The Business Performance Management Commitment

BPM software helps businesses produce more transparent financial reports and get a firm grip on where they're going.

Most companies have long sought a single version of the truth about their performance. They've been searching for a software system that can eliminate confusion about definitions, prevent discrepancies in the data and make clear to employees in real time exactly how they're doing. To achieve these goals, a company needs a software platform that integrates and standardizes data from disparate sources. The dream of efficiently centralizing corporate performance information is becoming a reality for some organizations, thanks to a concept called business performance management.

BPM -- or CPM (corporate performance management), as IT research firm Gartner Inc. calls it -- "is an umbrella term describing the methodologies, metrics, processes and systems used to monitor and manage an enterprise's business performance," says Lee Geishecker, research director at Gartner in Stamford, Conn. "It has existed for years in the form of isolated components. However, no single vendor or practitioner ever put together all the pieces."

Components of a full business performance management package encompass planning, budgeting and forecasting; actuals consolidation; performance analysis; metrics; an executive dashboard; Balanced Scorecard analysis; an online analytical processing (OLAP) engine; analytics capabilities; collaboration functionality; a Web portal; management of unstructured data (i.e., text); and process management. This range of functionality may make BPM suites sound complex, but the potential benefits of a holistic approach are dazzling. A business performance management system promotes greater visibility, makes models like the Balanced Scorecard more effective and better aligns employees' goals with corporate strategies.

"With BPM, there's more employee accountability, along with a tighter relationship between their performance and business outcomes," explains Katherine Jones, Ph.D., managing director of enterprise business applications at IT consultancy Aberdeen Group in Palo Alto, Calif. "Employees know whether they're doing what they're supposed to be doing in relation to their performance goals, their boss's goals and the goals of the company. And their performance can be evaluated on a frequent basis to make sure they're on track, rather than just annually."

How fast is BPM being adopted? Companies are moving cautiously so far. "The immaturity and confusion of the CPM applications market makes vendor selection challenging," says Geishecker. "ERP, enterprise business intelligence suite and business intelligence platform vendors are competing for a piece of this potentially lucrative market. Although the vendors will come from many areas, ERP vendors are likely to gain a significant presence in this market because of their domain expertise."

What are the potential pitfalls of a BPM software purchase? For one, companies that rush to buy may end up with something that doesn't fit their needs. "They get wooed by a slick sales pitch and end up with shelfware [unused software]," says Craig Schiff, CEO of BPM Partners Inc., a BPM evaluation and services firm in Stamford, Conn. "They tend to underestimate what it takes to implement it all; those are complex systems."

Shortsightedness can also cause trouble. "Companies end up purchasing it to solve an immediate problem; however, BPM should be a long-term investment," says Don Schulman, global leader for the financial management solutions practice at IBM Business Consulting Services in New York City. "It's not a plug-and-play solution. It requires an assessment of its life-cycle costs and annual costs for maintenance checks and upgrades." Schulman recommends that shoppers ask vendors for a full demonstration of all tools and applications in an environment that simulates their company's operations as closely as possible.