Critical Acclaim

A new class of applications offers ways to measure your enterprise's performance

By Mark Allen Smith

Optimizing and managing organizational performance across the enterprise is critical to the success of every business. The challenge has been that most companies have not understood the significant level of commitment required to accomplish this mission while dedicating the level of required resources. The decentralization of business and IT investment decisions for business intelligence (BI) and analytic applications has compounded this problem.

This approach has provided companies the flexibility to understand and optimize specific business processes (sales, service, and manufacturing) but has distracted them from efforts to build an enterprise information foundation that should be the pulse of their business. Building this foundation and implementing an information backbone for the entire business is important in order to provide information that is easily accessible and aligned to an individual's role to the organization and business processes.

A new class of enterprise performance management (EPM) applications are now being brought to market after years of struggling with data warehouse and BI technology. These applications introduce a centralized information management platform and offer insight and visibility to enterprise performance.

A Brief History

If you look back over the last 10 years, hundreds of millions of dollars have been invested into data warehouse and BI efforts to achieve this enterprise goal. Unfortunately, many of these efforts in the early 1990s and the lack of understanding about how to leverage this information has exposed many failures.

Although available education - Data Warehouse Institute and DCI Data Warehouse conferences and books from industry data warehouse gurus such as Bill Inmon and Ralph Kimball - has helped, the fundamental lack of business strategy and discipline has hampered most efforts. Although many data warehouse implementations are successful, most have not aligned business needs at the management or business unit level and have not met intended goals.

The last three years of analytic-application and line-of-business spending have brought an increase in decentralized information management and a return to spaghetti data networking and the resulting information silos. In many cases, these new silos have unknowingly blossomed within these analytic applications (such as the ones from Blue Martini Software Inc. and E.piphany Inc.) and have expanded beyond single-subject data marts. This situation is yet another burden on an IT organization's efforts to provide a comprehensive information architecture for basic EPM.

Determining the effect of manufacturing runs and how distribution management affects fulfillment's ability to meet the demands induced by marketing campaigns continues to elude most corporations. Additionally, an organization's ability to find value in information and put it in the hands of the broad workforce has been hampered by the immaturity of information access and delivery tools, which lack usability and scalability.

Only a small number of companies have met the challenge of providing information in the right context at the right time to make the right business decisions, and these deployments barely extend beyond 1,000 users. Even with these deployments, most are just providing static reports that provide little context beyond historical performance; most do not provide context for measuring and monitoring an individual's contribution.

Although I have not focused on many positive historical aspects, this foundation and context is necessary to understand the next evolution of information management in EPM.

A Balanced Scorecard

The base term "performance management" has begun to evolve to mean a framework for aligning analytic and collaborative technology to meet business requirements and leveraging information and metrics for improving organizational performance and business processes. You can apply this term to any organizational area, from individual (sales or manufacturing) to conceptual (customer relationship and supply chain management).

Figure 1 illustrates the broad scope of EPM across the entire organization and business network. But keep in mind that many of these applications have only just begun to address collaboration and optimize the people-to-people interactions.

EPM is a new application category and some vendors, such as Hyperion Solutions Corp., PeopleSoft, and SAS Institute Inc., use it to describe a set of applications (including balanced scorecard) and data warehouse products with significantly different approaches. Conversely, even though Oracle and SAP use the term strategic enterprise management, both of their approaches incorporate a balanced scorecard as part of their application portfolio. (For more information on balanced scorecards, see "Command Performance," June 5, 2000.)

Although many companies are beginning to adopt this application and methodology to align organizational strategy to action, feeding business metrics to the balanced scorecard has produced enterprise data warehouse challenges in providing metrics that align with organizational and business processes. This problem has increased the need for a data warehouse with an information foundation that provides a common set of metrics that can measure and monitor the performance of the entire organization.