Top Dogs 2010: The Best-of-Breed Unleashed

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Companies may not be hiring actual humans as fast as the economic pundits would like, but they're definitely back in the market for software.

IT analyst firm Forrester declared the 2008/2009 technology spending downturn officially over in February. By April a report from Morgan Stanley was being greeted with headlines like "Tech Spending Roars Back" -- on a projected growth of just 3.2 percent for 2010! But anything positive looked a lot better than the previous year's across-the-board declines. Forrester's latest predictions are decidedly bullish -- an impressive 9.1 percent surge for U.S. software purchases this year, with continued strong growth into 2011.

In the best-of-breed software landscape that's emerging, some long-familiar features have become even more prominent. Though the claims of "recession immunity" for the software-as-a-service space proved unfounded -- nearly all tech vendors were hurting in the depths of the downturn -- SaaS providers bounced back early and strong. Strategy consulting firm AMI Partners Inc. predicts a respectable compound annual growth rate of 18 percent for this sector in the small-to-midsize business market through 2015.

Open-source systems providers survived the tech freeze without too much trouble. Adoption of open-source business intelligence (BI) tools, for example, is doubling every year, according to IT research firm Gartner, forcing the larger commercial providers to defend their turf by offering low-cost "starter editions" of their own products.

It's a tribute to the adaptability of the niche software firms that they've continued to explore new ground in the past couple of years, including the long-heralded migration of enterprise software to mobile platforms. Want your balanced scorecard on your iPhone? Best-of-breed business performance management (BPM) firm ActiveStrategy can provide that capability, along with access to all your KPIs and project status data. How about some tax research tools on your Blackberry? Check out CCH's new app, CCH Mobile.

For now, the emphasis in best-of-breed mobile tools is on data access, dashboards and reporting rather than heavy-duty number crunching. But expect that to change as vendors scramble to meet the needs of an increasingly mobile workforce.

A Dose of Vitamin BPM

There are risks to being on the cutting edge, of course, and in the performance management space you could argue that vendors are already running ahead of their market. Strategy management and profitability modeling features have become standard components of many BPM packages, but the level of adoption is low; most implementations remain focused on budgeting, planning and forecasting. A recent Ventana Research whitepaper sponsored by Business Finance (Business Intelligence and Performance Management for the 21st Century) found that, in general, organizations are a long way from having achieved maturity in their use of BI and BPM systems. Most have only basic capabilities, such as querying sources for specific data, generating reports from data, and accessing data from spreadsheets for further analysis.

But that's understandable. Finance leaders I've talked to this year, especially in midsize firms, confirm that there's a lot of ROI to be squeezed even from a straightforward budgeting-focused BPM project. That was certainly the experience of Debbie Lansford, CFO of CORT, a Berkshire Hathaway Company, who installed a BPM tool from Adaptive Planning last year. "We're making a lot of improvements as we go forward, but we're a medium-market business, a niche type of business," she explained. "We're really the only company in the country that has a national presence in what we do, which is rental relocation services. So we have to design a lot of our own software. I think it would be difficult and not necessarily cost-effective for us to move to a really huge BPM system. These little bites that we're doing make a lot of sense."

Step-by-step also made sense to Megan Harris, CFO of Dartmouth, Canada-based Ocean Nutrition, a supplier of omega-3 food supplements and ingredients. Years of rapid growth had left the company's budgeting and forecasting processes in need of a tune-up. "We had little to no analysis or understanding of the data points," she recalls. "As far as budgeting, we're not any different from any other manufacturing firm; we have some risk drivers around cost, prices, currency and so on. A lot of it for us was understanding sensitivity around assumptions: Was the U.S. currency going up or going down? What does that mean from a P&L viewpoint? Would there be a dramatic increase in the cost of our commodity oil?"

The BPM system's scenario generation features gave Harris the view she needed. Asked to name some other benefits of the project, she points to enhanced reporting capabilities: "We're doing weekly revenue runs, we look at customer credit with open orders, we look at credit thresholds, we've got a number of quick on-the-fly reports within a number of departments that can help us track and trend, as well as the monthly management reporting package that we send out to the board. That flexibility has been great."

Then there's what she calls the "element of connectedness" between departments. "Everyone has control over their numbers so they're not as dependent on accounting or finance to give them the details. In the drill down they can go into their G/L detailed expenses and see the vendors and the amounts; that has helped immensely. They've become more independent, more confident in how they're looking at data and using the application, and I'd say overall for the organization it's been a massive timesaver."

One area that's ripe for BPM in many organizations is sales; what-if scenario modeling holds great promise for improving sales forecasting. Yet few companies have made the effort to provide their sales force with the dashboards and consistent, data-based decision support that workers in other departments take for granted. BPM vendors haven't made this a marketing focus, and any efforts to expand in that direction would bump into stiff competition from vendors in the exploding sales performance management (SPM) sector. SPM tools can help companies improve their sales reporting and analytics, track KPIs, manage objectives and quotas, and plan incentive compensation.