Business Performance Management

At the same time that the market for business performance management (BPM) software was maturing and spreading, the software-as-a-service (SaaS) industry was flourishing as well. Businesses began using “on-demand” and “hosted” software for all sorts of corporate functions. In many cases, they decided life would be simpler if they’d let the software vendor or third-party hosting provider handle all the IT responsibilities that surround running a complex software system, including hardware issues, system maintenance, and software upgrades. In other cases, the speed with which a SaaS provider could get a customized software package up and running was very attractive. Still other customers liked the cash flow proposition of paying subscription fees.

Despite these benefits of SaaS software, it seemed unlikely back when both markets were fledglings that they would have much success at the point of their intersection. After all, the information in companies’ BPM systems is often highly confidential. It was widely believed that hosted performance management might suffice for small companies that couldn’t afford a big software package but that businesses which had a real choice would generally avoid accessing their financials via the Internet. Over the years, that attitude has changed.

The shift isn’t entirely recent. Back in a 2006 BPM Magazine survey, we found that although only 6 percent of survey respondents used a hosted solution for their performance management software needs, 40 percent of companies that did go with a SaaS application spent more than $100,000 on the software. We were surprised that this percentage wasn’t lower, when compared with the 50 percent of all survey respondents who spent more than $100,000 on their performance management software. SaaS solutions weren’t just for those with minuscule budgets.

Still, the 6 percent was low. My experience indicates that this, too, may be changing. The number of companies considering hosted solutions seems to have taken off in recent years. Companies tying their performance management capabilities in with numerous other types of software systems, or those with complex data integration needs, are probably not good candidates for the SaaS model. However, for companies still looking to move away from Excel for their budgeting, planning, and/or management reporting activities, a hosted solution may sound appealing.

I recently spoke with Kent Wegener, the vice president of finance, and Joel Feldman, the director of financial planning and analysis from Otis Spunkmeyer, a $500 million food manufacturer; their detailed case study will appear in the December issue of BPM Magazine and will be online early next month. The company switched about a year ago to a SaaS-based performance management system, and its finance managers are not looking back. Formerly, they used Excel to manage planning and budgeting. The link between financial data and production management was tenuous in Excel. Otis Spunkmeyer derived supply-chain, transportation, and other production plans by backing into product mix and sales volume expectations based on revenue forecasts. Its new software allows for forecasting case volumes, as well as financial forecasting. This and the ease with which the company can now make broad-stroke adjustments in its pricing expectations have made its planning process far more effective. And because it went with a SaaS solution, the manufacturer was able to switch to its current BPM solution in two months. (It does plan to add functionality in the future.)

I frequently talk to finance and IT managers who have achieved this kind of impressive outcome by moving performance management processes from Excel to dedicated software systems. What was a bit different about this company’s software-selection process is the fact that it specifically set out to use a hosted system. When the company began seeking new BPM software, its IT department was already tied up in the process of shopping for a new ERP system. “Our CIO had a major concern about division of resources. … It seemed to make perfect sense to us — since the ERP project is going to be consuming resources for two, three, four years — that we should go with a SaaS solution,” says Wegener.

Although they admit to forgoing the bells and whistles available in some larger, on-premises BPM software installations, these executives have no regrets. “I think a lot of times people bite off more than they can chew,” says Feldman. “So we tried to stay very prioritized about which parts of the application we want to use.”

This is the kind of success story that warms the hearts of advocates of performance management and SaaS alike. And it’s music to the ears of those who stand at the intersection of the two.

Many companies still wrestling with Excel for their financial and operational performance management realize that they need to change but remain intimidated by the idea of a major software implementation. This economy makes a large software investment a scary proposition, yet accurate planning and forecasting are more important than ever before. Companies caught at this crossroads should consider SaaS BPM vendors. It’s an increasingly popular option for quick wins in performance management.