Business Performance Management

Midmonth Business Objects released a product called BusinessObjects Predictive Workbench, which adds data mining and predictive analytics to the BusinessObjects XI 3.0 business intelligence platform. Predictive Workbench analyzes data to identify patterns and trends, and enables users to project potential future events through what-if scenarios.

Information Builders announced in early June that it is developing a product called WebFOCUS RStat, which will enable database experts, statisticians, business intelligence software developers, and analysts to build predictive analytics applications. This capability will enable companies to extend predictive functionality to operations workers on the business’s front lines.

On Monday, River Logic announced that its Enterprise Optimizer financial analytics and modeling products now integrate with Microsoft Office PerformancePoint Server 2007.

Teradata is now offering version 5.2 of Teradata Warehouse Miner. This version accelerates the data mining process by embedding 50 statistical data mining functions, which were developed by Teradata partners SAS and Visual Numerics.

Compliance vendor ACL has released a new product, ACL AuditExchange 2009, which is designed to enhance the performance and productivity of corporate audit departments. It stores information related to audits — including data formats, audit tests, and analysis logs — in a central location so that they can be shared, and can be repurposed when appropriate.

CA has released version 1.5 of the CA Governance, Risk & Compliance [GRC] Manager. New features include management of GRC policies’ full life cycle; additional key performance indicators (KPIs) and key risk indicators (KRIs); automation of testing and cost tracking for GRC programs including Sarbanes-Oxley compliance, HIPAA, NERC, and others; and the addition of 120 new unified compliance framework (UCF) regulations.

On June 4, GRC vendors Paisley and QUMAS announced a partnership through which Paisley will embed QUMAS DocCompliance functionality into Enterprise GRC.

A recent study by the Advanced Performance Institute, Actuate, and the Chartered Institute of Public Finance and Accountancy evaluated performance management practices in the public sector. More than 1,000 respondents represented government bodies, health organizations, police forces, fire and rescue teams, courts, and educational institutions from the U.S., U.K., Canada, and Australia. The study found that these organizations have made substantial investments in performance management systems and processes, but that many have taken too mechanical a view to see dramatic improvements. Among those that are collecting vast amounts of data, few are using that information to make better decisions. In addition, performance management information remains unreliable for 68 percent of survey respondents.

That’s too bad because public-sector organizations that follow the study’s “10 principles of good performance management” substantially outperform those that don’t. The 10 principles are fairly predictable; in order, roughly, from most to least impact on organizational performance: achieve strategic clarity, create a positive learning culture, apply performance management analytics, collect meaningful performance indicators, ensure organizational alignment, dedicate resources and time, report and communicate performance well, gain cross-organizational buy-in, implement appropriate software, and keep the system fresh.

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.

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.