Frank Pizzolato, CEO Clarity Systems

15th January 2007

The BPM (Business Performance Management) space has been through a relatively turbulent period following a rash of consolidating transactions between BI (Business Intelligence) vendors and providers of more specialised budgeting and group reporting systems. But just when the dust appeared to have settled on the marketplace, enters Clarity Systems, a successful CPM software provider headquartered in Toronto Canada . After several uninterrupted years of profitable growth it is breaking out of its home territory in North America and embarking on significant expansion in Europe, commencing with the UK . Clarity's CEO, Frank Pizzolato, talks to Gary Simon, FSN's managing editor, about his vision for performance management and the opportunities he sees for providers in the market.

Frank Pizzolato, CEO Clarity Systems The corporate performance management (CPM) market is a crowded space and potential purchasers face a bewildering choice of software solutions all seemingly offering similar capability in planning, budgeting and forecasting, consolidation and reporting. But Pizzolato believes this apparent uniformity provides the ideal backcloth for differentiation based on Clarity's consulting heritage.

"We believe there is now a mandate in the market to develop CPM along vertical industry lines, for example into retail, banking, law firms and manufacturing. Customers are now looking for industry or sector specific domain expertise rather than pure technology capability or broad business coverage."

But according to Pizzolato not every performance management vendor is equally positioned to take advantage of this trend. Clarity Systems for example has a very different pedigree from other CPM vendors. Founded in 1995, it started as a consultancy practice specialising in the implementation of business applications leveraging other organisations' technology, most notably Essbase a very popular OLAP tool throughout the last decade. Pizzolato and many of the founding employees of the organisation 'cut their teeth' on these early projects before the decision was taken to 'product-ise' their knowledge and transition from a consultancy to a software house, (which in 2006 had a turnover of US $26 million).

"Many of the staff we started with are still active in the business and around half of the 150 employees are specialist consultants – many with a business or accounting background. Over the years we have built up a store of experience, expertise and knowledge of best practice processes gained from working on complex implementations in certain industry verticals which we can share with customers in a pre-sales environment and during their implementation."

Pizzolato believes this is a very different proposition from the majority of CPM vendors who are content to sell a technology solution and partner with a third party consultancy for the implementation. "By constantly building our vertical market expertise and carrying out our own implementations rather than partnering with consultancies we are masters of our own destiny."

Furthermore, almost every employee is incentivised on successful implementations. "Part of all employees' remuneration is tied to receivables. When a customer is content he pays the bill and the policy keeps employees focussed on the customer," says Pizzolato.

It's a gospel that Pizzolato is keen to preach more widely. One of Clarity's developments in hand is the creation of an 'incentive compensation management' capability that helps formalises the link between strategic objectives and operational plans by tying remuneration more explicitly to sales performance. "Sales forces need to be able to track and monitor remuneration to performance as they go along – they want to know whether they will make their bonus this month or not – but many systems cannot tell them. It's also a valuable tool for improving forecasting accuracy. People should be rewarded for making their targets and penalised if they over-perform or under-perform."

Pizzolato believes it is this kind of deep interest and capability in performance management that differentiates the best of breed vendors in the CPM market from the ERP vendors. "The transaction world of the ERP vendors is very different from the information world inhabited by the CPM suppliers. The ERP vendors have not brought any vision to the CPM space so I wouldn't be surprised if an ERP vendor acquires a performance management vendor to get the capability. But the key question is; will the acquired business have a voice afterwards?"

"Success in the CPM market will be driven by the ability to execute. This will be the key differentiator between vendors in the years to come rather than the technology or functionality which often looks the same to potential customers," he says.

The 'ability to execute' will also drive success in the mid-market although the challenges are different. "You have to be able to provide a fixed rate service and get in and out again in acceptable timescales. This is quite different from the large enterprise market which understands the complexity of what they are building and has expectations of longer duration projects. But we have a very open architecture which means we can work with a range of mid-market systems. In the longer term, tackling the mid-market based on 'starter' packages in our preferred verticals could be attractive," he adds.

Pizzolato regards Microsoft's entry into the performance management market, with Microsoft PerformancePoint as very positive. "I welcome Microsoft's involvement because it increases the visibility of CPM across all parts of the market. Basically it validates the market for everyone involved but that's not to say that they will get it right straight away. We'll have to see."

Meanwhile Pizzolato's sights are set firmly on profitable growth. The company is privately owned, cash generative and profitable, with annual sales growth of 35 percent for the last five years. "We certainly plan to stay private and have no need for venture capital funding, but if we identify some compelling acquisition opportunities that could change things," he adds.

Expansion is making good progress and Clarity is attracting talented individuals to its recently established UK business and there are plans to extend further a field. "We are doing well and have the product, technology and people to be a great CPM vendor," says Pizzolato.

It's a business that has come a long way since 1995 and Pizzolato looks back on the progress that has been made with considerable satisfaction. "What keeps me going is beating the competition and seeing our employees develop. There is a skills shortage and it isn't easy to find high calibre people – but it's exciting when we get it right," he says.

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