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BPM software -- the final frontier?

If you don't know what business performance management is, it's probably time for a crash course. Business app gurus say it may be "the last bastion" of enterprise software.

Business performance management can mean many things to many people, but new research suggests that BPM is taking hold.

Exact definitions of "BPM" vary, but the term generally refers to a set of integrated processes -- supported by technology -- that track operational and financial performance, often in relation to predefined goals. For instance, BPM tools like scorecards and dashboards give users a glimpse into how they are performing in regard to corporate initiatives such as cutting expenses.

Interest in BPM is rapidly ramping up, according to a report from Forrester Research, in Cambridge, Mass. One-third of organizations surveyed by the firm are currently using or piloting BPM, a dramatic increase compared with mid-2002, when just 11% were trying BPM.

One of the main reasons for this growth is the relative immaturity of the market, said Wayne Eckerson, director of research for Seattle-based Data Warehouse Institute.

"I really think [BPM] is the last bastion for software to automate businesses," Eckerson said. "What's left in an organization to enable with software? It's management, the execution of strategy. There have not been any good tools to do that."

But that is rapidly changing. Eckerson's research backs up Forrester's claims of BPM growth. While the Data Warehouse Institute's study found that just 13% of companies have implemented BPM software, 33% are in the construction phase or planning phase of a rollout.

In October 2003, American Eagle Outfitters Inc., in Warrendale, Pa., went live with Clarity Systems Ltd.'s Corporate Performance Management suite. The company deployed budgeting and forecasting software to help manage massive growth. American Eagle grew from 386 retail stores in 1998 to 915 stores in 2003, said Lisa Bechtold, director of profit improvement and financial analysis.

So far, the application has streamlined the company's human resources planning process. Department heads determine the company's HR budget through their employees' salaries and associated benefits. After some customization, the Clarity system now does all the calculations behind the scenes, so the budget director only has to worry about having the right people in the department at the right salaries.

American Eagle's motivation for investing in BPM is fairly typical. Budgeting applications and scorecarding are the two main drivers of BPM, Eckerson said. In fact, many companies already have some sort of de facto business process management in place, taking data from business intelligence and data warehousing systems and applying it to their budgeting, planning, financial reporting and forecasting processes.

"Companies understand the concept, but they're not deploying the concept as a whole," Eckerson said. "They have the pieces in place, but not in a cohesive manner."

According to the Data Warehouse Institute study, 72% of those organizations deploying BPM are doing so enterprise-wide, though the organizations who said they were just starting to explore BPM indicated that they would begin with smaller implementations.

American Eagle is looking toward a wider rollout after having used BPM in one budget cycle. After some positive user reviews and good results, American Eagle is now tapping Clarity for reports. Forecasting will come next.

Previously, finance staffers distributed scheduled reports via e-mail or spreadsheets. Now, department managers are able to immediately track online where they stand in regard to their monthly budgets, which helps them to be more accountable for their numbers, Bechtold said.

"[BPM] has really leveraged the time of the finance folks," she added. "They used to spend a lot of time preparing reports and sending them out. We've reorganized, and they are now looking at margins and a lot more analytics, rather than crunching numbers and writing reports."

Fostering collaboration between the finance and operational sides of an organization is another of BPM's benefits, Eckerson said.

The biggest BPM driver is increased visibility into an organization, however. CFOs are under increasing pressure to close the books more rapidly and accurately, thanks to the Sarbanes-Oxley Act. Eckerson said that financial metrics typically produce outdated figures that show organizations how they performed and not where the business is headed. Key performance indicators generated through BPM enable organizations to anticipate trends and be more proactive, he said.

A successful BPM implementation, like so many things, hinges on user adoption, and Eckerson urged companies to implement a reward system for those who use the application, as well as identifying a senior executive BPM champion within the organization.

Finally, when it comes to selecting the proper tool, many organizations are adopting BPM apps piecemeal, Eckerson said. Some BI vendors, however, such as Hyperion Solutions Corp. and Cognos Inc., are starting to offer suites.

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