Many finance organizations are missing an opportunity to use corporate performance management software for strategic planning to improve operations and boost profitability, according to a new Gartner Magic Quadrant that compares CPM software vendors.
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“It should be one of their main tools,” said John Van Decker, a Gartner research vice president and principal author of the report. “These functions are already in the finance organization. Still, there’s a lot of [Microsoft] Excel, which doesn’t provide a good single solution for reporting and planning. These tools help put Excel in its right place in the organization.”
The report depicts a CPM software market that is mature but not stagnant, as a consistent mix of “leaders,” “challengers,” “niche players” and “visionaries” pushes the functional boundaries of CPM beyond traditional budgeting and forecasting to operational analytics, profitability modeling, and strategic planning. Gartner said the CPM software market was rejuvenated in 2011 by a renewed focus on the finance office and the inclusion of more tools for financial governance, such as close management and disclosure management.
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Despite solid growth of 13% for CPM software in 2010, which Gartner expects to continue into the near future, the Stamford, Conn.-based research firm nonetheless took pains to hammer home the point that most CFOs fail to take advantage of the strategic potential of CPM software.
Adopting corporate performance management software
Van Decker said organizations have been slow to adopt the profitability management and strategic features, such as key performance indicators and balanced scorecards, despite the fact they’ve been available in CPM suites for years. Most companies use the more basic budgeting, forecasting and reporting features, he said.
“I think a lot of it has to do with the level of maturity of the organization. Some companies don’t take full advantage,” Van Decker said. Still, the report noted an 11% increase since last year -- to 41% -- in the number of respondents to a Magic Quadrant survey who said CPM software was used outside the finance department and executive suite, a few points short of the percent saying CPM remained mostly confined to finance.
CPM suites that have solid integration with operational data allow users to drill down and find the root cause of performance problems, he said. But to take full advantage of these analytic capabilities, companies must develop a “performance culture” and begin to align CPM with other improvement initiatives, such as Six Sigma. “What we’re still dealing with is that aligning the organization around business metrics could be a very political issue within the organization,” Van Decker said. “A lot of things that were hidden could now be exposed.”
“It kind of goes back to the fact that these applications, while they’re initially implemented by finance, have broad appeal across organizations -- if they’re implemented properly.” The necessary integration between the CPM suites and the operational data in, for example, manufacturing and supply chain systems, can be developed “rather quickly” during project implementation, he said.
Some organizations' reluctance might have something to do with unpleasant experiences. Only 25% of survey respondents said there was complete consistency between operational and financial data, while the remainder reported differences, with some saying the discrepancies were severe.
The report also noted a significant increase in the use of Software as a Service (SaaS) CPM products. Van Decker said this is partly because organizations have adopted certain functions that are especially well suited to SaaS delivery, such as disclosure management, more quickly than expected. Companies have apparently gotten over the security and privacy concerns that often accompany SaaS while being attracted to its cost-saving potential.
“We have not heard of any horror stories in terms of putting stuff outside the firewall,” Van Decker said.
IBM, Oracle, SAP: CPM software leaders
The CPM Magic Quadrant has an unusually large gap between the sole occupants of the leaders quadrant -- IBM, Oracle, and SAP -- and niche vendors, according to Van Decker. “There’s $600 million vendors and there’s $12 million vendors,” he said, adding that the gap continues to widen as the leaders enjoy the same double-digit growth rates of many of their much smaller competitors.
The position of vendors in the Gartner Magic Quadrant didn’t change much since last year’s report, Van Decker said. He noted, however, that IBM’s improved customer satisfaction rating helped it move up slightly, and in the report, he lauded the company for beefing up its analytics with new modeling and visualization features developed by its research wing. On the downside, the report named Cognos Controller as a weak spot in IBM’s CPM portfolio after the user survey showed less willingness to deploy and use the tool.
The report deemed Oracle’s strength to be the breadth and wide distribution of its CPM portfolio, focusing particular attention on Hyperion Enterprise Performance Management, which it said gained improved planning capabilities from its integration with Oracle’s business intelligence and Exalytics in-memory platforms. Gartner noted, however, that Oracle customers haven’t ventured much beyond financial planning and consolidation -- the two most popular uses of CPM software -- and gave the vendor below-average satisfaction ratings.
Meanwhile, SAP benefited from strong sales growth to slightly improve its position in the leaders quadrant, according to Van Decker. The report noted SAP has established a complete portfolio of CPM applications, often through partnerships or acquisitions. Like Oracle, it is making headway in CPM analytics by offering BusinessObjects Planning and Consolidation on HANA, its in-memory database, but needs to clarify its roadmap for analytics on HANA, the report said. The company also has a confusing roadmap for its acquired and legacy SAP CPM products, according to the Gartner analysts, and like Oracle, received below-average satisfaction numbers, especially when it comes to implementation support.
Infor and SAS were the only two to qualify as challengers to the big three. Infor earned kudos for its broad CPM portfolio, sales growth and BI and analytics tools. SAS builds on its reputation for providing statistics-driven predictive analytics, data mining and risk analysis, which makes it more popular for the more advanced type of strategic CPM while suffering from “lack of visibility” as an option for basic CPM, the report said.
Gartner ranked Tagetik and Exact-Longview as the only two visionaries, putting them just outside the leaders quadrant. Exact-Longview offers a single suite of integrated CPM functions that provides an alternative to multiple “point” applications and is good at handling the large data volumes of tier 1 companies, the Gartner analysts wrote. They cited Tagetik’s Collaborative Disclosure Management product, custom analytics and expertise in complex financial consolidation and reporting as among the reasons it is a technology visionary.
The six niche vendors nearly outnumbered the rest combined. Host Analytics led the category, almost qualifying as a challenger. It was followed closely by Prophix Software and Board International. Bitam, Prevero and KCI Computing lagged behind significantly.