Performance Management in 2013
Blog: Beye Network
Last year was a good one for performance management. Vendors continued to add customer-focused enhancements, they acquired or partnered their way to broader suites, new vendors appeared with surprisingly well developed offerings, and the pace of end user adoption accelerated. Where do we go from here? Hopefully we’ll see more of the same plus some growth in specific functional areas and utilization of the latest technologies. Here are my 5 predictions for performance management in 2013.
1) Focus on Forecasting
While almost every vendor that offers budgeting also offers forecasting capabilities, it is clearly not their focus. In fact it is more of an afterthought. More and more users though are looking for solutions optimized for forecasting. This means specific functionality, such as predictive analytics, as well as not having to be burdened by the overhead of menus, options, and functions better suited for budgeting. In our 2012 BPM Pulse Spotlight survey on budgeting, planning, and forecasting the most requested product capability was support for continuous forecasting. While most organizations are not actually there yet, it is clearly a direction they expect to be moving in. What really brought this home for me was a conversation I had late last year with a large telecommunications company. They informed me that they had abandoned their budgeting process four years ago because it couldn’t possibly keep up with their market realities. Now all they do is forecast at a fairly summary level. They had looked at the usual performance management vendors and were struggling to find one that had a strong forecasting focus. We pointed them to two smaller vendors that might meet their needs, but the fact remains that there is room for improvement in the forecasting solutions offered by the mainstream vendors.
What we expect to see in 2013: vendors will start to flesh out their capabilities in this area and perhaps even begin to package and price this functionality separately as opposed to just bundling it in with budgeting.
2) Increased Importance of Financial Consolidation
While budgeting and performance dashboards have been at the top of most organizations must-have performance management lists for year, financial consolidation has been near the bottom. Last year many projects, even those ostensibly focused on budgeting, added some consolidation functionality to their requirements. In some cases it was driven by the need for intercompany matching and eliminations, in others it related to currency conversion and partial ownership, and for some it involved the ability to make journal entries in their performance management system. For the vendors the opportunity is large for two reasons – not having basic capabilities can cause them to be eliminated even if it is not the focus, and financial consolidation led deals tend to be larger than budgeting deals. The largest multi-million dollar project we worked on last year was primarily focused on consolidation.
What we expect to see in 2013: at least one leading performance management vendor will introduce their first financial consolidation module, while other vendors will continue to enhance their existing capabilities in this area.
3) Expansion of Cloud-based Performance Management
Performance management has been a bit of a laggard in the acceptance of cloud-based solutions. The primary reason has been perceived security issues and the nature of the data stored in these systems. Of course any company that has been passing around spreadsheets loaded with confidential data has much bigger security issues than any hosted solution could ever have. In fact, unlike many systems and processes in use today by these companies, the leading cloud-based performance management solutions meet very stringent security standards. However, what is beginning to really turn the tide is the reality of overwhelmed IT departments. We have seen numerous organizations move to cloud-based performance management in the past year primarily because their IT groups told them they would have to get in line and wait for IT support for any new systems. The next issue to arise is that there is general confusion in the end user community when comparing true cloud-based solutions and single-tenant hosted versions of on premise solutions. In the end though, most organizations looking for cloud-based solutions have been purchasing products built from the ground up for that environment.
What we expect to see in 2013: the cloud-based vendors will see continued growth in demand, and several on-premise vendors will begin to develop their hosted offerings to more effectively compete with full cloud solutions. While we don’t expect any short-term re-architecting for the cloud, we do see pricing, marketing, and branding that will enable them to be taken more seriously.
4) New Choices
Several years ago there were a sizeable number of independent performance management vendors to choose from. Then came the great wave of acquisitions and we were left with a handful of mega vendors and a much smaller number of performance management focused application vendors. I personally thought it was going to stay that way because the barriers to entry seemed so high (how could a new vendor compete with the marketing clout of the big guys and the established track records of the remaining independent players). Apparently, I was wrong. Several impressive new performance management vendors have emerged in the past year or two. They are run by management teams made up of people that came from many of those companies that got acquired several years ago, so they clearly know what they are doing. Some solutions are simply incremental improvements upon what has come before, while others are truly innovative. Either way, more choice is always a good thing for end users. It also helps to keep the other vendors on their toes and constantly moving forward.
What expect to see in 2013: more new vendors! The year is young and we have already met with two vendors new to the performance management market. They continue the pattern of having seasoned management teams with deep experience in the space. One is somewhat innovative, the other is a new and improved version of a unified performance management solution. Both should be solid options for organizations looking for solutions this year. We will share more details as we spend more time with these vendors.
5) More Due Diligence
While performance management is no longer the Wild West of its early days when unsubstantiated marketing claims were flying all over the place and buyers had limited relevant knowledge and experience, it is still a challenge to get it right. By getting it right I mean: getting the best solution, at the best price, in a timely manner, with end user buy-in and a successful roll-out. While there are still many organizations that go off on their own, do some web research, and buy a product based on a canned demo, there are many more that are doing it the right way. They put together a team of internal stakeholders, prepare a long-range roadmap, gather detailed requirements, look at multiple vendors that could potentially fit, put them through scripted in-depth custom evaluations, score them against their ability to met the prioritized and weighted requirements list, and aggressively negotiate the price with the finalists. Since BPM Partners provides tools and expertise to guide companies through this process we get to see this first-hand. In 2012 we worked with more organizations than in any year in our history.
What we expect to see in 2013: the continuation of this trend. There are a number of reasons for this, one of which is the abundance of viable options to evaluate and choose from. Another is the fact that companies that have waited until now to move forward with performance management tend to be more risk-averse. In addition, list prices are higher than ever and finding a more cost-effective solution or knowing where and how far to push in price negotiation is critical.
Those are our thoughts. Now share yours: take the BPM Pulse 2013.