The Pulse of Performance Management
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.
