Business Intelligence Network - The Vision for BI and Beyond

Innovation in Performance Management, Part 1

Published: July 23, 2008

Craig Schiff looks at how innovation has impacted the business performance management marketplace.

For an enterprise software category to continue to grow and thrive, innovation is essential. As one explores the business performance management (BPM) software category, where can one turn to find innovation today? The question arises because many of the smaller, more innovative vendors have been acquired by larger, more stable, but decidedly less innovative organizations. In spite of this perspective, we believe that innovation in BPM is alive and well.

If we go back to the roots of the performance management software category, it’s clear that innovation has been a driving force that helped create some of the industry giants of today. Hyperion started life as IMRS (International Management Reporting Services). IMRS’ entire existence was based on an idea that was new and novel at that time. In the early 1980s, financial consolidation and management reporting (a core component of today’s performance management offerings) was done primarily on in-house mainframes or timeshare computing services. The personal computer was just coming into prominence.  Large timesharing companies saw the PC as a new, smart terminal to access the financial reporting software residing on their networks. IMRS had a better, more innovative approach: why not move the whole financial reporting process to the PC and use the timesharing network as a way to collect data from remote sites? Business was slow at first, and there were many skeptics (“a PC can’t handle the reporting requirements of my business”). However, a few large brand-name companies (Holland America Lines, AT&T, Black & Decker, etc.) were willing to be pioneers, and beta customers and investors helped launch the first PC-based business performance management software solution.  This early innovation propelled IMRS (later Hyperion, now Oracle) into a leading role in defining and developing the then early-stage software category that involved financial consolidations and management reporting.

OutlookSoft also came into existence primarily focused on its own innovations. At the time of its formation (late 1990s), the leading BPM vendors mainly offered client/server solutions. The market, however, was demanding easier to use and deploy web-based solutions. Also, if the BPM vendors offered more than one component of performance management, it was usually through acquisition; consequently, data integration and a common user interface were often lacking. OutlookSoft’s innovation was the introduction of the first unified, fully web-based performance management solution. Their challenges were around marketing. The other vendors who did not have the same technology capabilities co-opted the terms unified and web-based and attempted to confuse the market. OutlookSoft persevered and proved to prospects that they truly delivered what other vendors only claimed to offer. Not all innovations are successful however.  OutlookSoft attempted to sell its solution as a hosted, subscription-based offering. There were no takers at the time. At that point in time (1999/2000), the hosting platforms available to OutlookSoft and its customers were not very cost-effective. In addition, the market was not ready to trust having their key business data residing on a third-party host. In the end, it turns out that idea was just ahead of its time. More recently, BPM vendor Adaptive Planning built its business on that same innovation and has had great success with it.

Now let’s get back to today. IMRS/Hyperion and OutlookSoft have been acquired by Oracle and SAP, respectively. These two BPM companies, founded on innovation, are now part of much larger vendors that offer the market feature-rich and comprehensive solutions. Why do people believe that big companies such as SAP/Business Objects, Oracle/Hyperion, IBM/Cognos, Microsoft and other sizeable vendors are unlikely to bring new performance management innovations to market? There are several reasons.  For one thing, the driving force behind innovation is often the need to differentiate your product/service offerings to establish a beachhead or shake up an established market. For many smaller vendors, their innovations justify their existence and offer a reason for prospects to consider them as opposed to the established leaders.  Obviously, the larger, more established vendors don’t have this need and may be unwilling to take the associated risks. The big vendors are also quite busy integrating their acquired products and/or continuing to deliver on their product road map commitments. Having spoken recently with a senior executive at one of these vendors who shared some great new ideas for BPM, it is clear they know how to innovate; they just don’t have the time or extra resources to focus on it. Another innovation challenge for big companies relates to people, politics and bureaucracy. These larger layers may be less willing to try something new. They have lots of analysts who can tell you why something might fail. Bureaucracy gets in the way as well. If you try to break off a group of programmers to create a sort of skunkworks and work outside the system, the mainstream programmers stuck maintaining and enhancing the existing products will be resentful. Lastly, the customer base that helped make these large companies so successful is also a liability when it comes to trying something new. Most of them don’t want to see dramatic changes to the status quo. They want enhancements and bug fixes for their current software investments, but don’t want to have to train their people on something new or go through a massive upgrade. In fact, it is some of these very issues that led to a group of people leaving the once nimble and innovative Hyperion to form OutlookSoft and implement their new ideas there.

Next month, in Part 2 of this article, we will look at a handful of companies in the BPM space that are, in fact, bringing compelling innovations to the performance management market today.