Vendors of truly vertical BPM products offer buyers a wide range of benefits -- instead of marketing spin.

As business performance management (BPM) software systems begin to look more and more alike to overwhelmed buyers, one trend is helping simplify the purchase process. The market remains crowded and highly competitive, but the list of choices is becoming more manageable for many finance executives because, increasingly, vendors are tailoring their applications to specific industries. Businesses in the banking, health care, insurance and retail sectors can select from a cadre of budgeting, planning and reporting applications specially designed to meet their needs. And software buyers in these major industries are not alone. Even building-materials manufacturers now can consider a BPM offering developed just for them.

Every vendor of packaged performance management software seems to be getting in on the act. For a long time, a limited subset of BPM providers focused on specific industries, but now big players, whose horizontal products have been successful, are looking to specialize as well. "The vendors that haven't been vertically focused are starting to move in that direction, and ones that have been are expanding the range of verticals they address," says Craig Schiff, CEO of BPM Partners in Stamford, Conn.

Some vendors that talk about verticalization are simply spinning their marketing message, printing new brochures, hiring targeted salespeople and grouping customers by industry on their Web site. But many are actually changing their products. At their shallowest, product enhancements involve preconfiguration of the software and reports that are unique to the industry. Rather than requiring a customer to create its chart of accounts from scratch, a vertical solution might include line items that are typical to the targeted sector. An executive dashboard might come populated with the vertical's most popular key performance indicators. A system's data model might include definitions that help the customer determine which information to pull into the tool. Its end-user interface might be worded in the language of the industry to reduce training requirements. Or the software might offer prebuilt strategy maps and scorecards to assist in strategic planning.

One major benefit to customers of software preconfiguration is faster implementation, which results in faster returns and lower consulting fees. "When a company goes to do BPM, a lot of times they look at methodology, and they can spend a really long time trying to figure out what they should be measuring and the methodologies that they're going to use for that," explains independent analyst Brian Wood of Wood Capital Associates in Hope Valley, R.I. "The solutions that include that kind of component are going to be very beneficial." Even vertical performance management software requires customization to meet a company's unique needs, but getting a jumpstart on the configuration process carries obvious benefits.

Another advantage is that companies with limited budgets end up with software tightly focused on their needs. In 2003 BOK Financial Corp., a multibank holding company based in Tulsa, Okla., implemented software tailored to the financial services industry. "Because the system was geared toward financial institutions, we could do a lot of things right out of the box, and therefore, we could move to some advanced functionality quicker," explains Reg Ripperger, the company's vice president and manager of executive information systems. "Any system you purchase, you always tend to push its limits. And so if you can get a powerful system in the first place, then the pushing is on more advanced features as opposed to just trying to get it running to do the basics."

Some vendors take verticalization further than preconfiguration. They build wizards to enhance workflow in a way that is specific to the industry they're targeting. For instance, says John Colbert, vice president of BPM Partners, "a step-by-step work-through can guide someone through something like a risk assessment." The result of such an enhancement is that "a junior person can do more extensive analysis than they could have otherwise because the logic and the intelligence that the product has around these processes is so deep," Colbert adds.

The development of applications specific to an industry represents BPM vendors' deepest foray into verticalization. In financial services, for example, product profitability evaluations require resource-intensive customization of horizontal BPM applications, so some vertical vendors have developed separate software modules to perform those calculations. "In the traditional consumer product world, you have revenue and you have expenses, but the calculation is not as explicit" for banking products, explains Sridhar Kadaba, practice director for Parson Consulting in New York City. "On the deposit product, you know what you're paying in interest expenses, but you do not know what the interest revenue of those balances is. When you think about the loan product, you know the interest income, but you do not know what the cost of funding that is. So in order to be able to develop an apples-to-apples comparison from a margin perspective, you need to have a module that calculates the value of those funds."

In many cases, the BPM software vendor develops these industry-specific additions to its product's core functionality; however, vendors that have stayed horizontal may enlist a vertical consulting firm to help. "We don't have the deep domain expertise to go into a health-care environment or a pharmaceutical environment," says Bennett Indart, vice president of products for SymphonyRPM, a provider of performance management services in Palo Alto, Calif. "A lot of the problems that are being faced by these companies require deep-down knowledge of that particular industry."

SymphonyRPM encountered a similar challenge when it decided to target retail organizations, so it teamed up with retail-industry information and consulting giant Information Resources Inc. to develop solutions to those customers' needs. "They have built about 12 different applications to date that are particular to a retail CPG [consumer packaged goods] market. [They include tools for] price optimization, trade funds management, being able to handle new promotions -- all of which are fairly domain-specific for retail and CPG," Indart notes.