A number of clients have been asking me to clarify BPM for them. There is some confusion in the acronym as it refers to two different types of software and technologies:
- Business Performance Management (aka corporate performance management) is a suite of applications that typically provides analysis, monitoring and reporting of key performance indicators (KPI) linked to an organization's strategy.
- Business Process Management is an approach to model, improve and automate an organization's internal business processes and workflows enabling them to react to opportunities quicker and at a lower cost.
This blog entry focuses on business performance management, but please see the related entry on business process management.
BPM is typically a suite of 5 or so applications (planning & forecasting, P&L analysis, financial reporting, financial consolidation, and scorecarding) that sits on top of a organization's ERP system (or silo accounting, CRM, production, etc.) and provides modeling, analysis and monitoring of key performance indicators linked to a company's value-drivers. Administrators typically define reports or "scorecards" for individual business units or departments that summarize key metrics and rate business performance. For more granular data, business intelligence (BI) can be used to drill-down into trends and anomalies for a closer look. This allows management to define strategic corporate drivers and evaluate the performance of these goals in near real-time.
The biggest challenge with BPM is not vendor selection or implementation but in determining which metrics will accurately guage an organizations' performance. Significant work must be done upfront to determine the right KPIs. Many companies make the mistake of trying to measure "everything" instead of streamlining their KPIs to 2-5 metrics. Another key factor in the success of BPM is in developing a beachhead from which to further expand into the enterprise. The finance department is a logical target for the initial implementation as the scorecards and reports will be of value to all levels and departments within the organization. Companies can then look for strategically aligned opportunities (sales, production, etc) that will improve efficiencies and provide visibility to management. Important steps in implementing BPM include:
- Find a C-level champion that will push the project through
- Define goals and KPIs that are strategically aligned with the business
- Defined technology requirements and select vendors that fit within your existing infrastructure
- Include end users early on in the process to secure buy-in
- Educate and train users through all stages of the implementation
- Analyze results to ensure goals were achieved and end users were satisfied
BPM is typically utilized by Fortune 1000 companies but is quickly pushing into the mid-market. High profile vendors such as SAP, Oracle, Hyperion (recently purchased by Oracle), SAS and Cognos that have peddled their wares to their existing customers are now looking for new revenue streams in the mid-market. They are being challenged by a host of vendors that are offering hosted and vertical solutions that offer simplified features at a substantially reduced price point. Microsoft will make a big splash this year when they release PerformancePoint Server 2007 as a tightly integrated solution with Office and SQL Server. PPS will offer enterprise level functionality with the look and feel of Excel.