Business Performance Management

Cognos and predictive analytics vendor SPSS have partnered to provide better integration between Cognos 8 BI and SPSS Predictive Analytics.

PARIS Technologies released version 2.0 of its PowerAnalytics solution early this month. The new version provides better integration with SAP Business One and with BusinessObjects Xcelsius.

Business Objects has launched a product called Xcelsius Engage 2008, which simplifies data visualization. Through a point-and-click interface, users can develop interactive presentations and performance dashboards that provide real-time insight into business data from multiple data sources (Web services and/or internal applications). Xcelsius Engage can generate PowerPoint presentations, PDFs, or content for internal or external Web applications.

In late February, Teradata released version 2 of its Master Data Management solution. New features include better visualization of data hierarchies, the ability to profile master data in development and runtime environments, enhanced Web services functionality, enhanced security features, and better database optimization.

In mid-March, PROPHIX Software released version 7 of its Enterprise BI and performance management software. Enhancements in this release include a new user interface, support for PDFs, a “multiple administrator” feature that facilitates collaboration in the planning process, and audit log files for dashboards and scorecards. In addition, Enterprise 7 enhances automation of business processes and provides support for Windows Vista and for Microsoft Office 2007.

Midmonth, SAP announced upgrades to products in its governance, risk, and compliance (GRC) portfolio. GRC Risk Management now integrates with SAP Strategy Management, which is part of the company’s BPM product portfolio. GRC Access Control now can automatically detect conflicting roles and security authorizations; perform regular reviews of employees companywide; and centrally manage user access to a range of enterprise applications, including SAP, Oracle, JD Edwards, and PeopleSoft products. And GRC Process Control now can monitor compliance in both SAP and non-SAP systems; it also provides a “heat map” to indicate control exceptions.

Last week, SAS launched a new version of its flagship business intelligence (BI) software. SAS 9.2 improves the product’s analytics functionality, providing easy access to Bayesian methods, a new set of optimization procedures that incorporate algebraic modeling, and sophisticated model-selection methods that handle thousands of variables and scale to very large data sets. In addition, it provides simpler, role-based user interfaces. It breaks down data silos by making reuse of components easier and by enabling users to better communicate and troubleshoot problems. Finally, version 9.2 improves deployment, configuration, and administration.

Presumably, if you’re reading this newsletter, you’re intimately familiar with the budgeting process — perhaps more intimately familiar than you’d like to be. In many (most?) companies, budgeting is not only time-consuming, but also tedious and intensely frustrating for those focused on optimizing overall corporate performance. The usual budget is submitted by a line-of-business manager, who either adds a set percentage to his or her previous year’s spending, or else underestimates revenues and inflates expense projections in order to build a cushion for negotiations and secure the biggest prospective bonus.

It’s a sad story that is just a part of life for organizations of all sizes and shapes. As the editor of Business Performance Management (BPM) Magazine, I talk to a lot of people who are trying to rewrite the story in their organization. The changes they’re making are often significant, but they’re also usually incremental. That’s why I was so interested to hear the story of operating expenses (OpEx) at American Express, as told by that company’s VP of corporate portfolio management and strategic business analysis in this month’s issue of the magazine.

Anand Sanwal’s article describes a radically new approach to budgeting, in which American Express divides all of its spending into two buckets: discretionary and nondiscretionary. That company’s definition of discretionary, he says, is “all spending that is not required for a company to be a participant in its industry.” Every business will define “discretionary” differently, but Sanwal cites research by the Corporate Portfolio Management Association as finding that 25 percent to 40 percent, on average, of a company’s OpEx is discretionary. In fact, he says, “aspects of virtually every line item are discretionary.”

How could this be? Sanwal is careful to note that labeling an expense as “discretionary” doesn’t identify it as unimportant. Instead, it means that managers within the organization are making decisions about where exactly to put the money. What type of campaign should the marketing team engage in to promote a new product? Should marketing spend more on the campaign to get the product off to the right start today, or should some of the funds be directed instead to research and development to jump-start future enhancements to the product line? Although highly simplified, these questions exemplify the types of trade-offs that are inherent in many, many of the spending decisions made during the corporate budgeting process.

While the goal of budgeting is typically to minimize costs across the board, American Express’ approach is to make strategic investment decisions about all discretionary spending. (Well, almost all. Sanwal does make the point that “portions of salaries and benefits can be considered discretionary as well, but politically and operationally that position is usually not advisable.”) The company has established an internal marketplace in which business units compete for their discretionary dollars in the same way that many businesses’ capital expenditures (CapEx) compete for resources.

Meritorious ideas gain funding based on the business’ strategic priorities for the year and the risk profile of various ideas. For example, the company might decide that 25 percent of corporate discretionary spending should go to customer acquisition, 20 percent to IT, and 55 percent to customer retention, and it might allocate 60 percent to low-risk projects, 30 percent to medium-risk projects, and 10 percent to those with high risk. Instead of taking last year’s numbers and boosting them by 5 percent, OpEx managers at American Express must make a case for all of their planned discretionary spending, and their plans move forward only if the spending meets the business’ strategic goals.

For many companies, this approach would entail a seismic shift in corporate culture, and it would undoubtedly be met with resistance. But Sanwal cites several benefits of making OpEx decisions strategic. Clearly, doing so enables a company to better allocate resources. It also can bring a new level of appreciation for OpEx managers; they gain respect when their areas of spending are thought of as investments in achieving corporate goals. Finally, making OpEx strategic lends a level of agility to a company’s operations. Unlike traditional budgets, an OpEx marketplace makes it immediately clear when spending in a certain area is not providing benefit to the business. As the external environment changes, the organization necessarily changes with it.

I’m intrigued by the way in which American Express has redefined standard budget items as discretionary and begun treating them like CapEx. Considering the vast number of companies that find the budgeting process painful, there have to be a lot more innovative ideas out there. If your company has tackled planning in an unusual way, I’d love to hear your story too.

Panorama Software has launched a beta version of Panorama Analytics for Google Docs. The idea behind the new software is to provide users of Google Docs with enhanced pivot table and charting functionality, free of charge.

On March 3, Actuate launched Actuate iServer Express, a report server that provides scheduling, report security, management, and distribution for Eclipse BIRT and e.Spreadsheet reports.