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July 26, 2002

Process and Reality Through BPM

BI vendors are defining a new decision-support category, BPM, to provide an enterprisewide analytic view that integrates strategy and business operations

by Seth Grimes

Continued from Page 1

Start with vendor and analyst nomenclature: It's confusing! (Nothing new to IT there.) What most call business performance management some call corporate PM, with little difference in meaning. And don't look for actual management capabilities in the software: BPM initiatives provide enabling technology that supports rather than automates PM.

I found SAS Institute Inc.'s terminology to be candid and illuminating. SAS Institute's strategic management solutions director, Jonathan Hornby, told me that its current usage, strategic PM, reflects its ability to cascade strategy through all levels of an organization. SAS Institute is aiming to provide enterprise PM but doesn't claim to be there yet, lacking complete integration of strategic and operational management views. One way it's working on filling the gaps is by figuring out how to feed back the results of operational simulations and predictions into high-level strategies. Other vendors similarly supply technology that should eventually enable enterprise solutions, but they're honestly not possible yet.

A Confluence of Trends

Some companies, notably Hyperion Solutions Corp., have offered PM capabilities for several years. In these cases, coverage was at first generally limited to budgeting and financials and later expanded to other functional categories including manufacturing, human resources, CRM, and so on (depending on the vendor). The common underpinning is the ability to define "key performance indicators" (KPIs) or "metrics" — computed or observed values that illuminate performance objectives.

Indicators alone aren't enough; measured performance must be compared to norms or baseline figures to be usable. The numbers for comparison may be derived from diverse sources where context is key.

The emergence of packaged analytic applications, which comprise predefined indicators and data structures and libraries of end-user views, contributes to BPM initiatives. Packaged applications are tailored to particular business functions or industries and, in some cases, also provide guided analytics. Almost every vendor offers features including exception highlighting and report linking. I like Business Objects SA's term, "intelligent navigation," which successfully conveys the message that its tool understands the analytic techniques but affords the user freedom to explore.

Similarly, some vendors, notably Hyperion and SAS Institute, have long offered advanced management and analysis of time-varying data that includes model-based forecasting. Other vendors, such as Cognos Inc., have added at least basic time-dimension cognizance to their traditional focus on ease-of-use and accessibility. The now widespread ability to handle models and historical data in turn enables "predictive analytics" that allow evaluation of diverse what-if scenarios.

BPM delivers KPIs and predicative capabilities via another BI innovation: analytic portals and dashboards that are based on methodologies such as balanced scorecard and Six Sigma, which collect and display metrics in visually appealing form. Neil Patil, Brio Software Inc.'s senior product marketing director, compared these interfaces with the largely static Executive Information System views that were common in the past, noting that current interfaces are much more interactive, supporting end-user data exploratory analysis, including creating derived values and drilling through to source data.

BPM, then, is at the confluence of BI developments already mentioned as well as several non-BI-specific trends, such as the resurgence of thin-client computing architectures and the (related) widespread introduction of Web services. From the BI and database worlds, BPM adopts server-based metric computations and business-rule management, which together enable event detection and alerts.

Paradoxes

Yet BPM offerings are still purely analytic and informative, enabling rather than automating strategic management. There's plenty of talk about closed-loop integration of analysis and operations, but no one's doing it yet on an enterprise scale. That's good in my opinion. Immediate, real-time application of predictive analytics is great for customizing product displays during a customer's Web site visit or supporting fast approval or denial of a credit card application. I'd be wary, however, of any effort to scale techniques to the enterprise level, if only because no tool that I know of can be relied on to properly handle unforeseeable or unusual events.

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BPM innovations also give rise to other paradoxes. For example, tools with analytic depth are hard to use. Every vendor I spoke to stated the desirability of engaging expert business analysts to help develop data and process models. Rather than being able to take advantage of guided analysis, users may need consulting help to create useful indicators or adapt packaged applications to unique business requirements.

Many BI players have yet to announce BPM initiatives. Most of the technology is available but the broad market may simply not be ready to move to the next level. Providing cross-functional, enterprise-level strategic orientation is a great idea, but one whose time has yet to come.

Seth Grimes [grimes@altaplana.com] is a principal of Alta Plana Corp., a Washington, D.C.-based consultancy specializing in analytic computing systems and demographic and economic statistics.