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Originally pitched at finance, BPM software is proving useful across the organization.
Connie Winkler, CFO IT
March 15, 2005
When Grand & Toy, Canada's largest supplier of office products, saw some of its commercial customers defecting to American big-box invaders like Staples and Office Depot, the Toronto-based company brought in a secret weapon: Defector Detector. The software program helps Grand & Toy fight back by ferreting out potential switchers—clients with patterns of declining purchases—and quickly posting a Web-based alert for its commercial account managers and retail stores so that a little TLC can be applied and an account saved.
But Defector Detector doesn't come from the customer-relationship management (CRM) world, nor is it some specialized, homegrown concoction. Rather, it's based on the same numbers-crunching package that the company's finance department relies on—business performance management (BPM) software, in this case from Clarity Systems.
"When we realized the power of performance-management software, its ability to not only present reports but also extract, load, calculate, and format data all within one place and at the same time, we saw that it could solve a whole bunch of problems for us," says Allan Ramsay, manager of customer knowledge and the person who first hit upon the idea of giving account teams the names of at-risk customers. Since the application was launched a year ago, sales reps have been exceeding their quotas and reducing dormant and at-risk customers at about four times the rate before Defector Detector was implemented. That success has prompted Grand & Toy's sales team to also look at BPM software for analyzing sales data by region, stores, and products and for other trend research.
BPM software was initially pitched as next-generation budgeting-and-planning software, and plenty of the marketing message behind it is still given over to urging finance execs to leave the spreadsheet behind for purposes of financial consolidation, reporting, and forecasting. But because it relies on powerful database and analytic capabilities to make that happen, BPM is beginning to look like the little-engine-that-could for a surprisingly wide range of business needs. "BPM is like the icing on the cake" in that it adds a valuable layer on top of the data warehouses and other business-intelligence systems that firms have, says Kristen Katz, BPM product manager at GERS Retail Systems in San Diego, a supplier of retailing software that in January added BPM to its product lineup.
Grand & Toy is hardly the only company to tap the powers of BPM for uses well beyond core finance functions. Primedia, Gtech, Genlyte Group, and others have deployed the software for everything from human-resources applications to compliance systems. "Looking at BPM just as a financial application is too limiting. Its real value lies in measuring the performance of the entire organization," says Paula Rosenblum, director of retail research at consulting firm Aberdeen Group. In retail, for example, companies need to track the performance of stores, employees, merchandise, supply chains, and suppliers. There has long been a wide array of analytic software that can do just that. But BPM can connect that analysis to budgets, forecasts, and reports, and the potential for an all-in-one system appeals to companies, even if they deploy it a piece at a time and connect the pieces later on.
Companies are looking to BPM for additional capabilities, such as predictive analytics and risk management, even within finance departments. Hyperion and OutlookSoft, two of the first vendors to offer BPM, have recently unveiled enhanced analytic capabilities as part of their expanding product suites. Some of this is driven by the realities of the market: with IT budgets tight, few companies are ready to spring for new suites of financial applications, so BPM vendors aim their wares at "pain points," or immediate problems.
At De Lage Landen, the international leasing and asset-based financing arm of the Dutch Rabobank Group, the advent of Basel II regulations prompted a rethinking of how to blend and extend existing risk-management capabilities. "At Rabobank we decided not only to implement the Basel II regulations, but to use Basel II to lead us to a full-fledged, economic-capital framework," said Daan Greven, a former Rabobank group controller who now manages BPM integration in partnership with software vendor Hyperion. Basel II not only sets higher minimum risk buffers but also requires new economic-capital minimums—a more sophisticated, statistical capital requirement in the event of joint default in the same portfolio. "For us, managing economic capital would mean managing the risk-adjusted return on capital, which becomes a new performance measure," says Greven, who is based in Eindhoven, the Netherlands.
To bring this grander risk management together, De Lage Landen decided to work with Hyperion because it already used several of the company's BPM products, providing a valuable foundation. Hyperion in turn will market the jointly developed framework to the financial-services industry, tailoring it to meet not only Basel II requirements but also Sarbanes-Oxley and, in Europe, international financial reporting standards.
The new system will integrate finance and accounting from both compliance and management-information points of view to include credit-and operational-risk reporting, and key risk, control, and performance indicators, Greven says proudly about the BPM effort, which costs about $2 million annually.
In the United States, De Lage Landen's Americas CFO Peter Handels says the effort to use BPM as the glue that unites systems will be worth it. "When everything is much more integrated, you can rely on the data that's coming from various sources. [In the past] there were inconsistencies in the data, which is annoying when you're making decisions based on that data."
Assessing All The Variables
A greater appreciation for the vast interdependencies among various kinds of data is driving some of the creative deployments of BPM. "Organizations now want to analyze 15 to 20 variances simultaneously in order to run certain applications, whether it's determining labor needs or processing commercial real-estate loans," says John Cingari, OutlookSoft's marketing vice president. Many of today's BPM tools deliver that sophisticated database analysis via OLAP (online analytical processing) capabilities, an architecture for decision-support systems that, while complex, is nicely summarized by another acronym, FASMI, or fast analysis of shared multidimensional data.
At media giant Primedia Inc.'s Enthusiast Media group, which consists of about 120 magazines, the OLAP capabilities of a BPM product (in this case, TM1 from Applix) took the software from finance into the circulation and production departments. "Within publishing you have functional areas with their own significant repositories of data that are ideally suited to being stored in an OLAP cube [technology]," says Jeffrey Polner, senior director of financial analysis. These departments saw that BPM could help them combine circulation data, such as new subscriptions and renewals, with finance data to produce more-accurate projections.
In fact, BPM is emerging as an option for almost any data-intensive area of a company, particularly as businesses move beyond simply gathering that data to actually analyzing it. At Forrester Research, principal analyst Craig Symons knows the challenge users and vendors face: one of his clients has 72 different HR systems. "If data about your employees is in 72 different databases and systems, it's very hard to get any kind of big-picture view about who your best people are, where they are, and what they're doing," says Symons. Today, HR departments are often being asked to focus less on transactions and measurements like cost of hires and more on strategic concerns such as succession planning and workforce optimization.
"The real nirvana is integrated workforce management, where HR is proactive in understanding the goals and objectives of the business and takes the steps to position the company's human capital to maximize opportunities," says Symons. These corporate objectives need to be cascaded down to individual employees, which is where BPM enters: employees can be given specific performance metrics and then measured against them, an approach similar to the balanced scorecards companies have used for years, albeit one with vastly more data points and variables.
That's the same problem, of course, that many software companies that specialize in HR applications aim to solve, as do the ERP vendors whose systems often provide the technological foundation to the enterprise. The specialty firms will argue that they understand many subtle aspects of workforce management that a software company focused (originally) on finance can't grasp, while the ERP vendors argue that they provide much better integration than can be achieved by layering another company's software on top of theirs.
Companies have long grappled with this dilemma: the best-of-breed company versus the one-stop approach of the ERP vendor. BPM offers a third way, an adaptable suite of products that can address a pain point today and then extend into the enterprise on an integrate-as-you-go basis. This can touch off what Jason Averbook, founder of Knowledge Infusion, a consulting firm in Danville, California, calls "religious wars as to who owns BPM," as the department that first brings it into the company tends to want to maintain control over it.
To make the most of BPM, companies will have to avoid such squabbles. They'll also have to evaluate products from a number of market leaders, including (as ranked by Meta Group) Hyperion, PeopleSoft, SAP, Cognos, Oracle, Geac, Longview, SAS Institute, SRC, and Cartesis, along with offerings from newer, Web-based vendors such as OutlookSoft and Host Analytics. And they'll need to decide whether, and to what degree, software that cures a pain point can become a panacea.
Connie Winkler writes about management technology from Seattle.