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The demand for business performance management tools isn't likely to suffer as much as ERP in this recession, according to a recent Forrester Research report. While 2009 certainly won't be a banner year for business performance vendors as companies delay deals or opt for fewer licenses, the market for business performance management tools is outperforming big-ticket ERP software. Companies need business performance applications to run their businesses -- to manage finances and to help with budgeting, forecasting and measuring business goals, according to Paul Hamerman, vice president, principal analyst at the Cambridge, Mass.-based research firm. Many companies are turning to cheaper corporate performance management (CPM) alternatives that are quicker to deploy, particularly in the Software as a Service (SaaS) format. Within three years, this situation will force vendors such as IBM, SAP, Oracle and Microsoft to start offering SaaS alternatives, according to the report. "There's a collection of products right now that are pretty essential business tools," Hamerman said. "Companies should be looking at how to manage these processes and move processes forward in a way to manage through the recession and recover. It really helps people work through some of the challenges of this recession."
For instance, Otis Spunkmeyer, which does about $500 million in sales each year, turned to Host Analytics, an SaaS CPM tool, to replace the Excel spreadsheets it relied on for budgeting and sales planning. When searching for CPM software, Otis Spunkmeyer wasn't committed to SaaS but wanted a product that wouldn't take up too much of its IT team's time, according to Joel Feldman, director of financial planning and analysis at the San Leandro, Calif.-based baked goods company. "The cost becomes a big difference," Feldman said. "We wanted to do something smaller, control the cost a little bit more. It's delivering what we need at a very reasonable cost." Down the line, if the company decides to do a broader ERP implementation (it currently runs a legacy system called BPIX), it may consider one of the larger vendors for CPM software, Feldman said. Also, with the two-year contract, the company is not locked into anything long-term. Such performance and strategy management software -- used for planning, budgeting and forecasting -- will be in the highest demand, as companies try to implement performance initiatives and drive those measures down to individuals, Hamerman said. Demand for the software will grow by 11% through 2012. "That piece right there really has a lot of growth potential," he said. "Some companies do a good job with this now. Most companies don't." Also, the weak economy is increasing the demand for cost and profitability management software as companies seek to identify the most profitable products and customers. Demand for the software will grow by 13% by 2012, according to the report. In a recession, building the business case for software purchases will be difficult. But it also provides a reason to improve planning and measurement processes and systems, Hamerman said. Otis Spunkmeyer wanted to improve its planning processes in order to hold less inventory and free up capital, Feldman said, adding that the CPM software has particularly helped the company's sales managers with the planning process. "I'd say, if [companies] are trying to manage a large amount of data and struggling in Excel, it makes sense to [look at CPM software]," he said. Otis Spunkmeyer has 100 users. Implementing performance and strategy management software to automate processes that are labor intensive, such as budgeting and forecasting, is a great business driver, Hamerman said. "Companies can use these products to achieve some pretty quick ROI by putting it all online," he said. There's also the longer-term but strategic benefit of being able to measure and drive performance by putting better measurement tools and dashboards in place, making these measurements transparent and putting rewards behind them. "It's a longer payback and much higher payback," Hamerman said. "Companies need to get beyond finance in terms of utilizing these tools and expose it to a wider audience." When choosing performance and strategy management software, companies should look for compelling graphics and user interface features. They should also look for data models that represent the full breadth of the business and compare KPIs to industry metrics through connections to external content publishers, according to the report. The software should be configurable with nonstandard measures. It needs to be able to analyze data from multiple systems and should include best practice measurement frameworks. SAP meets all these requirements with its SAP Business Planning and Consolidation, SAP Strategy Management, Business Objects Profitability and Cost Management, and Business Objects Financial Consolidation products, the report says. But SAP, along with the other leading vendors in this market -- IBM, Microsoft and Oracle -- all filled out their suites over the last two years via acquisition and now face challenges integrating those products. For instance, SAP Business Objects (BO) now has a collection of functional products, but they're all written in different code bases, Hamerman said. SAP isn't going to rewrite the code but will try to achieve some unification around the user interface and the look and feel of the application, he said, and more importantly, at the data level, will try to integrate it into the SAP BI platform. "SAP did a very good job integrating the BO acquisition," Hamerman said. "But there's still work to do as far as integrating the products."
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