For Corporate Performance Management, Best, not Big, is Better

14th March 2016

The days of the monolithic CPM vendor are numbered, as users look to more compact solutions that provide more agile and attractive capability, which large corporate packages can’t always offer, according to Paul Barber, chief executive of Prophix, a Corporate Performance Management (CPM) software vendor, interviewed by FSN last week.

 

 

 

For several years now, the received wisdom has been that large CPM suites covering, budgeting, planning, forecasting, consolidation, analytics and reporting were the way forward. Big vendors such as Oracle, SAP and IBM have largely sewn up the market at the top end, but their solutions were built by acquisition, and although they were extensively re-engineered to give the appearance of a unified system, they never quite pulled it off. 

So the landscape is changing. Nimble, niche vendors such as Prophix, who have built their CPM system from the ground up as one uniform environment, are gaining ground - especially in the mid-market - because they’re providing solutions the larger vendors can’t match.  

“Big vendors are not keeping up with what people want to do” Barber said. And it’s not just in the field of CPM.  Specialist vendors are springing up everywhere to fill in the gaps left by mainstream ERP vendors as well. 

“There’s definitely a move away from buying everything from one vendor into best of breed solutions,” says Barber, who has worked in the software industry for 30 years and has watched the evolution of business software from its infancy. He sees the switch to best of breed being facilitated by the cloud, as companies are more inclined to select specialised applications, and then find they don’t need an Oracle or SAP company-wide solution anymore.  

But for Barber, a complete solution supports wider and more effective decision-making. “In our business it makes sense to group financial consolidation, reporting, analysis and planning into one solution,” he says. The result is a CPM suite that manages workflow, provides functionality and adds value to companies in the mid-market sector, which has been sorely underserved by the corporate behemoths.   


Hybrid Cloud is the Silver Lining 

Like all innovative software providers, Prophix is developing a cloud solution for its CPM software, but Barber believes the future lies in a hybrid cloud approach. 

“Certain applications lend themselves to the cloud. In many cases it’s when you have a lot of disparate users in different locations and you want them to be able to access the solution from wherever they are,” says Barber. 

For instance, budgeting and forecasting requires high user participation from across the organization, potentially in different locations as well. “For certain things people want to use CPM on premise, but for situations like collecting information from around an organisation, a cloud solution is very helpful.  In the future, I can see the cloud being used for data collection with the heavy processing being done on-premise.” But he warns that a hybrid solution has to be integrated properly so companies can move the data smoothly between the two environments. 

The cloud has also marked a sea-change in the user-interface. Barber believes business-to-business applications have lagged behind the consumer-facing apps in ease of use and the look and feel of the interface. He sees HTML 5 as offering CPM developers the opportunity to build rich applications on a browser interface.

 

The Evolution of CPM 

Many customers come to CPM initially for the most basic of budgeting needs, but find a wide spectrum of capability that can help automate and standardise their essential finance operations. 

“It’s when customers start using CPM for other things that they get real benefits. When they start thinking in terms of processes in parts of the finance function they want to automate. It’s not just doing budgets every year,” he says. 

For example there is a noticeable shift to producing more detailed planning, not just as a result of increasing computer power. Barber’s company noticed their customers were using its old personnel planning application to manage other sorts of planning, specifically vehicle planning. So they took the concept and generalised it. They now allow their customers to choose what they want to manage, be it people, vehicles or projects, and to develop detailed planning around each entity. 

For example an employee’s salary information could be used to calculate tax, benefits and overtime. Building up a detailed plan of an organization’s personnel, with granularity right down to the individual, can help management see the wood and the trees, and make strategic decisions based on all this information. 

Still, not all companies have made the step up from basic CPM functions to actually using it as a strategic tool in their company’s arsenal. That’s partly down to corporate culture. 

“Some companies don’t get the people running the finance function involved in their strategic decisions, and they’re doing themselves a disservice by excluding them.” 

Barber argues that if a company regards accounting as strategic in nature, they can draw on financial analysis and tools, for example running multiple scenario analyses, to help make or support strategic decisions. 

But like so many other organizational changes, Barber cautions that accepting the accounting function at the strategy table depends a lot on corporate culture.

 

A CPM Shake Out Is Coming 

The market is getting crowded especially with venture capital backed providers of all sizes, and Barber believes a shake-out is on the cards in the next year or two.  Companies looking to exit from their venture capital owners will usually either get sold or choose to list on the stock exchange, and Barber expects the IPO candidates to fare better. 

“In our experience when a company gets sold it typically disappears from the market,” says Barber. He cites the example of Axiom EPM, which was sold in 2014 to Kaufman Hall, a specialist provider of consulting and software tools to the healthcare industry, and which now focuses on selling its CPM software to healthcare companies. 

Similarly, tier 2 CPM players subsumed into larger corporations are often redirected to sell into existing customer bases.  “They cease to be a real competitor of ours,” says Barber. 

“When companies get acquired typically the way they do business changes and they become less attractive to new customers – the competition know the quality of support will go down and will use that to compete better,” he says. 

The CPM market is in a state of flux. Those companies that can get an IPO away will be in a strong position, Barber believes. Already there are murmurings of potential IPOs from mid-sized CPM providers, although market conditions for any IPOs aren’t exactly ideal considering the continued international economic uncertainty. 

But the turmoil may be good for the finance function of the future.  New innovative solutions, ownership structures, and a platform shift into the cloud, mean more organisations will have access to the best software, not just the biggest.

  

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