 1.0 to Office updates. Those multiyear release schedules “are entirely suitable for widely deployed, mature products like Office, but entirely unsuitable for an incomplete young product like PerformancePoint Planning. … While Microsoft could price PerformancePoint as low as it liked, there was no getting around the fact that the planning component was an inherently complex application and quite unlike the tools that make up the rest of the Microsoft BI product line.”

As a result, PerformancePoint’s thousands of beta testers did not translate into thousands of paying customers. How does this fact reflect on the BPM market as a whole? The answer from John Colbert is: It doesn’t. He points to the BPM vendors that are thriving as the economy requires companies to gain better insight into their performance. “PerformancePoint was a misfire on Microsoft’s part. It was too complex, and bringing it to maturity would have taken more time than Microsoft was ready to invest. Independent of Microsoft’s pull back, our research shows that BPM is still a very healthy market.”

For companies that invested in PerformancePoint installations for the functionality that was formerly ProClarity, SharePoint may still offer a good solution. And for companies that already run Microsoft Dynamics, PerformancePoint’s planning capabilities might continue to be appealing. For other organizations that bought PerformancePoint, well, as this issue’s Product Briefs section (above) suggests, a lot of vendors with better-established performance management systems would be happy to help you migrate.

Earlier this month, we reported that despite spending cutbacks by many corporate IT departments, the market for software-as-a-service (SaaS) performance management applications is thriving. Since that report, we’ve seen more evidence of this trend. Both Host Analytics and Adaptive Planning reported record results in 2008. Adaptive Planning CEO William Soward says that customers who have chosen his SaaS solution lately have tended to take the attitude that they are willing to sacrifice a few bells and whistles they might find in more complex BPM products if forgoing those extra features means they can improve their performance management for a low up-front cost.

Analyst firm IDC recently raised its projection for 2009 growth in the SaaS software market overall (i.e., not only among firms that specialize in SaaS performance management solutions) from 36 percent to 40.5 percent. How is this possible as the rest of the software industry is hurting? “People are likely to be commitment-phobic,” suggests Ray Wang, an analyst with Forrester Research.

Companies across the board are reeling from the changes to the global business environment over the past few months. Purchases of enterprise software systems have become fewer and farther between. Organizations in almost every industry sector put the squeeze on their CapEx budgets in general, and IT budgets in particular. A Gartner study released midmonth reveals that global IT budgets will be flat this year.

Gartner surveyed CIOs in more than 1,500 companies in 48 countries and found that improving business processes and business intelligence capabilities are these organizations’ top IT priorities for 2009. CIOs expect to invest in business intelligence applications and information consolidation in order to raise enterprisewide visibility into performance, a priority in this economy. “These investments are expected to pay extra dividends by responding to new regulatory and financial reporting requirements,” Gartner reports.

Although it doesn’t contradict that the enterprise software market overall is in a state of gloom and doom, an IDC report released on Monday indicates that one segment of the software market is likely to come out of the downturn stronger than it went in: software-as-a-service (SaaS) — also known as hosted or on-demand software.

“With a broad slowdown across IT sectors, businesses are increasingly bearish about their short-term ability to invest…” said Robert Mahowald, director of on-demand and SaaS research at IDC. “But SaaS services have benefited by the perception that they are tactical fixes which allow for relatively easy expansion during hard times, and several key vendors finished the year very strong.”

Among IDC’s findings: Seventy-six percent of U.S. businesses will use at least one SaaS-delivered application by the end of this year. And the proportion of U.S. firms that spend a quarter (or more) of their IT budget on SaaS applications is expected to rise from 23 percent last year to 45 percent next year.

It’s common sense that corporate investments in large enterprise software systems would become more difficult to justify during a downturn, and a couple of studies out this month indicate that that’s the case. But the goal of business performance management (BPM) software — gaining better insight into the true drivers of a business’s performance so that decisions made within the organization optimize its results — is even more crucial when good results become harder to achieve.

For organizations that can afford to buy services and technologies to improve the insights provided by their BPM activities, those improvements are as likely to pay off today as they were back in boom times. But for organizations that simply can’t afford external advice, the results of a new McKinsey & Company survey might help improve decision-making on the cheap.

McKinsey spoke with more than 2,500 executives in a wide range of industries, functions, and geographic regions about one specific capital or HR decision that their company had made. The study explored how successful each of these decisions was and examined what factors influenced its success. Two-thirds of the decisions met or exceeded the company’s expectations for revenue growth and/or cost savings. Still, the survey was able to pinpoint activities that correlate, either positively or negatively, with smart decision-making.

One factor that can affect a decision’s success is the identity of the decision’s initiator and its approver. More specifically, the decisions in the survey that were initiated and approved by the same person generated the worst financial results. Collaboration, it seems, improves the likelihood of positive outcomes. When McKinsey delved more deeply into the nature of collaborative activities that boost decision quality, the firm was able to identify three characteristics that appeared to substantially affect decisions’ results: choosing participants in the discussion based on individuals’ skills or experience, reliance on transparent approval criteria for the decision, and discussion of the decision’s place within the company’s entire portfolio of decisions. What else helps a company make better decisions?

Four analysis activities emerged as beneficial: performing sensitivity analysis and financial-risk modeling, considering comparable situations from the decision-maker’s or the company’s past experience, considering the decision’s risks in light of the company’s entire portfolio of projects, and creating a detailed financial model of the decision. Those that took this last step and generated NPV, IRR, ROIC, or another type of financial model before proceeding with the decision saw the results of that decision beating expectations for revenue, profitability, and/or speed to project completion by more than 50 percent.

Finally, McKinsey considered the role of corporate politics in decision-making and made a somewhat counterintuitive discovery. Although the study found that political maneuvering is detrimental to decision quality when those engaging in the politics are looking out only for the interests of one business unit (rather than the interests of the organization as a whole), it also found that some “horse trading” can be beneficial, particularly in achieving a better-than-expected speed to project completion.

Changing a company’s decision-making climate from top-down to collaborative, or dramatically increasing analysis activities, is obviously not a quick fix for a business that wants to improve management on a tight budget. How decisions are made is a cornerstone of corporate culture, and one that is difficult to dislodge. Nevertheless, the McKinsey results come at an interesting time. Perhaps an organization that has had to postpone a large BI initiative will find less daunting a project that presents a portfolio management view of decision-making. Or, on a smaller scale, maybe a company will be able to improve the quality of its decisions by more carefully choosing which people are involved in the discussion.

What activities have you found to positively or negatively impact the likelihood that decisions in your organization will be successful — in other words, that they’ll result in outcomes that exceed expectations? I’d love to hear from you.

Before it was purchased by IBM, Cognos regularly offered new “blueprints,” models designed to jumpstart a BPM implementation project, either in a particular industry or within a particular corporate function. After the acquisition, however, blueprint generation ground to a halt. Until now. Last week, IBM Global Business Services and Cognos announced that they have teamed up to jointly release a blueprint focused on strategic investment management and decision support.

PricewaterhouseCoopers and CA have teamed up to jointly deliver PwC’s governance, risk, and compliance (GRC) consulting services with CA’s GRC Manager software. The companies are also offering a specialized joint solution focused on insurance companies that are facing the Model Audit Rule mandate for FY2010 financial reports.

A week ago, iDashboards and contact-center vendor Parallax Technologies announced a partnership designed to bring iDashboards’ data-visualization capabilities to Parallax customers. “The industry-leading dashboard technology from iDashboards, connected with Quality assurance, performance management, and customer satisfaction data that exists in Contact Centers will deliver great value to Parallax customers,” said Ernest LaBara, president of Parallax.

BI toolkit vendor BOARD International has released version 6.1 of its flagship product. This version is interoperable with OLAP databases from other vendors, including SAP, Microsoft, and Hyperion/Oracle. It also includes enhancements in security management, scalability, and database administration.