Most organizations are either in the midst of a project or in the planning stages for improved business performance management. While the directive to pursue this initiative often comes from the CEO or COO, it is the CFO who is usually placed in the driver's seat. This is a mission-critical, high-visibility project that touches most departments in the company. There has always been a degree of risk associated with performance improvement projects, but today's volatile technology environment has increased the level of risk.
Business performance management is designed to enable a company to attain strategic alignment around its key goals and to monitor and manage how well it executes on achieving those goals. Based on both user demand and software vendors' desire to differentiate themselves, the components that comprise performance management today are greatly expanded from where they were even just a few years ago.
Business performance management today has gone beyond basic budgeting, planning, consolidation, and dashboards. It now can include customer and product profitability analysis, predictive analytics, governance, risk, compliance, and operational analytics. Developing requirements as well as selecting and implementing a performance system have clearly become much larger and more complex tasks.
The other aspect of today's technology environment that is playing a role in increasing risk is the vendor landscape itself. There doesn't seem to be a month that goes by without the announcement of another merger of performance management software vendors. Some have perceived this as making things easier -- fewer choices equals less time spent evaluating vendors and fewer chances of making the wrong decision.
Unfortunately, the opposite is true. First of all, it is nearly impossible to stay on top of which vendors now own which products. The vendor you had a demo from last month may now either not exist independently or have a very different product set to offer. Second, there are big questions as to which components of the now overlapping product sets of these merged vendors will survive. You certainly don't want to be the owner of the modules that don't make the cut. In addition, the future direction of these products from both a supported technology as well as feature set perspective may change under new ownership.
As far as having a reduced number of vendors to evaluate goes, well, this is not exactly true either. While some popular stand-alone performance vendors have been acquired by larger companies, these companies are now viable performance choices themselves -- which they may not have been in the past due to a weaker product set or absence of true performance offerings. Also, some smaller and more specialized vendors that couldn't be heard in the past due to all the marketing noise are now coming to light. So, for most companies, looking at four or five vendors to start and then focusing in on two to three is still the way to go.
In this environment, we recommend that a CFO do the following to increase the chances of performance management success:
• Partner with the CIO. When evaluating the latest crop of solutions, understanding the technology road map and data integration challenges of each offering is critical. Of course, IT involvement is always important to performance initiatives, as these systems require easy access to data from multiple source systems throughout the company.
• Form a cross-functional team with senior representation from each area. As performance management expands into operational analytics, it is important to have team members with a deep understanding of each department. This will also help in attaining company-wide buy-in when the system gets rolled out.
• Ask the right questions. Be thorough in documenting your business requirements and make sure that you ask the newly merged crop of vendors, What does your product road map look like? If they say that all of their products will live on indefinitely, it's time to move on to the next vendor -- maybe they'll give you the straight story. In addition, ask them what percent of their performance management customers (postmerger) are not existing customers of their other products. Is ownership of some of their other products required to obtain full functionality from their performance management offering?
• Add an expert to your team. Hire a full-time employee or consultant who has broad performance management experience and is up-to-date with the latest developments. You and your CIO have full-time jobs and can't possibly focus enough time and energy on staying current with the rapidly evolving performance management landscape. Their experience will also help you to avoid many of the costly pitfalls experienced by companies that take the go-it-alone, trial-and-error approach.
Following the guidelines outlined here should put you on the fast path to enjoying the benefits that many companies have already obtained from their own business performance management systems.