<Originally published - August 8, 2006
The key differentiators between business performance management (BPM) and operational business intelligence (OBI) are unclear. In the past few years, vendors have been moving away from traditional business intelligence (BI) to position themselves in one of two areas: either BPM or OBI. Although there are in fact differentiating factors, many vendor product offerings overlap in terms of features and functionality, making it difficult to distinguish between the two. In general, vendors in both camps market themselves in the same light. They promise a single view of organizational data; they say they deliver data almost instantaneously based on organizational need; and they provide organizations with the necessary tools to manage performance, collaborate on tasks, and set metrics to manage the process. Basically, both types of vendors profess to offer a single integrated solution.
For organizations to choose and implement the proper solutions (meaning the solution geared to their particular needs), it is important to identify more than just what each term means, and to push beyond vendors' marketing hype. For example, what is the real difference between OBI and BPM? How do vendors position themselves within these respective markets? And why do they say they differ, when they are actually selling the same products with similar functionality?
Organizations should be asking these questions to make sure the solution they implement really meets their needs and helps drive their future business needs as well. After all, both product groupings offer scorecarding, dashboarding, reporting, analytics, and data consolidation functionality. The main differentiators are the strategies used by vendors to distinguish their product offerings, as well as the focus of their tools.
Defining OBI and BPM
Before identifying the factors that differentiate OBI and BPM and looking at how vendors position themselves within the market, it is necessary to define what these terms mean.
BPM and OBI are both extensions of BI. They have evolved based on changes in the way organizations choose to view data and to leverage traditional data warehousing structures. Before the advent of real-time data updates, BI was limited to analyzing stale data. Generally, batch jobs were processed weekly or monthly, and loaded into a data warehouse or data mart to create online analytical processing (OLAP) cubes and reports. Due to their complexity, the use of OLAP cubes was relegated to a few decision makers across the organization. Report distribution was more widely circulated; however, the advantages provided by the tools were not necessarily being exploited to their full potential.
As data volumes increased and the demand for more frequent updates became the norm, data warehousing structures and BI platforms had to accommodate the additional needs of users. Extract, transform, and load (ETL) evolved to encompass technologies such as enterprise information integration (EII) to allow organizations to manage their data integration initiatives on an organizational level, and to move beyond housing data in a data warehouse (for more information, see Comparing Business Intelligence and Data Integration Best-of-breed Vendors' Extract Transform and Load Solutions). These changes have allowed organizations to leverage BI tools and move toward a forward-looking view of data to help embed BI into business processes, as well as use it to manage performance throughout the organization.
Traditional BI is normally applied within organizations in two ways. Firstly, strategic BI has been used to identify long-term organizational goals by comparing yearly or monthly historical data over time. For example, strategic BI has been used to identify business goals and activities for the next few subsequent years. Secondly, tactical BI has been used to achieve short-term goals by analyzing daily or weekly data. Tactical decisions include identifying what products to sell and where to sell them.
OBI, sometimes called enterprise business intelligence (EBI), is the extension of traditional BI. Instead of using BI as identified above, BI is embedded within business processes. What this means is that data is leveraged to help organizations make decisions based on real-time needs, with a focus on addressing business needs as opposed to creating data stores based on data availability. As organizations' data has become more diverse and as data volumes have increased, demand has shifted from looking at operational data on a weekly or monthly basis to identifying how operations are performing multiple times daily. The increase over time in data volume and in data complexity has created the necessity to deliver more data more frequently.
BPM, on the other hand, is defined as the use of software to help organizations manage their processes and measure their key performance indicators (KPIs) to optimize performance and help drive corporate strategy. For more information, see Business Performance Management Basics: An Overview of Business Performance Management and Its Benefits to the Organization. Focus is on front-end interfaces, such as scorecards to manage sales force performance, as well as identity of product distribution.
Operational BI and BPM Differentiators
Both OBI and BPM use similar tools to measure and define an organization's performance and to compare the defined measurements to identified metrics. However, the focus of each industry differs slightly. OBI focuses on the internal operations of an organization, whereas BPM focuses on defined metrics. An area of differentiation includes OBI's focus on an organization's processes versus identified KPIs. Also, product offerings are generally more specific to financial functions, such as financial consolidation or budgeting. In general, the products are the same, but vendor strategy differs.
Performance management focuses on the departmental management of metrics or KPIs to manage the application of strategic planning, whereas OBI leverages the use of BI to embed those tools within organizational processes. OBI uses general BI tools to leverage the BI platform and analytics in order to help users make timely business decisions. The term right-time BI has been coined to denote the ability to provide the right decision makers with the right information at the right time. This has been accomplished primarily by bringing the traditional BI toolset to lines of business (LOB) managers and using the BI platform, such as data warehousing structures and ETL, to provide managers the ability to analyze and manage the performance of departments and employees.
BPM's main focus is to help organizations measure performance through the use of its visual tools. Even though many BPM vendors offer OLAP, reporting, and analytical tools, their main selling point is the ability to leverage data to monitor KPIs and to provide decision makers the ability to monitor employee and organizational performance. Their feature products include scorecards and dashboards, as well as monitoring and collaboration tools. These tools are used to monitor the metrics defined by a specific business unit and to collaborate on projects and tasks that will help the organization meet and exceed the metrics set (as opposed to being process-centric).
BPM can be tied to operational BI in terms of asking the same questions. However, the focus may be different, or it may not. For example, BPM solutions may identify a business process or department function (such as managing call center performance) through the use of graphing tools or scorecarding with heat graphs and stoplights, as a way to visually monitor the outcomes of set metrics. OBI takes these two systems and merges them. The premise and platforms for BPM are the same as for BI in terms of structure, but the questions asked and the way the data is used are different. Both OBI and BPM help organizations monitor and manage organizational performance based on metrics set by the organization.
Although BI vendors such as Hyperion have specific modules targeting organizations that focus on financial consolidation, performance management vendors tend to specialize more readily in financials. One of their focuses is the consolidation of financial data from across the organization to create a single view of financials and to measure performance against financial-based KPIs. When organizations look for performance management tools, aside from specific functionality they normally look toward business areas such as financials, call centers, and sales. OBI vendors also have solutions linked to these business areas, but tend to focus on overall business issues as opposed to specialized departmental solutions. Thus, OBI tends to appeal more to operations users and LOB managers, while performance management tools appeal to financial applications users.
Vendors focusing on their scorecarding and dashboarding product offerings are generally considered to be BPM vendors because their main focus is to manage and measure performance at different levels within the organization or external organizational focus, such as sales demographics across various geographical regions. Performance management vendors provide BI tools, but may not provide traditional data warehousing platforms, or at least may not call them “data warehousing.” Their focus will be on the use of ETL and EII to provide the right data at the right time, but they may use other database structures in conjunction with their product offerings, or they may have their products sit on top of a more general BI platform or database structure.
Conclusion
OBI and BPM are natural extensions of BI. As BI tools have matured, organizations' needs have also evolved. Many BPM vendors offer solutions tailored to departments' specific needs, whereas OBI focuses its efforts on identifying and managing business issues by using BI within business processes.
The main difference between OBI and BPM is positioning within the market. Although performance management is touted as the next generation of BI, OBI can provide organizations with the same features and functionality. However, traditional BI is still seen as important within organizations, and its use is still pervasive. There are differentiators between performance management and OBI, but distinct differentiators seem to be quite evasive, since the definitions of each depend upon the vendor and how it positions itself within the market. In general, BPM solutions use scorecarding and dashboarding to measure organizational metrics and to help organizations manage performance. OBI allows BI to be leveraged to provide the data needed to answer essential business issues and to use the data as drivers to plan and act based on the analysis of business problems.