Business Performance Management

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.

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.

Business performance management (BPM) initiatives are major projects. Doing BPM right requires a great deal of time from various individuals across the company, and it’s often expensive. As a result, some companies indefinitely postpone the thorough evaluation of practices and software that a comprehensive performance management project entails. No one is interested in spearheading a high-profile project that they fear could result in failure.

Another approach is to reduce the scope of the BPM initiative. If a BPM project is limited to a simple software installation, the risk seems to be reduced for project planners. Unfortunately, limiting the project’s scope may be the surest way to drive a BPM initiative into the ground.

There is no silver bullet that guarantees success in BPM. But I recently had a conversation with Mike Davidson and Richard Holt, two directors at Alvarez & Marsal, in which they explained some not-so-silver bullets that frequently leave holes in performance management plans. Their firm has its roots in crisis management, and in their experience BPM failures tend to result from one (or more) of three types of problems.

The first of these problems will come as no surprise to anyone who reads BPM Magazine regularly: For a project to be successful, it needs a clear vision and strategy. The logic of this point is indisputable. A project that starts without direction could end up anywhere. But too many companies sidestep this crucial piece of the planning process, in the push to get resources for the project. An effective project begins with a clear vision, agreed upon by executives and project participants alike.

The second problem Alvarez & Marsal frequently encounters is inadequacy in project management or change management. Both are critically important. Quality project management involves stakeholders throughout the company in various stages of the project. Poor project management fails to involve all the right people at all the right times, and so is likely to result in the project coming in late or over budget, or to fail to deliver results that some stakeholders require. Change management is also critical, because the success of a performance management initiative depends on the buy-in of end users. Those who will be providing data for BPM processes, or those who will be using data from BPM systems to inform important decisions, must understand the purpose of the project and must be willing to change their behavior. Otherwise, the initiative is unlikely to produce desired results.

The third and final problem that Davidson and Holt have identified is pervasive misunderstandings about crucial details of the project. For example, expectations about the amount of time the project will consume often vary among participants. Data-quality problems are prevalent as well. And when businesspeople and the IT department disagree about the desired outcomes of the project, no one is happy with the results.

Obviously, these three types of problems are interrelated. A project that is well-managed will begin with the definition of its goals and will involve adequate communication to keep everyone on the same page. It’s interesting that so many projects continue to be poorly managed.

Building effective project and change management activities into initial projections of a project’s length and resource consumption may make the project less attractive to the executives who need to approve it, even sponsor it. But shortchanging these crucial elements in the beginning undercuts the project’s potential to be effective. In the experience of Davidson and Holt, at least, this is the surest way to lead a project to failure.

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.

As the global financial markets melt down, the stock market takes a roller coaster ride, and business credit practically vanishes, companies are hunkering down. This is a natural reaction, and for many organizations it is necessary. But achievement in the longer term will depend on a company’s ability to do more than cut costs. It will require ongoing creativity, a culture of perpetual innovation.

Of course, it’s easy to suggest that companies need to be innovative. It’s a lot more difficult to build a company that actually is, especially when other matters demand immediate attention. However, the latest issue of BPM Magazine includes two feature articles that could guide organizations in using a well-known method for cost reduction and process improvement to also help build the innovation needed for long-term success once the business environment stabilizes.

The method is Lean Six Sigma, which is the product of companies’ incorporation of the Lean approach to process optimization into Six Sigma quality-control initiatives. Lean Six Sigma benefits from a focus on fact-based analysis and direct customer input, and it is typically thought of as a way to find efficiencies in corporate operations. That’s not the full extent of its potential, though; it can also spur broad-based innovation.

Many companies attempt to cultivate a culture of innovation by declaring creativity to be a core corporate value and by encouraging employees to spend time pursuing independent research. Such actions may stimulate employees to give innovation more thought than they otherwise would, but they don’t create a mechanism for promoting those projects that are aligned with the company’s overall goals over those that aren’t. Lean Six Sigma introduces discipline to innovation, encouraging companies to create a strategic vision for innovation that is based on insights into the needs of customers and other stakeholders (provided by the Six Sigma half of the equation).

The results can be astonishing. We published an article by IBM’s Amy Blitz and Dave Lubowe that tells the stories of three companies in different industries and facing different market challenges, each of which has used Lean Six Sigma to radically reshape themselves and drastically improve their competitiveness.

We also published an article by Forrest Breyfogle, a Six Sigma expert who has developed a comprehensive, nine-step approach to the problem of choosing projects to undertake. He adds to Lean Six Sigma a thorough analysis of corporate metrics at two different levels so that initial selection of which innovations to pursue becomes more regimented and so that flailing projects can be nipped in the bud.

A major initiative like a Lean Six Sigma implementation may be the last thing you think your business needs right now — this may seem to hardly be the time to dump resources into such a project. But for companies wanting to come out of the downturn with a competitive advantage, now may be the perfect time to simultaneously introduce efficiencies and spur innovation.

Do you agree? Along with all your colleagues who read this column, I would love to hear your take.

Extensible business reporting language (XBRL) may have moved to the SEC’s back burner in the past few weeks. There are obviously more pressing issues demanding the agency’s attention. Nevertheless, it’s a topic that isn’t going away – and it’s a topic that many people responsible for corporate planning and reporting remain clueless about.

In August, BPM Magazine conducted exclusive research on the topic, sponsored by TITAN-Pinnacle, a TITAN Technology Partners company. The results are astonishing.

Of the 196 respondents to the survey, two-thirds work in public companies that file with the SEC (a handful work in companies that file overseas; the remainder are in private companies or government agencies). Yet only 1 percent of respondents work for companies that have implemented XBRL.

The companies that haven’t implemented XBRL offer a range of reasons. For 9 percent of respondents, cost of new software to support data tagging is the largest obstacle; lack of demand for XBRL holds back another 16 percent. This is significant for some survey participants. Wrote one: “[XBRL] isn’t for our benefit; it is for the benefit of regulators, vendors, information aggregators, analysts, etc. It is foolish for a company to think it will save them money. We already know all our numbers and can look at them every which way. Some analyst or regulator will make assumptions and make a wrong analysis, and then we will have to spend more time and money explaining to them the error of their ways.”

Clearly, many of our readers have not bought into SEC chairman Christopher Cox’s assertion that using a standard, searchable data format such as XBRL “promises to let companies prepare their financial information more quickly, more accurately, and for less cost.”

Even worse for XBRL’s prospects in the near term, at least among organizations that aren’t required to adopt it, is the fact that our survey respondents most frequently cited “time and effort needed to learn about XBRL” as their company’s biggest barrier to data tagging (selected by 32 percent of participants). When asked to describe their current level of knowledge about XBRL, 43 percent called themselves beginners, and 38 percent said they have no knowledge at all. Of those who have no knowledge of XBRL, 81 percent work in public companies, and 43 percent work in companies with more than $1 billion in annual revenue. They include finance managers, financial and business systems analysts, vice presidents of finance, project managers for BPM software implementation projects, even consultants with well-known firms.

Perhaps these results aren’t as alarming as some of the other news rocking the SEC this week – but they’re worth noting. A proposed SEC rule would require certain very large companies to use XBRL in all of their SEC filings for fiscal periods ending this December 15 and beyond. Says KPMG director of advisory services Michael Ohata, “CFOs and other finance executives don’t need to be XBRL experts, but they should understand XBRL’s potential impact on the organization’s financial reporting processes, including what XBRL reporting actually looks like and how it differs from current filings.” Our research indicates that many finance managers remain far from this base level of understanding.

If I’m describing you, what can you do? The BPM Magazine and BPM Express online archives can help. In May’s newsletter, I explained XBRL at a pretty fundamental level. We’ll continue to cover XBRL reporting in future issues. It’s also a good idea to monitor the XBRL information coming out of the SEC, and many software vendors and consultants are interested in making the case for benefits companies stand to gain by making their data more accessible to investors, analysts, and others.

XBRL is coming, whether companies like it or not, and there’s no longer a good excuse for finance professionals in public companies to stay uninformed.

Last month in BPM Express, I talked about the fact that amid all the hype about integrated technologies and the oversized marketing budgets of the big players in the business performance management (BPM) space, many companies are still stuck in spreadsheet hell. They don’t need the complexity of a big-budget solution. They can pretty dramatically increase the efficiency and effectiveness of their performance management processes by implementing a very basic BPM application.

I believe that’s true for many companies. But I came across an interesting white paper this month that takes the opposite view. Companies that are going to do BPM, it argues, should aim to fully integrate their various technologies in order to synchronize data across planning, customer management, and operations. The white paper makes the point that decisions are better when companywide data is consistent — and it raises some questions companies should consider when shopping for performance management software today.

The white paper was put out by Ventana Research, and was sponsored by Cognos. One might expect it to be skeptical about Oracle and SAP’s claims that they have achieved full integration and all’s hunky-dory within their family of BPM products. It is. “Identifying fragmented performance management platform offerings can be difficult,” Ventana states. “The vendors have … pressure on their sales staffs to sell larger packages or more than one of their products. Hence you wind up in the crosshairs of extreme marketing, replete with words like ‘complete,’ ‘unified,’ ‘integrated,’ and other characterizations that aren’t precise or technically accurate and more often are matters of opinion.”

That’s strong language, but ever since the BPM megadeals of 2007, it has been hard to get a handle on exactly what products will be integrated, how integrated they’ll be, and when. The Ventana white paper offers advice on how to figure out the level of connectivity among different offerings from the same vendor. The first suggestion is to hire a consultant for professional guidance. This is, probably, the safest route. Another good suggestion is to ask the vendor to commit to a specified deployment schedule for the software, and then ask for customer references who can vouch for the vendor’s ability to meet its deadlines.

Moreover, Ventana recommends remaining skeptical throughout the process. “Can you actually achieve an integrated environment with disparate tools?” the white paper asks. “How do you weigh the fragmentation challenges of the vendor’s technology and the amount of implementation consulting required, which could heavily outweigh the cost of the software? … Ask, and be sure you understand, what levels of effort, time, and skill will be required to build and maintain disparate environments.”

Finally, Ventana advises, buyers need to dig beyond the vendor demos that are designed to show how integrated products are. Just because its dashboards are flexible and configurable doesn’t mean the data is seamlessly (or easily) integrated. In the end, buyers must do their best to evaluate their requirements for the software in the areas of installation, configuration, data modeling, user preparation, and readiness for business usage. Scrutiny of the vendor’s claims, in addition to testing with data integration top of mind, can give a company a better idea of how much integration a particular product offers.

To those readers who are braving today’s somewhat muddled market and investing in a major BPM suite: Drop me a line. I’d love to hear (and share) your techniques for evaluating how integrated the big vendors’ products really are.

Everyone who was shopping for business performance management (BPM) software — or on the BPM Express subscriber list — last year knows that the market experienced a dramatic, fundamental shift as large ERP vendors purchased the biggest players in performance management. That was the big news in 2007.

This year, the vendors involved in this earth-shaking M&A have been working furiously on integration, while the smaller suppliers of this software have been working furiously on distinguishing themselves. Meanwhile, the question remains: Where will performance management software buyers come out as the vendors race to gain competitive positioning? And when vendors spend their energy sniping at one another, will buyers feel their BPM initiatives are getting caught in the crossfire? Answering these questions may be the big news story of 2008.

The vendor making the most noise this month is Oracle, which released a new performance management suite that integrates former Hyperion BPM products with Oracle Fusion Middleware and the Oracle E-Business Suite. The Product Briefs section provides more information about the functionality of the Oracle Enterprise Performance Management System and the related release of a Hyperion Profitability and Cost Management application.

Not too surprisingly, Oracle calls its new EPM System “the industry’s most comprehensive, fully integrated suite of EPM solutions.” Even less surprisingly, SAP/Business Objects disagrees with that assessment. Sanjay Poonen, the executive vice president and general manager of performance optimization applications for Business Objects, responded to the Oracle release by stating, “Oracle is playing catch up to us on our vision about the importance of combined EPM, GRC [governance, risk, and compliance], and BI. Business Objects is the only vendor today that offers a complete vision and solution portfolio which unifies EPM, GRC, and BI.”

Such language is understandable; after all, these vendors are trying to establish new, joint brands in a market currently marked by confusion. But this kind of marketing noise only adds to that confusion, which means it’s counterproductive for many organizations that these vendors want to woo. It’s not that Oracle and SAP shouldn’t be working to integrate the products that they spent a pretty penny to own. It’s in everyone’s interest for BPM systems to run as efficiently, and to be as easy to install, as possible. But in my experience, there are an awful lot of companies that still stand to reap big benefits from the most basic BPM functionality.

I recently spoke with two organizations that exemplify this point. Both have implemented performance management software in the past two years, and both are pleased with the results. One is a relative newcomer to the insurance industry that, until very recently, used only Excel for financial planning and reporting activities. The company is in the process of implementing a system that will function as a back-end data storage engine for its BPM processes, while retaining an Excel-like front end. By implementing a more efficient, streamlined BPM system, the company has reduced the number of individually stored formulas it uses for performance management-related calculations from 840,000 to 754. The numbers are dramatic, but the explanation is simple. The BPM product this company selected stores formulas in a central repository, so a formula does not have to be re-entered in a new spreadsheet cell every time it is used in a new calculation.” This product may not offer all the bells and whistles of Hyperion/Oracle or Business Objects/SAP — but think how many more mistakes the company would be likely to make in its forecasting, planning, and reporting processes if individuals were entering 840,000 formulas versus 754!

Another company I talked with in the past month has implemented software from a different, but also small, BPM vendor. This organization is in the food-production business, and it’s currently facing a rapidly changing financial landscape. Like the insurer, it recently shifted its financial planning and management reporting processes away from Excel to escape some specific pain points of a cumbersome spreadsheet-based process. This food producer went with a smaller vendor in large part because of the urgency with which it needed to replace Excel. Its vice president of finance told me, point blank, “I will probably get into some preconceived notions here, but it seems to me that the bells and whistles of a lot of the more established budgeting packages add complexity in terms of time to implement and in terms of users being able to pick them up and go.”

For companies running ERP systems from Oracle or SAP, the integration of BPM and transaction data is likely to be a key selling point. And for large organizations running many different ERP systems, data integration is absolutely essential if a performance management software implementation is to have any hope of success. Nevertheless, innumerable organizations are still handling budgeting, reporting, and related processes in Excel spreadsheets. As sniping among Oracle, SAP, and others introduces even more confusion into the market, some prospective customers may decide to postpone purchase decisions until the big guys sort themselves out. And that would be a shame. For many businesses, particularly midsize and smaller organizations, implementing something today may offer big benefits. How much a particular organization could benefit from performance management software depends on a variety of factors, but the confusing marketing noise coming out of the big guys should not muddy that basic analysis.

As business intelligence (BI) and business performance management (BPM) software become increasingly pervasive, vendors of these technologies have begun to see the value of incorporating into their budgeting, financial reporting, analytics, and similar applications some of the capabilities that are popular in the consumer world. This trend has the potential to substantially expand BPM software’s usefulness to managers throughout the enterprise.

Requiring managers outside the finance function to use proprietary software for their budgeting and planning activities can reduce the quality of those managers’ budgets. They have plenty to do running their niche of the business and may resist dedicating much time to achieving proficiency in a technology they don’t see as core to their job. Its familiarity, at least at a baseline level, to businesspeople in almost every industry is part of the reason for Microsoft Excel’s success.

Ever since “BPM” was identified as a category of business software, vendors have been searching for a way to simplify the look and feel of their products in order to encourage nonfinance budget managers to use BPM tools to their fullest. The first, and most common, attempt at a standard and easy user interface came in the form of the spreadsheet itself. Several vendors developed Excel front ends, in which their performance management functionality was accessed through options added into Excel menus or formulas that expanded the power of standard spreadsheets. However, in many cases this approach has fallen short of the ideal of full use of BPM features companywide. One explanation is that while finance people adore Excel, operations managers are far less familiar with some of the more complicated activities required to develop solid, defensible budgets within spreadsheets.

Now, many vendors are turning their attention beyond spreadsheets to consumer technologies that promise to improve both user interfaces and actual functionality for ease of use and better decision-making among operations managers. Collaboration technologies are drawing interest among some software makers. As one article in the June issue of BPM Magazine explains, the future of performance management applications may incorporate Web 2.0 technologies, so that teams of people could discuss forecasts and concerns with the finance department as they developed their budgets, then could upload budgets (along with commentary and explanations) into a centralized, transparent corporate database. Such a solution would have the potential to substantially improve not only the efficiency, but also the accuracy, of each step of the budgeting process.

Even more widespread over the past couple of years has been vendor attention to incorporating search functionality into business intelligence applications. The ultimate goal of adding search to BI or BPM software is to enable users to search for information both in databases and in other types of files (e.g., in spreadsheets, on Web pages, in Word documents) from within their BI or BPM software suite. Previous issues of BPM Express have reported on the addition of search technologies (usually Google technologies) into various BI and BPM applications.

A survey by Ventana Research that is also covered in the June issue of BPM Magazine found that 34 percent of organizations believe linking this “semistructured” and “unstructured” information with BI data is very important, while 50 percent believe it’s somewhat important. Why? The same survey found that most respondents think integrating BI and search technologies will help them make better-informed decisions (for 53 percent, this is the most important benefit of this integration), as well as make decisions faster.

The ERP vendors have been understandably sidetracked over the past year with efforts to fully integrate the BPM products they’ve purchased into their own enterprise applications, so much of the recent noise about extending performance management to operations managers has been coming from smaller players. However, once ERP vendors get their integration efforts under control, consumer technologies may begin to gain more of their attention as well.

When that happens, performance management technologies may finally extend as far into the organization as vendors and consultants feel they should. A Facebook- or Google-inspired front end is sure to make finance software less intimidating. And the more budget managers take advantage of BPM’s full capabilities, the better organizations’ BPM processes are sure to be.

The hottest acronym right now in the realm of business performance management (BPM) has to be XBRL. That’s not because it’s new; the concept has been around for a decade, and the acronym has been mainstream for several years.

In 2004, the SEC began to investigate the benefits of using XBRL tags to label each piece of data in a financial report. The idea is that if SEC filings were labeled with XBRL tags, public-company transparency would be vastly expanded. Software used by investors, market analysts, and competitors would be able to automatically gather data from online financial reports, then organize the data in a way that enables easy analysis and comparison of companies’ financials.

The timing of the SEC’s entry into the world of XBRL was not a coincidence. SEC staff publicly stated that the organization was considering this means of improving transparency as a direct result of the Sarbanes-Oxley Act and the financial-reporting scandals that led up to that law. Since early 2005, the SEC has allowed companies the option of submitting their financial information in an XBRL-tagged format — and ever since then, software vendors, consultants, and (yes) the business media have been beating the drum for the eXtensible Business Reporting Language.

What’s changed, then, to make XBRL such a buzzword all of a sudden? Many companies that have previously ignored XBRL now have to pay attention because tagging of SEC filings will likely be mandatory by the end of the year.

On Wednesday, May 14, the SEC voted unanimously to adopt a rule proposal to mandate the XBRL tagging of SEC filings of financial statements. If the rule is adopted this fall, the first companies affected by the change will be large, accelerated filers (those with a market cap of $5 billion or more), which will be required to submit reports in XBRL format for fiscal periods ending December 15, 2008, and thereafter. The XBRL requirement will be phased in until it encompasses all public companies, both domestic and foreign, that are listed on U.S. exchanges.

In addition, on May 21, the SEC approved a proposal to mandate XBRL tagging of risk/return information in mutual fund prospectuses. The goal of this rule is to simplify for investors the process of comparing investment objectives, strategies, risks, historical fund performance, and fees among funds.

Said SEC chairman Christopher Cox in February, “A standard data format for sharing financial statements and other information that is important to investors will facilitate the kind of comparisons among global investment options that investors need. The international movement to employ extensible business reporting language for this purpose will let investors easily find and compare business and financial data with the same ease of doing a Google or Yahoo! search today. And it promises to let companies prepare their financial information more quickly, more accurately, and for less cost.”

Whether companies will save money through XBRL tagging remains to be seen. But consumers of corporate financial information certainly stand to gain dramatically.

XBRL US, a consortium of software vendors, consulting firms, and other organizations interested in the future of XBRL in the United States, predicts that for preparers of financial statements, the XBRL reporting requirement will increase the time and costs involved in SEC filings in the short term. In the long run, though, XBRL US expects filers to benefit from improved data consistency and faster reporting, once their financial management systems include XBRL functionality. For investors, XBRL US believes that short-term gains may not live up to the current hype. However, the organization expects analysts and investors to benefit greatly in the long term, as tagged financial data improves both the accuracy and granularity of information available on public companies. XBRL US anticipates that once XBRL tagging becomes widespread, XBRL-formatted financial data will be in great demand by investors and market analysts.

When XBRL is finally prevalent in corporate financial reporting, it will be fair to say it’s been a long time coming. But it will probably also be fair to say it’s well worth the wait.