Several recent developments in the world of business-performance management (BPM) software may inject new life into a concept that dates back to at least 2000. New competitors are helping to drive down prices, the need to cope with new regulatory pressures is prompting companies to look for help from technology, and the software itself is being extended into areas well beyond the budgeting and forecasting functions, although those areas remain its focus.
While software currently labeled BPM (or CPM, for corporate-performance management, with a few other variations used by some vendors) has been marketed to finance departments for several years, John Schoenherr, vice president of analytic solutions at Oracle Corp., points out that “if you strip away the name and look at the promise of the software, it’s been around for 25 years.” In the 1980s, “executive information” and “decision support” systems tried to do what BPM now promises: link a range of key strategic and financial information together with operational data and present it in a summarized way that aids decision-making.
A sound concept and a laudable goal, but the integration needed to pluck data from various software programs and databases was difficult to pull off, and the data was often suspect, with the numbers in one system (sales for the Northeast region, for example) disagreeing with what were ostensibly the same numbers residing in a different system.
Now the execution may have caught up to the concept. “We’re at a new level because the need is greater than ever,” says Schoenherr, “and the technology is starting to deliver.”
At BPM’s core are consolidation, planning and budgeting applications, a common database, and, often, the ability to display the data via a scorecard or dashboard interface. Vendors tout the closed-loop nature of BPM: the same data flows through applications used for budgeting, planning, forecasting, and operations, so as business results change, budgets and forecasts can change in response. In a sense, BPM is to performance data what ERP is to transactional data: a broad embrace of all relevant information, fully integrated and thus providing a single view tailored, in this case, to the needs of finance and operations executives.
BPM currently ranks among the fastest-growing enterprise software markets, with sales increasing about 15 percent in 2003 to about $1.1 billion, says John Van Decker, senior vice president at Meta Group. He and other analysts expect that rate of growth to continue for several years, especially as organizations continue to look to BPM to meet compliance/governance requirements, currently one of the biggest drivers.
It was a low entry price, however, that attracted Smart & Final Inc. to TM1 from Applix. The grocery chain initially signed on several years ago for fairly routine financial consolidation and management reporting functionality. But late last year, a grocery workers strike in Southern California brought the company an additional $90 million in new business, as customers reluctant to cross picket lines flocked to its nonunionized stores. That’s when, according to controller Wayne Geffen, the BPM capabilities of Applix’s TM1 product came in handy. “It was critical to understand how we could have some flexibility to schedule people during the strike period,” says Geffen. “We had to be more flexible to change — you didn’t know what was happening or if the strike was going to be over tomorrow.” Using Excel spreadsheets and templates, the finance group was able to gather the now-needed data and feed it into the TM1 database to produce staffing options. Those options were then made available over the Web to store managers.