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A Performance Management Primer What Vendors Say

It seems every vendor has its own pet take on how BI and PM relate

Ask a nebulous question, expect a nebulous answer. It’s true with respect to just about anything—and it’s doubly true, or so it seems, when it comes to the very nebulous relationship between business intelligence (BI) and performance management (PM).

Every vendor seems to have its own pet take on how (if at all) BI and PM relate, not to mention the many and varied ways in which they complement or differ from one another. To a large degree, these positions tend to dovetail rather neatly with the product strategy of the vendor in question.

All the same, vendors do agree about a few things, such as what PM is (hint: it’s not vanilla BI), and about how the two practices differ from one another.

"PM isn’t really a product. You can’t call ‘management’ a product, after all. It’s more of an enabling discipline. And BI is an enabling technology that helps you with that," says Gaurev Verma, performance management product marketing manager with SAS Institute Inc., and a veteran of PM pioneer Cognos Inc. "PM [describes] the proliferation of the strategy of the company and the tactics associated with that strategy. So that every action that [someone] make[s] anywhere in the company, they can evaluate that in terms of its overall impact. To be considered performance management, it has to have an impact on the strategy that drives this company or this business."

There’s a further wrinkle, too, proponents argue: PM solutions stress usability and actionability (that is, insight that leads to decision-making) to a much greater degree than do BI tools, which—traditionally, anyway—have offered mostly ad hoc reporting or analysis.

As a result, advocates claim, the potential audience for PM is much wider than that for BI. "BI has been hard to use. It’s still viewed as for the select few, for the power users that really understand data, that have the semantic understanding of data. It’s more forensics: I have a question I need answered and I’m going to have to do some analysis," Verma explains. "Performance management takes that level of complexity out of it and says, ‘I’m going to show you the metrics that will help you drive your part of your business and I’m going to expose that to you.’ The underlying complexity of how you drive that—a BI problem—is a complexity that’s hidden from the user."

This definition tallies with that of other, ostensibly less biased sources.

The Operational Angle

One of the reasons some BI pros seem leery of PM is that it mostly originated on the financial side of the house. As a result, proponents concede, there’s a lingering perception that PM is more of a financial discipline—namely, the practice of financial performance management (FPM).

Recently, several BI and PM vendors have pushed to alter this conception, elaborating visions of PM that—to one degree or another—have an operational, or at least extra-fiscal, bent to them.

Information Builders Inc. (IBI) is in the forefront of such a push. CEO Gerry Cohen articulates an IBI-centric vision of PM that he calls "operational performance management," or OPM, which draws on IBI’s strengths in scalable, high-performance reporting, pervasive embeddedness, and rich connectivity (courtesy of its iWay subsidiary), says Cohen. "We’re in largely the operational BI business, where people use BI to do new applications, to build new information systems that they use for a profit-making reason, or a competitive reason, or just to do the job they do better or more efficiently."

Of course, some folks allege that OPM is just a fancy new way of marketing one or more bread-and-butter BI best practices. (See accompanying article.) Cohen emphatically rejects this claim. "BPM is mostly financial performance management. That’s taking numbers out of the accounting and budgeting system, [which is] run by the CFO," he indicates. "Operational performance management is a specialty. It’s a niche area that in the last three years has been attached to the BI marketplace. If you go to Gartner and you say, ‘What do you have to be to be a BPM player?’ they’ll tell you that you have to have a budgeting system, a financial performance management [system], a cost-based accounting system, [but] what does any of that have to do with BI?"

IBI, too, defines the relationship of PM—or of OPM, rather—to BI as that of the particular to the universal. In this respect, then, OPM describes first the identification and then the instantiation of company-wide objectives, plans, and performance metrics in the BI layer itself. OPM draws from BI’s universal reporting, analysis, and connectivity capabilities to refine and particularize. Call it BI, to be sure—but BI with an extremely high signal-to-noise ratio.

The kicker, proponents say, is that OPM—or PM applied outside the financial domain—can have a very definite impact on the financial bottom line. "They’re not necessarily the financial metrics you would measure with financial performance management, but they … help drive profitability," Cohen argues.

To one degree or another, most vendors subscribe to this view. BI and PM stalwart Cognos, for its part, calls this practice "operational cause for financial effect." It, too, has pushed to drive PM from its financial Heimat ever deeper into the organization. "You can do financial planning, which is important for cost control and budgeting and understanding revenue, but you need to do operational planning at the sales level, at the marketing level, at the customer level," says Delbert Krause, director of performance management product marketing with Cognos. "Those operational views of information feed back into the financial view of the business. If you’re going to do a headcount view, for example, it’s by cost center; if you’re doing marketing, it’s by program and territory—and every one of those has different KPIs."

Krause uses the example of a company that wants to improve the efficacy and experience of its sales team: "Their sales model might have [a metric like] ‘Average Tenure Per Sales Rep,’ and so they [might] declare that a good average tenure is five years, but then they find that their team is only at three and a half years. So they know that they need to start adding seniority to their team."

The salient point, Krause argues, is that the decisions which a company makes in this case and others can—indeed, will—have an impact on its financial bottom line. A secondary point, PM proponents claim, is that such decisions shouldn’t entirely be entrusted to the (often highly idiosyncratic) "gut" instincts of middle managers and other sub-C-level decision-makers. Krause, for his part, doesn’t dismiss "gut" decision-making out of hand, but suggests, instead, that operational PM can help augment the experience and acumen of seasoned managers.

For example, the decision to add sales seniority either stems from a known best practice or is linked to a company-wide strategy. In this case, PM gives management immediate visibility into an existing condition—the overall experience or inexperience of the company sales team—that it can use to put its strategy into effect. And that’s really all there is to it, Krause says. "We think of performance management as the forward view—it’s ... tracking day-to-day activity against your forward plan," he indicates.

Cognos, for the record, still conceives of BI and PM as distinct practices. "BI is about measurement and understanding against that plan. I need to measure my performance against the plan, but I also need to have deep analytic capabilities across all of the operational transactional information below the areas where I have the plan," Krause explains.

But Wait: It’s Even Bigger than That

Cognos competitor Hyperion Solutions Corp. had staked out a rather different position, at least prior to its announced acquisition two months ago by Oracle Corp.

John Brkopac, technical product marketing director with a then-independent Hyperion, offered a more ambitious take on the relationship between PM and BI—one that’s consistent, to a degree, with his company’s long-time focus on BPM: Hyperion, like Cognos, is a BPM pioneer. "BPM isn’t just about BI, or financial applications; it’s really about managing the business. That’s why we don’t want to be known as a BI vendor, or an applications vendor—we want to be known as a BPM company," said Brkopac, in an interview at this Winter’s TDWI World show in Las Vegas. In this model, Brkopac continues, BPM actually "subsumes" BI.

Hyperion senior product marketing manager Colin Dover, for his part, says BPM is a top-down initiative, while BI typically originates as part of a bottom-up push. To the extent that BPM is top-down, it’s necessarily aligned with business in a way that BI, with its mostly bottom-up provenance, isn’t.

"I’ve been in the BI business. It’s all about the warehouse. It’s all about the architecture. It’s all about IT. It’s very rarely about the business. But people don’t implement bottom-up solutions because there’s no problem, [they implement because] there’s a business problem behind everything they do. IT organizations that fail to remember that are in big trouble," Dover argues. "When IT is task-focused, it becomes a matter of getting them to recognize that any task they’ve been given has a higher business purpose behind it."

For example, it’s one thing to assign a ream of report data to a business analyst and ask her to make what she can of it. It’s quite another to instantiate the knowledge or best practices that are unique to her position into the BI layer itself—drawing both from her skills and expertise as well as the skill and expertise of her colleagues. "If you don’t have PM, you just have BI, people are still trying to do those tasks, but now they’re happening in someone’s head, but you have no way of institutionalizing that knowledge so that everyone can benefit from it," Brkopac comments.

PM and Its Discontents

Not everyone agrees that PM is or should be a discipline that’s separate from BI. (See accompanying article) It isn’t that some vendors and industry watchers reject the validity of what is called performance management. For the most part, that isn’t the case. Instead, some in the vendor and analyst communities question whether many organizations aren’t already doing—and haven’t, to a degree, been doing—PM with their own bread-and-butter BI tools.

For this reason, some question the relevance – outside of marketing strategy—of branded PM tools. One vendor that’s staked out such territory is BI power MicroStrategy Inc. Officials declined to be interviewed for this story, but—in an interview earlier this year—MicroStrategy officials reiterated the company’s stated position with respect to PM: namely, all that customers need to do BI or performance management is already built into MicroStrategy itself.

There’s a lot to be said for this position. Consider the new Dynamic Enterprise Dashboards that MicroStrategy unveiled earlier this year. In a January interview, MicroStrategy vice-president Mark LaRow described a use case—i.e., the elimination of multiple, independent reports—that’s also espoused by many PM proponents. "This one dashboard can replace what were previously 12-15 different reports. If you make the dashboards truly dynamic this way, then you can reduce people from having to look at 12 different reports to looking at one dashboard and never changing their focus of attention," he argued.

Moreover, the interactive dashboard itself is typically regarded as the PM-killer-app-par-excellence. LaRow, for his part, talked up MicroStrategy’s interactivity—which taps both Flash and AJaX—as one of its key differentiators.

But LaRow stopped short of calling MicroStrategy’s new product a dedicated PM tool. "Instead of static blandness, we’re giving [users] a good-looking dashboard, with more finely refined output," he said. "This is important, because where the BI vendors have classically fallen short is in making the dashboards have onscreen dynamic features that let users flip through many different views of the data, without leaving the dashboard," he explained.

In an interview last year, MicroStrategy chief operating officer Sanju Bansal put the issue more starkly. "Certainly we’re big believers in the idea that you would use BI to monitor and ultimately manage corporate performance. We do think of BI as the feedback loop in the CPM cycle, and you need that daily feedback in order to make sure that you stay the course, and ultimately derive better corporate performance," he said. "But the idea that there are specialized CPM products distinct from BI doesn’t make that much sense. The bulk of what these vendors do is core BI. In fact, what they’ve done is just confuse the market by introducing another acronym for what is BI through the CPM moniker."

More to the point, Bansal argued, CPM isn’t strictly a BI problem. "I do understand that in addition to the bread-and-butter BI, CPM does sometimes need to have some plans uploaded, but we think that’s the domain of the ERP vendors," he argued. "We think companies like Oracle and SAP have been and should be ultimately the winners in the budgeting and planning part of the cycle, and the BI vendors should stick to what they do best."

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