Corporate performance management software: Gartner study says competition heats up

Business intelligence, enterprise resource planning and spreadsheets can't do the job of corporate performance management software. Learn who the CPM suite leaders are in Gartner's Magic Quadrant.

Bad spreadsheets and good timing are driving increased interest in corporate performance management (CPM) software, according to Gartner Inc.

The CPM software market is growing rapidly, according to Nigel Rayner, author of Gartner's December 2006 Magic Quadrant for CPM suites and research vice president with the Stamford, Conn.-based analyst firm. He attributes much of this growth to spreadsheet replacement initiatives as companies shun Microsoft Excel in favor of more formal financial systems. Part of the trend toward CPM software is also timing, he said. Now that many organizations have implemented enterprise resource planning (ERP) and business intelligence (BI) applications, they're learning the limitations of those systems.

"Companies have come to the realization that ERP and BI systems don't do a good job for high-value, executive-focused functions like planning, budgeting and advanced financial management reporting," Rayner said.

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BI systems are a good platform for CPM but don't have the advanced analytic functions needed for sophisticated financial activities, he explained. And, as the market evolves, buyers are now seeking CPM suites, rather than tools that just address a few financial functions. They want products that handle financial consolidation and financial management reporting, as well as planning, budgeting and forecasting, he said. The Magic Quadrant evaluations considered these features, as well as market penetration and strategy, and put CPM vendors that met its criteria into one of four quadrants.

The leaders, with the best vision and execution, were Santa Clara, Calif.-based Hyperion Solutions Corp. and Ottawa-based Cognos Inc. Hyperion's many years in the industry gives it strong brand recognition with chief financial officers, which means it's "present in virtually every CPM suite evaluation," according to the report. But Hyperion also upset users when it charged an "enablement fee" for existing customers to upgrade to its System 9 platform, Rayner said, and this could put off prospects. The other leader, Cognos, has a strong combined BI and CPM strategy, giving it a good market position as these disciplines converge, he said. But neither vendor should rest on its laurels.

"The [leaders are] under increasing pressure," Rayner said. "There are a number of vendors that could potentially make it into the leaders' quadrant, if they have a strong year. Both Hyperion and Cognos will be under an increasing challenge from vendors like Cartesis, OutlookSoft and SAP. And SAS and Business Objects, if they really get their execution right, could also become leaders."

SAP straddled the line between the leaders' and the challengers' quadrants, with high customer execution but lower vision. SAP may see advantages from its increasing ERP deployments, Rayner said, since users may look to it first for CPM. The other challengers were Oracle PeopleSoft EPM and Infor Global Solutions, which acquired both Geac and Systems Union last year.

The majority of vendors were clustered in the visionaries' quadrant, with lower execution but better vision. This section included Cartesis, OutlookSoft, SAS, Business Objects, Oracle CPM, Applix and Longview Solutions. The BI vendors, SAS and Business Objects, are poised to become leaders and face more challenges in marketing and execution than product development, Rayner noted. Finally, the niche quadrant -- vendors with less execution and vision -- included Lawson Software, Clarity Systems, Board International and CorVu.

Corporate performance management software trends

One notable vendor is not on the quadrant at all -- yet. Microsoft's announcement of PerformancePoint Server 2007 made waves in the CPM market, Rayner said, even though the product isn't slated for release until mid-year. But his report carried a warning.

"Microsoft faces execution challenges before it can deliver on the promise of PerformancePoint Server. Consequently, organizations should not defer CPM suite evaluations pending the availability of PerformancePoint Server. There are already plenty of viable CPM suites available," Rayner wrote in the study.

Another key trend is the continuing convergence of BI and CPM. Customers are considering the benefits of a single vendor for both, Rayner said. This could be a boon to Hyperion, Cognos, Business Objects and SAS -- and a challenge for pure-play vendors. Some broader IT trends, such as service-oriented architectures and hosted applications, could also affect the market, he said. One vendor that didn't quite make the quadrant, Adaptive Planning, has a Software-as-a-Service CPM tool, which could be attractive to the lower end of the market.

Corporate performance management software buying advice

Buyers have lots of good choices, and finding the right tools may be the easy part, Rayner cautioned.

"The product functionality exceeds the buying criteria," he said. "The sophistication of these systems is actually way ahead of what people are looking to buy, because most are just looking to replace an Excel-based planning system."

Companies should expand evaluations and look beyond "the safe bets" to some of the other interesting offerings available today. Evaluators should remove their "finance blinders," too, Rayner continued. Visionary users are linking CPM software to other planning tools, such as those for supply chain management, to create integrated enterprise-wide systems.

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