FSN: Has CODA opened up a fourth front in the performance management space?

Has CODA opened up a fourth front in the performance management space?

15th August 2005
The recent news that CODA Group plc, the financials software house, has acquired Simple Concepts AB, a Nordic consolidation and treasury systems software house sets the scene for a different kind of player in the corporate performance management market. A financials driven approach is a unique strategy which sets CODA apart from the pack and could resonate well with the finance function.

The corporate performance management (CPM) market is a volatile, congested and rapidly growing marketplace. A culture of compliance coupled with increasing shareholder focus on performance is driving considerable growth. Cognos, for example, has reported 2004 growth of more than 20% against the backcloth of a general IT market that is struggling to reach double digit growth rates. These exceptional growth prospects have attracted many different software houses to the performance management segment and there has been a steady stream of acquisitions and mergers. For example, Cognos acquired Frango, a Swedish consolidation systems player earlier this year following on from the successful acquisition of Adaytum. Hyperion bought Brio the reporting and analytics software vendor and Cartesis announced the acquisition of INEA, a provider of budgeting, planning and forecasting software in order to accelerate the delivery of its ambitious plans in the CPM space.

To date, the acquisitions have taken a predictable path depending on where the software houses started. In broad terms the market is characterised by three business models. Firstly, there are the CPM vendors whose roots and history are steeped in the traditional business intelligence space. These vendors made their reputation with analytical and reporting tools which leveraged financial and other transaction systems. Cognos is probably the best known example of this strategy but has managed to establish itself as a 'full service' CPM player in a relatively short space of time with a series of bold acquisitions.

The second style of software house has its roots in performance management applications such as financial consolidation and budgeting but has acquired business intelligence capability and tools to provide a total CPM capability. Hyperion, for example, acquired Arbor some years ago to give it the Essbase multidimensional database platform and followed up with the purchase of Brio, the reporting and analytics software vendor. Other software houses have a tradition of performance management capability but have been less acquisitive, preferring to build the capability they need. Outlooksoft and SAS fall into this sub category.

The ERP vendors such as SAP and Oracle represent the third wave of performance management vendors. These late entrants into the CPM market have built specialised budgeting, planning and consolidation applications onto their established transaction systems and their 'ownership' of the transaction and information systems layer represents the greatest competitive threat to the leading performance management vendors.

CODA's positioning is differentiated from the other categories because its heritage is in core financials. Whilst it shares similarities with the ERP vendors in leveraging its transaction systems these do not have the same breadth as Oracle and SAP. But CODA clearly does not fit the Cognos or the Hyperion mould either. The inclusion of a treasury system as part of the Simple Concepts AB acquisition serves to further underline the differences between CODA and other performance management suppliers who have not ventured into this specialised area.

In fact Jeremy Roche, CEO of CODA Group calls into question the whole concept of CPM. He told FSN, "The CPM concept does not really exist. Lots of organisations we deal with do not see CPM as a suite of applications but as a collection of tools that they buy at different times to meet specific needs. Very few organisations are prepared to commit to the whole CPM concept. Neither do all organisations need the fully fledged capability of an ERP vendor." So is CODA ploughing its own furrow?

On the face of it, the answer appears to be yes. CODA's strategy is to align itself with the growing needs of the CFO and the finance function. This is a very different proposition from the CPM players whom by definition are aligned with a business cycle i.e performance management or a collection of applications, tools and technologies. "We're building a strategic portfolio of applications that supports the finance function in compliance management, performance management and consolidation so that the CFO gets accurate financial results upon which to make business decisions," says Roche.

This undivided attention to the finance function is diametrically opposed to the positioning of other CPM suppliers who actively seek opportunities in other functional areas of a business based on the performance management model. CODA's heritage in complex financial applications gives them the credibility and skills base to pursue their strategy. Additionally, CODA's sights are set beyond it's client base. "I don't necessarily expect people to abandon the financials engine of their ERP system but we are certainly well placed to wrap our compliance, control and other financials applications around a SAP or Oracle installation," Roche tells FSN.

Whilst CODA's complete suite of applications may qualify it as a CPM vendor it is clear that their management do not see the world this way. Their functionally based strategy sets them apart from the pack and cleverly allows them to compete in a category of one.

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