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June 30, 2003

A Market Evolves

Performance management is more than what it appears

by Mark Smith

The market for business performance management (BPM) continues to gain momentum. Global organizations recognize the imperative to leverage their investments in transactional systems, such as ERP, and the need for systems that support their management cycle and performance management processes. This well-founded desire for information-centric environments that enable individuals to collaborate and determine intelligent courses of action is now supported by a new generation of solutions we classify under "performance management."

Some industry pundits have questioned whether this evolution to performance management, and the corresponding shift of vendors' market positioning, is just short-term opportunism or a response to sustainable customer demand. This uncertainty demonstrates how resistance to change can trump knowledge of management fundamentals. Your organization, too, is likely to balk at change. What's foreign to the background and experience of the individuals involved will likely fall under suspicion.

In the 15 years I've spent in this field, I've seen several niche markets emerge: executive information systems; online analytic processing; query and reporting; extract, transform, load; scorecards; and BI. I've then seen these markets consolidate in response to businesses' converging requirements for information to manage their organizations. This time, we are seeing all these information, analytic, and collaborative software categories aligning under one umbrella: performance management. Performance management is not BI. Let there be no doubt that we're transitioning into a new software category focused on reorienting organizations from mere efficiency to full effectiveness.

Why is this point important? The push to deploy ERP in the last decade was focused on gaining efficiency through automation, but efficiency doesn't replace the need for management. People manage, and they need information to do it. Those vast ERP investments now must be managed as systems of record on transactional facts that can be brought together to form a set of interlocking metrics for managing performance. These metrics can be used by for-profit or nonprofit organizations; it doesn't matter, as long as they want to focus on deriving more value through improving the quality of relationships. Traditional reporting systems have fallen short because they don't help us optimize future performance or align our actions with our goals.

Vendor Race

Vendors are now racing to lead this market. As I have monitored the market, seen customer successes and failures, and conducted objective analyses of vendors, it has become clear to me that how you approach performance management is critical. Temper your zest for excellence; be sure your organization can adopt and deploy performance management software correctly before you acquire it.

Unfortunately, as vendors grab for market share, they don't seem to understand or analyze the market. Too many are duplicating competitors' applications and functions that, although marketed as "enterprise," "corporate," or "business" performance management, don't help organizations self-manage effectively.