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.

Packaged vs. Standalone

To address this problem, enterprise application providers, such as Oracle, PeopleSoft, and SAP, have recently migrated their applications, including balanced scorecards, to operate on their maturing data warehouse platforms. (Maturing is the key word: These vendors have taken five years to evolve a data warehouse platform that may be suitable for large enterprises.)

Unfortunately, some vendors (for example, Oracle and SAP) have begun to repackage these offerings, which makes buying them independently without also implementing a significant number of their operational applications, like ERP or CRM, difficult. This bundling can be an asset or a detriment, depending on the evolution of an organization's enterprise data warehouse and whether migrating to another vendor's operational applications is acceptable (although most of these vendors do have certified partners that can provide information access and delivery tools).

Alternatively, application providers such as Corvu Corp., SAS Institute, and Hyperion Software provide EPM that offers score-carding methodologies (such as Norton & Kaplan Balanced Scorecard) that do not require using their proprietary enterprise data warehouses. This particular approach has provided these vendors some level of independence and success in adapting to existing data warehouse infrastructures, although still requiring some level of information readiness. But Gentia Software - the first provider of the balanced scorecard methodology - has been stumbling financially in its ability to maintain shareholder value and grow its existing business operations.

The Next Stage

The new class of EPM applications in this category offers a less structured application approach but provides a packaged enterprise data warehouse, and information access and delivery tools. This method addresses some of the problems experienced in balanced scorecard implementations that did not get deployed throughout an organization because it could not align information in a usable form to the broad workforce.

Informatica Corp. is leading this new approach with its cross value-chain analytic applications, which bring Informatica's depth of experience in providing data integration tools for data warehousing and a toolset for BusinessObjects BI integration. This package is possible because of acquisitions that provided enterprise data warehouse models and metrics for EPM. Look for further advancements in its information delivery capabilities based on Informatica's acquisition of Zimba in late 2000.

DecisionPoint Applications Inc. has accumulated a set of integrated enterprise data models and business metrics but still lacks a comprehensive information access and delivery offering. SAS Institute is taking a slightly different approach by providing more flexibility with its Strategic Vision application, which can implement a balanced scorecard or meet more generic performance-management requirements. In addition, it has more tightly integrated its data warehouse tools and has an EPM Ready program to ensure tighter information integration with its existing performance management offerings, which include CFO Vision, HR Vision, and IT Service Vision.

This new market opportunity has put a sparkle in the eyes of other vendors such as Cognos Inc. and Business-Objects, and you should expect similar offerings from them that will address this enterprise space in the future.

The Right Approach

Which approach is best? There is no one answer, but a strategy for EPM is critical. Your organization's business and technology maturity levels will affect whether you use a vendor-supplied solution, a build approach, or a bit of both. What is clear is that having a strong enterprise information architecture, along with a complement of information access and delivery tools and score-carding applications, is necessary.

EPM can also provide the information backbone to support existing and future business process-centric analytic applications. It will also be the baseline for addressing cross-functional business challenges like customer profitability and supply chain performance. Providing enterprise performance metrics, from individual to organizational areas, that are easily accessible and can drive action inside of the organization is critical to everyone's success.

Mark Allen Smith [mark.smith@fullcirclestrategies.com] is principal and founder of Full Circle Strategies and an expert in the applied use of information and analytics in the areas of business intelligence, portals, and analytic applications.

Resources

DecisionPoint Applications Inc.
Informatica Corp.
SAS Institute Inc.