WHITE PAPER Evaluation Criteria for Selecting a Successful Business Performance Management Solution

Transcription

1 Global Headquarters: 5 Speen Street Framingham, MA USA P F WHITE PAPER Evaluation Criteria for Selecting a Successful Business Performance Management Solution Sponsored by: Cognos Kathleen Wilhide January 2006 IDC OPINION Dan Vesset Business performance management (BPM) is a management culture that encompasses business processes, technology, and methodology for supporting goal setting, performance monitoring, data analysis, and information dissemination. Successful BPM initiatives have a common characteristic of strong emphasis on nontechnical variables such as executive support, establishment of competency centers, business process reengineering, internal communication, and project management. IDC research shows that these business-related issues largely define the outcome of BPM projects. However, none of these business initiatives can succeed without the support of a robust underlying IT architecture and appropriate end-user decision-support software. This software structures and automates the participation of many organization stakeholders in the performance management processes (such as planning and forecasting, management reporting and analysis, financial consolidation and scorecarding) as well as provides the appropriate support for ad-hoc decision making. Economic, stakeholder, and regulatory pressures contribute to the need for technology initiatives enabled by BPM applications and business intelligence (BI) tools built on a business analytics platform. Market research shows that both are high on the business and IT agendas for organizations, across industries. IDC recommends that when evaluating software solutions to support BPM efforts, organizations that have implemented either packaged or internally developed operational systems should focus on the following key variables:! Breadth of functionality to address both corporate objectives as well as the needs of the different user groups.! A common, integrated software platform that supports a single metadata model.! Support for heterogeneous data sources that span multiple operational (e.g., ERP, CRM, SCM) and analytic systems and instances of the same system.! Self-service functionality that balances the IT group's charter to develop, maintain, and control the software platform with process-owners' need for adaptation of the performance management environment and end-users' need for a flexible and interactive decision support and information delivery solution.

2 ! The implications of the BPM software on the upgrade and maintenance demands for the operational (ERP, CRM, SCM) system that act as sources for the BPM solution.! Software vendor's business model that takes into account the vendor's experience, expertise, partner network, and support structures and processes in the BPM and BI markets. IN THIS WHITE PAPER Business performance management (BPM) (sometimes called corporate performance [CPM] or enterprise performance [EPM] management) means many things, but in the software world BPM is defined as software applications for performance management processes. A successful BPM solution enforces the necessary elements of closed loop performance management processes that enable control, continuous feedback, and decision support, as well as information transparency. This white paper outlines IDC's view of the key variables that organizations that have implemented operational applications, such as ERP, CRM, and SCM, should consider when evaluating software solutions to support their internal BPM efforts. SITUATION OVERVIEW Many organizations spent considerable resources over the past several years to implement and deploy packaged ERP, CRM, and SCM applications. Now more than ever, these organizations need to move from the operational efficiency gains achieved through such technology to leveraging their enterprise data for business performance management and business intelligence. To achieve this crucial evolutionary step, organizations require robust capabilities for managing information and ensuring the enterprisewide ability to rely on consistency of information throughout the performance management and reporting processes. IDC research shows that BPM and related BI initiatives are high on the list of priorities for both CFOs and CIOs. For example, 67% of organizations with 1,000 or more employees indicate that BI is the either a critical or high-priority issue on their 12-month IT strategy plans (IDC and InfoWorld BI Survey, March 2005). This rate goes up to 73% when the IT strategy plan is expanded to a 3 5-year horizon. CFOs need to support performance management, statutory reporting, and compliance initiatives with speed and accuracy. CIOs must provide access to consistent and reliable information across multiple enterprise systems at reasonable cost. Organizations must address these business and IT goals, needs, and requirements by creating an information management strategy that is the springboard for managing corporate performance. The resulting BPM architecture encompasses BPM analytic applications, complementary BI tools, and the underlying business analytics platform that helps break down organizational silos and the underlying operational applications that usually support specific, individual business processes, such as accounting, human resources, sales, or procurement. 2 # IDC

3 BPM, BI, and Business Analytics Platform Market Definitions and Landscape The BPM analytic applications market is estimated to reach approximately $1.6 billion in The market has consistently experienced double-digit growth over the last several years a growth rate that IDC expects to continue for the foreseeable future. IDC defines the BPM analytic applications software market as cross-industry and cross-functional applications whose main purpose is to measure, analyze, and optimize business performance processes. The complementary BI tools include query, reporting, dashboards, and multidimensional analysis software. Both BPM analytic applications and BI tools are deployed on a business analytics platform that encompasses data integration and data management software, such as ETL (extract, transform, load), data warehousing, and reporting and analytic servers. Figure 1 depicts the major components of a BPM solution with prepackaged BPM analytic applications supported by a business analytics environment. FIGURE 1 Major Components of a BPM Solution Query & Analysis Strategy Management (incl. Scorecarding) Budgeting & Planning Financial Consolidation Profitability Management End-User Reporting & Dashboards Collaboration & Workflow Management Reporting OLAP Data Mart or Warehouse User Rights & Security Management Data Integration Metadata Management Analytic applications Analytic tools Supporting tools Source: IDC, IDC #

4 The suite of BPM applications is designed to support a set of interrelated management processes for running the business standardized on a business analytics platform that leverages existing enterprise systems as information sources. Many organizations have implemented point BPM solutions from different vendors and wind up having to map the results generated by these systems to each other through a reporting strategy, highlighting the need for a common platform and shared functions that are maintained centrally but used by multiple applications. IDC recommends that in evaluating software solutions to support BPM efforts, organizations should focus on the following key variables:! Breadth of functionality! Support for heterogeneous data sources! An integrated software platform! Self-service functionality! Initial and future maintenance and upgrade implications for the operational system! Software vendor's business model Breadth of Functionality As organizations indicate readiness to embark on a BPM strategy supported by technology, it is clear that the business functions of statutory and management reporting, planning and budgeting, and KPI tracking are related and come together to form a performance management suite. Common modules of such suites should include: strategy management, financial consolidation, planning & budgeting, and profitability management. In addition, there is a requirement for complementary BI tools either for production reporting or ad-hoc query and analysis. Common functionality of both BPM application modules and BI tools is highlighted in the following sections. BPM Analytic Applications Strategy Management Strategy management applications, such as scorecarding, support the communication and deployment of corporate strategy definition and accountability, including the reporting and monitoring of key initiatives as well as key performance indicators (KPI). 4 # IDC

5 When considering a strategy management application, the following criteria are particularly important:! KPI/metrics definition a strategy management application must support metrics definition and the development of a data model to consistently source calculations. A delivered catalog of KPIs and a related data model based upon standard industry measures can jumpstart an implementation, yielding quick time to value.! Strategy management applications are the umbrella over the entire BPM suite and must integrate with actual as well as planning and budgeting information and processes. The goal is to source and calculate automatically both actual KPIs and targets.! The application must be able to adapt as the organization evolves and its strategy management needs change. An organization may start with KPI calculations and role-based dashboards and then integrate them into strategy maps, initiative tracking, integrated planning, and detailed reporting and analysis for better insight. Notably only 22% of organizations claim to have adopted an industry-standards methodology such as balanced scorecard (IDC Business Intelligence Survey, May 2005). Therefore, it is important that the application be adaptable to support an evolving strategy management life cycle. Financial Consolidation Financial consolidation applications provide a structured approach for compiling financial results across disparate sources and entities to support both statutory and management reporting. Consolidation applications provide the structure to support these integrated views of enterprise-level profitability and financial condition, and therefore represent an important foundation of an enterprisewide reporting strategy. The BPM system can be, in effect, the system of record for organizations that implement consolidations and related reporting as a central strategy across multiple ERP, CRM, and SCM applications or instances. For example, recent IDC survey analysis found that only 5% of organizations with $500 million or more in revenue have a single operational system feeding their business analytics solution. 34% indicated that they had 10 or more operational source systems feeding their business analytics solution. When considering a financial consolidation application, key criteria are:! Automation of the closing process, enabling repeatable and auditable steps for developing financial results! Application flexibility to support changing business models or mergers and acquisitions! Globalization to provide a consistent approach for foreign exchange 2006 IDC #

6 ! Accounting support for key processes such as intercompany transactions, accounting for investments, or multiple GAAP versions! A scalable platform to support enterprisewide consolidation of results Enterprise Planning To meet enterprisewide needs, operational and financial planning solutions must include support for top-down planning and target setting, bottom-up budgeting, and dynamic forecasting capabilities on an integrated platform. Planning and budgeting continues to be the fastest growing segment of BPM applications. The tactical requirements of achieving budget preparation and consistency often drive the initial selection and implementation, but success leads to requests for adoption of emerging best practices including more frequent forecasting cycles or rolling forecasts, driver-based plans as well as more information and analysis. As organizations assess enterprise-planning solutions, they should consider the ability not only to meet the short-term tactical requirements, but also the ability to support a longer-term view of dynamic enterprise planning, budgeting, and forecasting. Planning best practices include driver-based planning (e.g., linking operational and financial dependencies), rolling horizons (e.g., a five-quarter rolling forecast), highparticipation and high-frequency forecasting (e.g., having thousands of cost center managers update forecasts on a monthly basis). It is particularly valuable to link operational planning processes such as sales forecasting with financial planning processes such as corporate P/L, balance sheet, and cash flow projections. When evaluating enterprise-planning solutions consider the following:! Budgeting, planning, and forecasting are not standalone processes and therefore must be integrated applications.! Integration into a BPM suite # Supports for actual results reporting, variance analysis, and detailed operational analysis. # Plan targets should feed downstream KPIs/metrics.! Usability and collaboration the application must support the ability to define budget templates that are linked to an enterprise framework while supporting unique budget processes at the operational level. Workflow, annotation capabilities, and management of attachments with supporting information increase both efficiency and visibility in the budget process.! Packaged, best practice delivered capabilities or blueprints for standard corporate processes can speed implementations, reduce risk, and result in quicker time to value. These areas include headcount, capital and sales planning, among others. 6 # IDC

7 Profitability Management Information to support profitability management comes at a high cost in many organizations. Organizations that are looking to incorporate detailed and dynamic profitability reporting should consider three key issues:! Profitability reporting requires support for robust costing methodologies through allocation functionality or integrated activity-based costing capabilities.! As profitability management initiatives mature, requirements for cost analysis increase, and integrating both financial and operational data becomes more important.! Decision support requires not only actual information, but a link to the planning, budgeting, and forecasting processes to implement improvement initiatives and support scenario modeling. Business Intelligence Tools Query and Analysis In addition to the packaged BPM analytic application described above, decision makers will often require query and analysis tools that enable ad-hoc analysis. Such analytic functionality is supported by query and multidimensional analysis tools. Increasingly BI tools must be able to seamlessly access both relational and multidimensional data sources and also present them to end users through a unified graphical interface. Query and analysis tools must be able to source data both from BPM and operational applications. The questions of whether to provide users with packaged analytic applications or ad-hoc query and analysis tools depend on their individual needs and sophistication in analytic techniques. In this case, a single capability is unlikely to satisfy the varying needs of different user constituents. Thus, companies will need both analytic applications and BI tools. End-User Reporting and Dashboards End-user reporting and dashboards are another requirement of a complete BPM solution. It enables both management and statutory reporting. Often production reporting is executed directly off of operational data sources. In addition, reporting has the requirement of the "pixel-perfect" output (i.e., the layout and graphics quality of production reports usually has a higher standard than that of ad-hoc query and analysis tools). In most cases reporting has a larger user base than ad-hoc query and analysis, which results in more stringent scalability and availability requirements. Similarly to reporting, dashboards are primarily concerned with delivering the right information to the right people at the right time. The major difference of dashboards is that they are personalized, exception-based information delivery vehicles that incorporate a higher level of data visualization along with tabular representation IDC #

8 Integrated Software Platform As organizations embark on evaluating technology to support BPM initiatives, the focus many times begins with the evaluation of capabilities in a single area, such as budgeting or consolidation. This strategy is geared toward solving a short-term pain, and even when successful, winds up being revisited as organizations expand BPM capabilities by adding additional features or components. The information required to implement a robust performance management framework rests in multiple systems, and, in many times, multiple formats. Additionally, as organizations implement performance management processes, additional information is generated: plans, budgets, KPI targets, explanation of results, all of which must be kept in context. Successful BPM initiatives require consistency and transparency in the information source and related functions. A robust business analytics platform plays a critical role in BPM solutions. When considering the type of business analytics platform that's necessary to support BPM initiatives, organizations should consider the following key capabilities:! A common enterprise data model encompassing global variables (i.e., a single data model that is shared across multiple BPM applications and related BI tools) rationalizes the necessary data components from multiple operational systems with the flexibility to expand that model at the local or departmental level. An ideal data model provides comparability based on global consistency while supporting relevancy based on local flexibility.! Integrated reporting and analytics servers within the context of performance management applications that support the needs of multiple users. # The OLAP server supports analytic ad-hoc analysis and drill down. # Report building and publishing include support for dashboards that bring together alerts, charts, relevant reports, and access to BPM applications based upon individual user role.! A common graphical user interface provides a uniform user experience and ensures end-user familiarity with features and functions regardless of the specific component of the BPM software portfolio they are accessing.! Collaboration and workflow for automating processes are based on result threshholds and organizational accountability.! User rights and security management grant role-based access to relevant information and ensure compliance with privacy rules and regulations.! Data integration capabilities ensure quality and consistency by extracting and standardizing information from multiple systems. This capability of the business analytics platform is important enough to warrant a separate consideration as one of the key software evaluation criteria. 8 # IDC

9 ! Consideration must be given to the maturity of the BPM solution. Is it field proven with other customers in your industry or company size bracket? Is it scalable and complete in terms of the components outlined in Figure 1? Integration of Heterogeneous Data Sources The importance of integrating data from multiple sources in support of BPM cannot be overstated. Consider a simple profitability metric that must be built up from revenue data from a sales system, product cost data from a SCM system, labor cost data from an HR system, and post-sales direct costs from a returns management system. It becomes quickly obvious that calculating such a profitability metric is not a trivial matter. Many organizations are faced with multiple operational systems from different software vendors or internally developed systems. Others, that have standardized on a single operational application vendor, often have multiple instances of that application and upgrade cycles for the various modules are seldom coordinated to happen in unison. Time and again, such heterogeneity is confirmed through market research studies. There are many reasons for it, including decentralized IT groups within large global organizations, ongoing mergers and acquisitions, and risk management policies that prevent the organizations from relying on a single software vendor. Given the diversity of data sources, it is important to consider the capabilities of the BPM solution to access data in multiple formats, such as multidimensional (i.e., often from a data mart or other analytic server) and relational (i.e., ERP, CRM, or custom developed application). The BPM solution must be able to support all sources of data the customer has (both now and in the future) with the notion that all data for a given report or application may be coming from any one of the data sources. The inability to support this requirement will result in the need for multiple BI tools and BPM applications that users will need to do their jobs. It is important for organizations to consider how the BPM solution can reduce the number of different tools and applications with which the end user must interact. When evaluating a BPM solution, consider not only functionality, but the information landscape and integration of information, asking questions such as:! Is the BPM software platform able to integrate data from multiple sources either through delivered capabilities or through tight integration with external specialty data integration software that supports industry-standards protocols and APIs?! Can the BPM solution replace other information and reporting silos within the organization, reducing the number of tools that exist?! Can the BPM solution support a reporting strategy that transcends long-term initiatives to consolidate systems? 2006 IDC #

10 Self-Service Functionality Real success in deploying BPM solutions comes from distributing appropriate analytic applications and BI tools to all operational stakeholders. While necessary, this strategy exposes the central IT group to a high volume of ongoing customization and development requirements. BPM processes are iterative. Initial functionality provided to users is followed by requests for new functionality, changes to the user interface or addition of new data sources. Central IT support of such change requests may have been possible for a single finance department. However, providing such support on an enterprisewide scale is not feasible for most organizations due to limited IT resources. The second highest variable (23% of respondents) that organizations believe will lead to wider adoption of business analytics is faster implementation of requested changes by end users, such as new data sources or new views (IDC Business Intelligence Survey, May 2005). A key driver (25% of respondents) to help promote wider adoption was executive focus on managing by fact and building a performance management culture. The result of not addressing the self-service requirements would be increased time frames to deploy end-user change requests and a decrease in the value of the enterprise data asset. End-user disenchantment with IT leads to a pattern of distributed IT purchasing by individual business units; thus, defeating the goal of an integrated BPM solution. As a result, a winning deployment strategy for BPM solutions includes charging the IT group with managing the business analytics platform, including functions such as data integration, database management, query tuning, security management, etc. At the same time, individual business units have the flexibility to author, modify, and adjust the end-user facing analytic applications, reports, and dashboards based on their individual needs. When evaluating a BPM platform, assess the vendor's commitment to usability and simplification of applications from both an IT and end-user's perspective. The self-service capabilities of any BPM solution are critical to achieving user acceptance and satisfaction once the solution goes into production. Evaluate the software based on:! Capabilities such as customizable interfaces and wizard-driven functions that do not require IT support! Changes requiring IT involvement and the skills needed to accomplish them! The need for and amount of specialized training required by end users and IT In this scenario of controlled empowerment, IT retains control of the platform, but process owners and end users are empowered through self-service functionality to support their own ever-changing BPM software needs. 10 # IDC

11 Initial and Future Maintenance and Upgrade Implications for the Operational System Organizations are continually balancing IT requirements, and a key issues that comes up time and time again is the upgrade strategy of enterprise systems. Companies must weigh the disruption of an upgrade against increased functionality that benefits the business and the impact on interfaces and related systems. For many organizations where business models are constantly changing, it makes sense to have multiple, complementary solutions that are linked, but not necessarily impacted across the board by upgrade and maintenance strategies of one solution in the mix. For example, in a recent IDC compliance study, organizations were asked about ERP standardization in light of increasing information consistency and transparency requirements. The norm in many organizations is multiple instances and inconsistent master data models. While the majority of organizations are considering strategies that include upgrades or reengineering of master data for consistency across systems or instances, these are long-term strategies. Information needs must be met now. Implementing a BPM/BI strategy as an umbrella over these systems is evolving to meet these information transparency needs, supporting organizational effectiveness now, as well as providing a road map for how organizations need to look at information, which will factor into optimizing transactional system consistency in the future. Consideration should be given to the following questions:! Given the operational environment, does it make sense to put in place a BPM system that can be integrated with but is independent from operational systems?! How will the upgrade of operational systems impact the BPM environment, and is it, or should it be, truly independent?! Will implementing/upgrading the BPM system necessitate upgrading the operational systems? Can your organization tolerate delays in gaining access to new BPM capabilities until such operational system upgrades can occur?! How can the development of an independent and dynamic corporate BPM model serve as a strategic road map for data standardization within operational systems over time? 2006 IDC #

12 Vendor's Business Model Vendors specializing in an area of technology deal with the business issues of users every day. The leaders incorporate their learning into key capabilities, implementation accelerators, and best practices from which future customers can benefit. In looking for a BPM solution provider, organizations should consider the following as evidence of the vendor's domain expertise: Technology Expertise BPM is a process that is supported by an array of technologies. Consider questions such as! Sourcing information is a key challenge. Does the vendor have expertise in integrating heterogeneous data?! Can the vendor's solutions be implemented incrementally and in manageable projects that provide value along the way and do not require a "big bang" approach?! Do they have deep expertise in business intelligence to creatively visualize and display metrics data, validate correlations among metrics, do root cause analysis in the face of issues?! How can they help keep the goals of business and IT on track and ensure that the solution does not become IT centric? Application Maturity The maturity of a BPM solution can be measured not only by longevity, but by the role that the application plays as part of an enterprise technology and business strategy. Consider questions such as:! Have reference customers expanded the use of the applications both organizationally and across the BPM suite over time?! Does the vendor have expertise in key business areas such as compliance, activity-based costing, and value-based management that are reflected in both the product as well as the experience of implementation resources?! Systems integrators and consultants specializing in BPM are process and industry experts that play a key role delivering successful performance management solutions. Does the vendor make use of a partner ecosystem to deliver choice and flexibility for the implementation of necessary functionality? Can the vendor assist in finding consultants with experience and skill with your chosen BPM solutions?! Does the vendor work with partners to integrate complementary technology to meet the organization's needs? 12 # IDC

13 Best Practices and Expert Resources Leading BPM vendors incorporate requirements generated from customer implementations into their product road map and build successful communities around their performance management offerings. Performance management improvement initiatives can benefit from peer networking and expert resources as well as proven techniques that help galvanize executive support and mobilize sufficient time, attention, and talent to these important initiatives. Some vendors have established relationships with industry experts that give unique and valuable access that supports key initiatives. Validate this by asking:! Is there an active user group that contributes to the requirements definition for future releases?! Are there best practice templates that can be used during implementation to speed time to value? Customer Support Last but certainly not least is the ability of the BPM software vendor to support your implementation and ongoing development and maintenance needs. Consider questions such as:! Does the vendor provide a localized point of customer support?! Do they provide the necessary training to bring the IT and business people in your organization up to speed on the new BPM applications?! Do they take responsibility for all aspects of the solution in the life cycle spanning pre- and post-sale? FUTURE OUTLOOK The requirements for BPM system are high on the corporate radar. These solutions complement the enterprise transactional and operational environment to support strategic processes and analysis. As organizations look for the common denominators in business challenges, such as compliance, decision support, and managing performance, a BPM strategy that is holistic is key. Key BPM vendors are committed to delivering a complementary suite of products that support performance management processes as well as information transparency. The strength of both the BPM solutions as well as the supporting business analytics platform will become equally important. As the market matures and vendors respond to customer demands, the lines between initiatives, such as planning and budgeting, reporting, and business intelligence, will begin to blur in support of enterprisewide information transparency and decision support IDC #