Blog: Mike Ferguson

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Vendor Acquisitions Fuel The Creation of the Performance Management Platform

The movement in the Peformance Management (PM) market of late seems to be heating up as mergers and acquisitions have seen some PM vendor consolidation as vendors start to beef up their PM product line. You can go back a few years to when all this started to happen with many vendors offering dashboards and scorecards on top of their BI platforms. Early PM products were somewhat lightweight starting out supporting just one thing e.g. scorecards or planning or budgeting. BI vendors focussed on strategic performance management and tried to battle it out with ERP vendors for CFO mindshare. Meanwhile operational performance management was ignored. Even today it is difficult to find PM products that allow you to declare the full business strategy to the software i.e. actually entering text for stategic business objectives, key initiatives, KPI owners, KPI targets, plans and activities, budgets and adding commentry on trends. Most were just associated with KPIs only and traffic lights.

Early PM products had a lot of limitations including separate databases from BI system data warehouses which meant that they could only show summary data and offer limited if any drill down into detail to understand why a traffic light has gone red. Key to most executives and particularly CFOs is planning and budgeting and so it is not surprising that we saw various acquisitions of Planning and Budgeting vendors to add to PM products that focussed on scorecards initially. Cognos acquisition of Adaytum comes to mind in this space.

More recently as process management has started to take hold as a key element of service oriented architectures (SOA), the areas of Business Activity Monitoring and Activity Based Costing have come under the spotlight as companies ask questions about their operational process efficiency and the cost of their operational activities which form the steps in their processes. Interest in Activity Based Costing has been steadily growing over the last few years to the extent now that the link between ABC, planning and budgeting is becoming clear. Companies want Performance Management software to thread together:
• Support for Performance Management methodologies e.g. Balanced Scorecard, TQM, Baldridge
• Business Objectives
• KPIs and KPI targets to track performance to see if objectives are being met
• Owners who are accountable for the performance of a KPI
• Key Initiatives that a company intends to implement to achieve each objective
• The plan for each initiative - i.e. the activiies in the plan
• The budget for each initiative - how much the company can spend on each initiative
• Activity based budget - to see the planned spend for eash activity in a plan
• Activity based costing - for actual costs of plans against budget at the activity level
• Business Activity Monitoring for live monitoring of operational process performance management

I have lost count how many clients of mine now want to see costed plans against budgets at the activity level. So it is no surprise to me that ABC is growing.

Looking at the market it may have been a visionary move by SAS when acquiring ABC Technologies to add to it's PM offerings a few years back (or just plain good fortune). Also last year we saw Business Objects step into the Activity Based Costing market by acquiring ALG. Cognos acquired real-time Business Activity Monitoring (BAM) vendor Celequest fairly recently. Then Oracle stepped into the market by acquiring Hyperion to plug the PM gap in it's product line and just last week Business Objects announced their intent to acquire French PM vendor Cartesis.

So what is happening here? The answer is that we are seeing the consolidation of various pieces of the PM puzzle to create Performance Management Platforms that will sit on top of and integrate with BI platforms (typicaly from the same vendor). By Performance Management Platform I mean a complete suite of integrated tools for managing the buiness. This PM Platform is also likely to be integrated with Office applications, portal products and collaborative workspaces for sharing performance.

It takes me back to when we had a reporting tool from vendor A, an OLAP tool from vendor B, a mining tool from vandor C and an ETL tool from vendor D. Now we have complete BI platforms from one vendor. A key point here is that PM platforms are not the same as BI platforms but sit on top of the BI platform. Secondly PM is growing and lucrative while BI platforms are coming down in price fueled by Microsoft competitive pressure, Open Source and even the DW appliance market. Also ETL is separating from the BI platform and going enterprise wide under the guise of Enterprise Data Management.

There is still a lot more to come in the PM consolidation space. Also it has to grow beyond BI and go enterprise wide by integrating with business process management and SOA as well as collaboration tools and content management.

For example in many PM products today you cannot
• Associate a business objective in a scorecard with business process activities
• Associate a performance initiative defined in a scorecard with a plan and business process activities
• Link a process model to a scorecard strategy map
• Use performance management software to pin-point where in an business process to make improvements to optimise performance
• Use performance management software to initiate business activity monitoring (BAM) of activities in process models to identify process inefficiencies
• Use performance management software to cost activities in plans and business processes
• Use performance management software to link operational performance to one or more objectives on a scorecard
• Use performance management software to set up business rules for automatic real-time decision making

Performance management needs to ADD the following to make everyone performance aware
• On-Demand analytics & BI
• Real-time decisions and automated recommendations
• Guided analysis
• Event driven Business Activity Monitoring (BAM)
• Monitoring agents
• Automated real-time alerts
• Guided and recommended actions
• Active performance management scorecards capable of managing at strategic and operational levels
• Decision monitoring to see how effective decisions have been in terms of achieving targets
• Business intelligence driving business process rules behaviour
• Personalised scorecards to make them available to everyone

No doubt we will see a lot more acquisitions over the next 12 months

Posted by Mike Ferguson on Saturday, 28 April 2007 | Permalink