Originally Published - May 16, 2007
Although business performance management (BPM) offers outstanding benefits, such as helping organizations align their performances to their business processes and their overall organizational strategies, widespread adoption has been slow at best. BPM vendors need to ask themselves why this has been the case, and what they can do to increase their market penetration. A step in the right direction would be to identify BPM's competitors within the overall business intelligence (BI) market, analyze the market penetration that BI solutions have sustained, and determine how BPM can reposition itself to increase its competitive edge.
Identifying Vendor Differences
Identifying the way vendors are positioning themselves in the market may help users find the vendors that most closely meet their requirements. Although there is a great deal of feature and functionality crossover, vendors market their differences aggressively. This may create confusion for user organizations. Differentiators among vendors are generally seen in business benefits, market positioning, and organizational uses, which often translates into how solutions are adopted and used.
Leading BPM vendors include Applix, Cartesis, CorVu, Clarity Systems, Actuate, and Hyperion. Analysts forecast that the BPM market will reach roughly $1 billion (USD) by 2011. While BPM vendors provide similar features as their BI counterparts, they primarily focus on planning, budgeting, forecasting, consolidation activities, etc. that center on an organization's financial performance. This can include sales and marketing efforts, human resources management, and vertical market solutions.
Traditional BI Vendors
Traditional BI vendors include Cognos, Business Objects, Information Builders, and MicroStrategy. In 2005, analyst consensus placed the overall BI market between $4 billion and $6 billion (USD) with high growth rates for subsequent years. BI vendors provide users with the ability to create and leverage data from within a data warehouse, and extract, transform, and load (ETL) functionality that pools data from across various applications to create a centralized data repository. Additionally, reporting, online analytical processing (OLAP), analysis, scorecard, and dashboard functionality provide the user with interface and front-end analysis tools. Lastly, many BI vendors develop solutions based on various vertical markets, or business functions, to meet the general needs of organizations out of the box, and increase their usage across the organization by providing specialized solutions.
In addition to vendors with a strong presence in either BPM or BI markets, several vendors have expanded their product offerings and marketing strategies to compete in both spaces. Included in this list are Actuate and Hyperion, which have crossed over from BPM to include BI. Within the BI space, Cognos and Business Objects are examples of vendors positioning themselves in both markets. These crossovers give users more flexibility. For BI vendors, their expansion into the BPM market gives their customers the advantage of a BI platform, vendor viability, and features and functionality. Additionally, many customers that implement BPM solutions do so as expansions within their BI frameworks.
Operational BI Vendors
Operational business intelligence (OBI) has emerged to provide organizations the forward-looking analysis and real-time decision-making ability lacking in traditional BI. Operational BPM and BI use similar tools to measure and define an organization's performance, and to compare those defined measurements to identified metrics. However, the focus of each market differs slightly. BPM focuses on the departmental management of metrics, or key performance indicators (KPIs), to manage the application of strategic planning. OBI leverages the use of BI to embed those tools within organizational processes. OBI includes the development of analytics and dashboards to monitor various metrics and provide collaboration tools to interface with various departments. OBI tends to appeal more to operations users and lines of business (LOB) managers, while performance management tools appeal to financial applications users.
Factors Inhibiting the Widespread Adoption of BPM
Aside from market size and current market penetration, the perception of BPM is that it has less presence than its BI counterpart. In reality, BPM and BI each play to a different audience in terms of usage within the organization. BPM's main focus is financials, including budgeting, consolidations, planning, and so on. However, BPM vendors may offer some similar features and functionality as BI vendors. BI vendors focus on the breadth of their product offerings, which include data warehousing, OLAP, reporting, usage of dashboards, etc. This means that BPM vendors might have to fight to get their "foot in the door," because BI plays to a wider market.
BPM vendors compete in a skewed market where they are immediately disadvantaged. Why? BI has a large installed base. BI vendors use aggressive marketing campaigns to target their current customer bases and to increase standardization within organizations. This presence often creates a roadblock for BPM vendors. A BI vendor's installation base and crossover strategy makes the vendor a natural contender for growth within user organizations. BI vendors have greater success because it is easier to sell to a current, satisfied customer than to find new customers. Additionally, many BI vendors develop crossover strategies or market their BI functionality to meet an organization's BPM needs.
Standardization on a single platform by the information technology (IT) department represents a significant obstacle to BPM vendors. One of IT's goals is the creation of a stable and manageable environment. BI standardization involves the use of a common BI platform to meet the needs of an entire organization. It also allows BI vendors the advantage of expanding their installed bases to generate more revenue and to align themselves more closely with the IT department.
This means that once a BI environment stabilizes, the expansion of that environment may be seen as the easiest route to achieve both IT and business satisfaction. Vendors that try to enter these organizations may encounter resistance due to the additional time and resources necessary to install, maintain, and integrate the new tools within the current environment.
Similarly, organizations have been gravitating toward standardization on an overall IT platform—that is, Microsoft, IBM, SAP, and Oracle (MISO). Therefore, organizations are more likely to look to these vendors first for BPM or BI solutions. Although most BPM vendors can integrate within these environments, the seamless transition and the use of a single platform create more ease for the IT department.
Also, the products offered from the MISO vendors are built specifically for these platforms to make, in theory, the job of the IT department easier. Whether other BPM suites are better suited to the organization's needs becomes inconsequential, as the short-term benefits of an easy integration and general functionality may outweigh the payback of a full-scale project to evaluate other options.
BPM vendors have another obstacle—the financial strength of BI vendors. With their substantial revenues and profits, many BI vendors have an advantage over BPM vendors in their ability to grow functionality or sales channels either organically through internal efforts, or inorganically through the acquisition of smaller vendors. The development of BPM functionality allows users to use their current platforms with minimum integration or training issues. This provides inherent value to current customers and allows them to take advantage of a vendor's far reach.
BI vendors that become crossover vendors through organic growth can increase their installed bases and focus on platform standardization. Alternatively, many BI vendors choose to acquire smaller, best-of-breed BPM vendors to broaden their market shares. A recent example is Business Objects' acquisition of ALG Software. Such acquisitions give larger vendors an automatic inroad into the BPM market. Additionally, by buying out BPM vendors, BI vendors increase their market penetration, customer bases, and overall presence. Once BI vendors do this on a large enough scale, they could dominate the market by default, making it difficult for best-of-breed BPM vendors to compete or to expand their market presence.
BPM vendors are missing the boat by arguing ease of use against BI tools. User-friendliness occurs due to familiarity with the tool, and not because of its perceived intuitiveness. Training initiatives are required to get users "up to speed" (accustomed to) on whatever tools they will use. Their comfort using the installed applications creates an ease of use that cannot always be duplicated by a new system.
Basically, the unfortunate reality for BPM vendors is that BI is already in the organization. Even if the learning curve for a BPM tool is not as steep, it may not matter. The result is that BI's use within organizations creates its ease of use over time. For BPM vendors, arguing that they have an advantage in this respect may be a losing battle. A better strategy would be to focus marketing messages on addressing perceptions of BI instead of focusing on a point BPM vendors are not likely to win.
How BPM Vendors Can Accelerate User Adoption
BPM vendors and their messages of aligning corporate strategy and business processes to drive profit have gained momentum within organizations. However, the subsequent actualization of BPM's strengths has been adopted at a slower rate than its BI counterparts. BPM vendors need to identify and focus their market strategies on differentiating themselves further from BI and on using their key strengths to further penetrate the market.
BPM vendors could accelerate user adoption by expanding into key vertical markets. These markets include finance, banking, and government. BPM's strengths are within budgeting, planning, activity-based costing, and so on.
Focusing on these areas may provide BPM vendors with the ability to show user organizations the inherent value of their software in a way that does not compete directly with their BI counterparts. Also, by providing these features out of the box, and because they require less customization, the implementation times are lessened, thus adding to users' perceived value.
In addition to a vertical focus, the features that BPM solutions provide to target these specific markets could give BPM vendors the edge in relation to more horizontal implementations. Once a vendor becomes known as a leader within a specific sector, its expansion across departments within organizations may be an easier transition. Additionally, based on a BPM vendor's strengths, it can partner with BI vendors that already have a strong foothold within the industry, but whose functionality may not include BPM. This would deliver benefits to both vendors, and enable BPM to extend its presence within organizations.
Seeing IT as an Ally, Not a Detractor
To ensure successful BPM, the IT department and business unit need to work together. Many BPM vendors abandon the sales effort if IT is involved in the decision-making process. In reality, these vendors may be "kicking themselves." In many cases the business unit may drive the process and choose the tool. However, the IT department provides the back end support and maintains the platform.
Due to its overall structure, such as being built using a data warehouse and ETL processes, IT's involvement in BI is great. The expansion of many BI projects is based on IT's buy-in to support the infrastructure. Because BPM appeals to financial departments, business units that manage metrics, and C-level managers, the involvement of IT might not seem as intuitive.
Vendors positioning themselves solely for business units may be missing the boat. IT's involvement, and bridging the gap between IT and business units, can help guarantee a vendor's positive perception by the organization. Alternatively, if buy-in from the IT department is not attained, the internal expertise to keep the system up and running may be lacking, and expansion throughout the organization will most likely not occur.
Tying Key Differentiators to Return on Investment
Within the BPM and BI markets, return on investment (ROI) seems elusive. These two markets have an overlap of various features and marketing messages, but the overall advantages and how to measure them are not straightforward. Common ROI measurements that reflect hardware and software costs do not provide the full picture, as BPM advantages tie in directly to the organization's strategy. Examples include an increase in sales, lower customer turnover, successful financial consolidations, and so on.
BI can provide the same advantages, where its focus aligns with that of a BPM initiative. This means that although BI can be measured in time versus cost savings, the additional ROI measurements attached to BPM only work if the solution is aligned with organizational strategy. Vendors can use ROI calculators to develop an ROI methodology that highlights their alignment to an organization's overall strategy to further differentiate themselves from their BI competitors.
The focus of BPM and BI vendors overlaps as BI vendors enter the BPM landscape and vie for domination within the market. Due to their current market presence, BI vendors have a perceived advantage over their BPM counterparts. BPM vendors can learn from BI's past successes to expand their presence in the marketplace. Additionally, they can leverage their key differentiators to make more inroads into expanding their customer base and to build upon their inherent advantages.