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Getting Payback from Your Corporate Performance Management Initiative

  • February 01 2004, 1:00am EST
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Return on investment (ROI) –­ it's the big buzzword in information technology (IT) these days (actually, it always has been). However, the big question that accompanies the buzz is "How do you get ROI from a corporate performance management (CPM) system?" Most of the leading CPM products show enormous potential, yet remain largely untested. Furthermore, a CPM system will save you millions of dollars if you do it right, but cost you millions more if you do it wrong.

According to Gartner, CPM technology is at a dangerous watershed. CPM is hyped by the media and industry pundits alike, but the high-flying expectations for the technology remain largely unfulfilled. In its annual study, "Hype Cycle for Business Intelligence, 2003," Gartner analysts describe CPM technologies as being in the "peak of inflated expectations" phase of the technology hype cycle.1

The Gartner study goes on to say that "During this phase of over-enthusiasm and unrealistic projections, a flurry of well-publicized activity by technology leaders results in some successes, but more failures, as the technology is pushed to its limits."2 In other words, ROI from CPM investments right now is very, very scarce.

However, if you choose to invest in a CPM system for your organization –­ a wise decision given the U.S. government's recent spate of corporate regulatory edicts –­ there are ways to build a system that will give you a good chance to earn back those precious investment dollars.

First, make sure your system is measuring what it needs to measure. I know this sounds simple, but it is utterly critical to the success of your CPM system that the metrics the system tracks are those that are vital to measuring the performance of your organization.

The important metrics are: total revenue, cash operating profit, net income, capital expenditures, head count and operating margin –­ on a per month, per business unit, per department or per unit basis. These metrics will largely determine the success or failure of your organization ­– they are the ones that will give you the most bang for your investment buck in terms of being worth their value to measure. They will give you ROI.

Second, use your investment dollars wisely. Build a proof of concept now and make the system scalable. Start with the most critical metrics and functionality in the system, show that it will work and build on that success. In short, choose the CPM technologies that best fit your organization now and that will grow best with your future successes.

Scalability is key to determining the ultimate success of this approach. Any system architecture you choose must employ multiple, clustered application servers for faster processing, robustness and system growth potential. It's also a good idea to choose a vendor whose product runs on multiple platforms so that there is less customization needed to fit your particular needs now and no need to buy a different product should your needs change.

Finally, stress performance and teamwork. Give performance-based incentives to involved parties depending on how well the ultimate system performs. For example, tie performance reviews and bonuses to the performance ­– and budget –­ of the CPM system. If the architects and the members of the user community that participate in the design process know that their compensation will be at least in part dependent upon the technical and budgetary success of the system, they'll work energetically to ensure that it achieves its goals.

Use teamwork to build trust in the user community. If the people who have to use the system don't like the way the technology folks constructed it, they won't trust it and they won't use it. Get the system architects and users together to make sure that the system is technically sound and that it meets the needs of the user community. Use whatever method works best for you. Methods include but are not limited to: group requirements sessions, interviews and collaborative work teams. Regardless of the method, make sure that the two sides of the house communicate.

I'm not saying that there's a foolproof way to ensure the success of your CPM project. As I've said before, the technology is still emerging and is, as yet, essentially untested ­– especially over the stress of many years and many users. However, by following the strategies I've outlined here, you will ensure that you build a technically sound system that meets your organization's needs –­ now and in the future. That will go a long way toward ensuring that the system meets its ultimate goal: paying for itself by allowing you to better manage the performance of your organization.

1. Buytendijk, F., H. Dresner, B. Hostmann and A. Tiedrich. "Hype Cycle for Business Intelligence, 2003." Gartner Strategic Analysis Report R-20-0831, 6 June 2003. p. 11.
2. Ibid. p. 11.

All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions are those of the author and do not necessarily represent the views and opinions of BearingPoint, Inc..

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