The cloud computing revolution has touched most parts of the business landscape but has so far failed to make a deep impression in the business performance management (BPM) space. Known by various acronyms (BPM, CPM and EPM) performance management in all of its varied hues embodies the crown jewels of an organisation, such as, its consolidated numbers, operational plans and financial forecasts. So is that what is discouraging businesses from investing in so called, on-demand applications or has the tide changed? Gary Simon, FSN’s managing editor, looks at why on-demand is gaining respectability in the conservative world of the finance function.
New predictions about the rampant growth of cloud computing appear with almost tedious regularity. And there is no doubt that the on-demand phenomenon is growing as organisations of all types cede responsibility for applications to third party organisations credited with having better capability than the in-house or on-premises alternative. However, it is worth examining what applications have popularised the cloud. The most frequently quoted example is the Salesforce.com CRM system followed perhaps by NetSuite as an ERP provider. But these are the exceptions. There are dozens of small cloud computing vendors accounting systems market jostling for recognition, market share and profitability. It has to be said that the Cloud computing model is far from universally successful.
When it comes to performance management, few have dared to venture into the on-demand market, but that does not mean it should be ignored or that it isn’t going to develop into an important market. It could simply be that it is still early days. The world’s largest vendors are also not sure how matters are going to pan out and most are riding two horses at the same time with the oft quoted phrase, “we give the customer the choice of on-demand or on-premises solutions”. But let’s face it, none of the big players are particularly enamoured with a subscription model that only allows them to charge a hundred dollars per user per month for software that has taken hundreds of man years to develop.
So BPM has been positioned somewhere in no-man’s land, caught between on-premises and hosted solutions with none of the established players putting their heart and soul into the cloud model. But there are signs that the void is being filled as more entrepreneurial businesses such as Host Analytics and Adaptive Planning enter the fray, unencumbered by historic revenue models and returns.
So what exactly does a cloud computing or on-demand based BPM solution offer over and above the traditional on-premise offerings? Does the difference merely boil down to the on-demand model or is there more to it?
For Keri Brooke, of Host Analytics, a rapidly growing on-demand CPM vendor, the advantages of the cloud are a strong pull. Talking to FSN she said, “The ability to have your applications hosted in the cloud without having to worry about maintaining an IT infrastructure or in-house skills is a major benefit.” Indeed, the Cloud model is particularly appealing for companies that simply do not want to manage their own environment or be distracted by the latest upgrade or version that needs to be implemented. Host Analytics provides a multi-tenanted solution, effectively a single environment shared by multiple organisations. On-demand vendors are usually picky about this topic and keen to contrast the difference between a solution set designed, developed and optimised specifically for the web as opposed to an existing on-premise solution that has been shoe-horned onto the web. So there is no doubt that on-demand solutions take away much of the ‘heavy lifting’ when it comes to maintaining an IT infrastructure. On the whole they are also less expensive. On-premise CPM suites can cost tens of thousands of dollars whereas the on-demand ‘equivalent’ can cost form as little as a $100 per month/user. An unfortunate side effect of this kind of pricing model is that it attract small companies and even start-ups and can give the impression that Cloud computing is not for “serious” businesses.
However, Brooke has noticed a shift in the last couple of years. Like many CPM vendors Host Analytics ‘cut its teeth’ on budgeting applications in small companies and divisions of substantial businesses. “Customers such as Pitney Bowes fall into this category,” Brooke told FSN, “but since 2009 we have seen a shift into sales at the corporate level in substantial businesses. We actively target organisations in the $100m to $1bn range,” she added.
Bill Soward, CEO Adaptive Planning another cloud or SaaS-based CPM vendor agrees. Back in October last year he told FSN he believed that the market had reached a tipping point and is now prepared to embrace the cloud based model. Adaptive Planning has more than 600 customers and Host Analytics has around 200.
“These organisations are seeing advantages in total cost of ownership (TCO) and implementation timescales. Over a 5 year stretch our TCO will be 50% less than an on-premises solution and our implementation timescales are measured in weeks rather than the months often associated with the heavyweight CPM suites,” added Host Analytics’ Brooke. The comments carry a little more credibility since many of Host Analytics’ management learnt their CPM craft with the likes of Oracle, Hyperion, GEAC and IBM so have seen first-hand just how long things can take.
But Cloud computing is not without its problems; take for example, the thorny issue of customer contact. The business model behind cloud computing tends to rely on a very lean organisation because the subscription model simply cannot sustain hordes of people in any function. Bill Soward’s company, for example, relies on very little contact with the customer, but Host Analytics has struck a rather different note. “The finance function is conservative and likes to look people in the eye. Although much of the sales cycle is executed over the web, including proof of concept, we have people in the regions and it is often the case that customers will meet one of our people at least once in the sales cycle,” says Brooke.
Integration is the other key issue. CPM solutions don’t work in a vacuum, they need to be furnished with data from multiple disparate sources and this information frequently resides inconveniently in on-premises installations. Brooke recognises the problem but counters, “We can load simply from Excel spreadsheets, flat files, specifically built ERP adaptors and Informatica. We also partner with companies such as Boomi and Pervasive that specialise in moving information between SaaS platforms and on-premises solutions and visa versa.”
But Host analytics also seeks to differentiate itself in another interesting way. Its “Decision Hub” aims to provide a repository of benchmarking data, libraries of KPIs (see fig1.0) and commonly used financial data (such as exchange rates, XBRL tagged information and interest rates) so that companies can better leverage external information in their decision making. “We are making Decision Hub the ‘go to place’ for financial information, not just for users of Host Analytics but anyone that wants to access this information through another CPM platform,” Brookes told FSN.
Fig 1.0 Decision Hub holds a KPI Library
With Host Analytics and Adaptive Planning now leading the charge there is a real sense that on demand or SaaS based CPM is beginning to get some traction in the highly competitive performance management space, as companies take note of the advantages of a hosted solution. The addition of Decision Hub to a full CPM solution may be enough to convert the doubters.
