Microsoft’s foray into the enterprise performance management space was always going to be high risk for a technology oriented company, but even seasoned commentators have been surprised by Redmond’s decision to pull down the shutters on PerformancePoint later this year. The decision to put some of the remnants of budgeting, planning and financial reporting into the Microsoft Dynamics business, though architecturally sound, may also be flawed, says, Gary Simon, FSN’s managing editor.
Microsoft’s entry into the performance management space was a stern test for a company that had built its reputation principally on technology and infrastructure. But following on from its significant investments in accounting and business applications - now wrapped up in the Microsoft Dynamics brand - there was a sense that Microsoft had matured as an organisation and was ready to take on heavy weight applications that resided in the office of finance.
It wasn’t that anyone particularly doubted Microsoft’s technical capability – what was under scrutiny was the company’s ability to deliver complex and specialised financial applications, i.e. whether it had the skills it needed.
Cast your mind back to the pre-recession days of early 2007 and you will recall that skills in the BPM (performance management space) were in very short supply. Even today, the blend of accounting and systems skills needed to execute on a BPM strategy remain scarce.
The strategy also wasn’t helped by the curious positioning of the product in a black hole somewhere between the mid-market and the large enterprise space. On the one hand Microsoft wanted to bring BI (business intelligence) and performance management “to the masses” – a laudable objective – but simultaneously seemed to be targeting larger enterprises.
The trouble is that mid-market companies almost exclusively use spreadsheets for BI and performance management because it is cheap and easy to understand and none of the established EPM (Enterprise Performance Management) vendors, such as Oracle, Business Objects (now a part of SAP) had found great success selling sophisticated performance management applications to small business.
So Microsoft was caught between a rock and a hard place. It had a product the mid-market probably didn’t need or want and insufficient skills to sell convincingly into the high end. The situation probably wasn’t helped by the fact that the business planning and budgeting application had been modelled on Microsoft’s own planning application – hardly the typical mid-market company.
Others have a different explanation. Kristina Kerr, lead product manager for Microsoft Business Intelligence, quoted on the Redmond Developer Blog indicated that part of the problem was Microsoft's failure to differentiate from the competition. She told the blog, "The way we were packaging [PerformancePoint] and selling it was no different than any other BI vendor out there," she said, adding, "Really, our team is aligning itself to how customers are purchasing our software right now."
So what is Microsoft to do now? Well, Microsoft has announced that effective immediately PerformancePoint Server (PPS), its Financial Performance and Strategy Management (FPSM) product, is no longer available as a standalone product. The functionality in PPS will be split and consolidated into other products, with the scorecards, dashboards and analytics going to the portal offering Microsoft Office SharePoint Server (SharePoint), and most of the financial planning elements of PPS going into Microsoft Dynamics.
Commenting on the debacle Alys Woodward an analyst at IDC told FSN, “This is the first time that Microsoft's business analytics strategy has not worked. The release of PPS [PerfrormancePoint Server] was something different, taking Microsoft away from its traditional market of selling infrastructure into IT department. The discontinuation of PPS as a standalone tool is a clear indication that the original PerformancePoint strategy has not worked. For Microsoft to stop an investment like this is an unprecedented backwards step in its business analytics strategy.”
As to why the strategy went wrong Woodward suggests that the partner network did not have the expertise to sell PerformancePoint, “The FPSM [financial performance and strategy management] market leaders have always employed accountants as salespeople, set up centers of expertise to share best practice, and used finance language in their products. As long ago as 2006, we asked Microsoft whether it intended to do the same. At the time, Microsoft was somewhat bemused by the question. Our point however, was simple: this is an essential step in order to successfully sell FPSM solutions to finance professionals, who, compared to IT professionals, are much less keen to "play with new toys" and prefer to do something boring, time-consuming and repetitive as long as they know it will work. Microsoft is vastly experienced in selling infrastructure, via partners, to IT departments, but it did not understand how FPSM is different – and neither did the bulk of its partners. We believe that there is a clear message here for other vendors – do not rely on the quality of your technology or the goodwill of your partners if you plan to address specialist, non-technical buyers,” says Woodward.
“Microsoft clearly had problems selling and positioning its Performance Management technology and therein lies the problem,” say James Fisher, Senior Director Solution Marketing in SAP’s Enterprise Performance Management group. “Performance Management has never just been about technology and customers expect you to know that. It’s also about people and processes and it’s by combining all three that you deliver real value. You can only do that by having a bench of experienced people who can not only leverage their combined experience with the customer but also build that knowledge into the actual applications,” he added.
Has Microsoft learnt from this experience? The early indications are that it may be about to repeat the same mistakes. Collapsing the business end of PerformancePoint into the ERP (Microsoft Dynamics) business makes perfect sense architecturally and follows similar moves by the likes of Oracle and SAP who offer a one-stop shop for performance management and transaction applications. But there is one big difference. Both Oracle and SAP have plenty of domain expertise by virtue of their Hyperion and Business Objects acquisitions. Oracle has skills in abundance and SAP has the benefit of the old Cartesis, Armstrong Laing and OutlookSoft businesses. Microsoft doesn’t have the same heritage – hence the problem. Business skills are not readily transferrable from transaction systems to information systems, (although it often works well the other way around). But faced with the problem it is probably the least worst option.
The remaining question is whether disappointment over the PerformancePoint decision has damaged Microsoft’s credibility with the business community? One partner that did put itself in the position of selling into finance was IMGroup, Microsoft's Partner of the Year for BI for the last four years (2004 to 2008). According to Woodward, writing in an analyst’s note, “After some early struggles, IMGroup realised that the best way to leverage PPS was to set up a new Corporate Performance Management practice. It was headed by John Taylor, the former MD of Cartesis UK.” Woodward adds, “The company was surprised to hear Microsoft was dropping the product after only a year and is apparently rethinking its CPM practice.”
Microsoft’s reputation in this space may turn on how many other vendors have been caught out?
