Given the current tough economic climate, performance management is likely to be a hot topic in 2003 because it allows corporations to optimize their business operations to improve efficiency, reduce costs and increase revenues. This area of business intelligence, however, is littered with different technologies and confusing terms. This month I will try to sort out the different types of performance management and explain how to use performance management to exploit the power of your business intelligence (BI) investment.
Broadly speaking, there are three types of business initiatives associated with business intelligence applications and tools and their underlying data warehouses. These are shown in Figure 1. Strategic planning involves determining long-term business goals that may take many months, or possibly several years to achieve. A goal could be, for example, to improve customer revenue, retention and satisfaction. Strategic performance management (SPM) applications enable executives and managers to set performance goals and to monitor actual business performance to determine if the organization is achieving those goals.
Figure 1: Types of Performance Management
One key element of SPM applications is that each business analytic (often called a metric or key performance indicator) produced by the application is someone's responsibility to monitor and manage, and they must take action if the metric indicates objectives are not being met. BI products that fall into this category are frequently called scorecards after the balanced scorecard methodology made popular by Robert Kaplan and David Norton. Scorecard products implement one or more formal methodologies and sometimes enable an organization to implement its own informal methodology. More information about strategic performance management can be found on the Balanced Scorecard Collaborative Web site (www.bscol.com) and on www.bettermanagement.com. Most leading BI vendors provide SPM products including Hyperion, Oracle, PeopleSoft, SAP and SAS.
Tactical analysis is an activity that takes place over a period of weeks, or possibly several months. This type of business intelligence is used to drive and measure the effectiveness of short-term business initiatives. In a sales, marketing and support organization, for example, initiatives could be launched to create and monitor new marketing campaigns to cross- and up-sell products to existing customers or to provide a high level of support to key customers. Tactical performance management has been the focus of most BI initiatives and products (OLAP, data mining, etc.) over the past few years. The issue in this area has been that while companies have been successful at generating tactical analytics, they have not delivered these analytics to the core business users that need them and have not tied these analytics to business objectives and business users' job responsibilities.
Recent technology and product enhancements in the tactical performance management area include:
Enterprise portals for delivering tactical analytics from companies such as Computer Associates, IBM, Microsoft, Oracle and Plumtree.
Development platforms for building analytic applications and dashboards from BI companies such as Business Objects, Cognos, Informatica and ProClarity.
Packaged analytic solutions from a wide range of vendors including Microsoft, Oracle, PeopleSoft, SAP and SAS.
The third type of BI initiative is an application that generates operational actions for driving day-to-day business operations. Here, closed-loop, and possibly automated and real-time, operational performance management applications continuously monitor business performance to detect business issues and take action to correct them. This action may involve, for example, sending an alert to a business user to inform him about a business problem that requires urgent action, routing an action message to an operational application to offer a special deal on a product, or recommending specific products or services to a Web customer. It is this area of performance management that will receive the most attention over the coming months as it can provide quick and short-term return on investment (ROI) to a company. This is why there is interest in Gartner's Business Activity Monitoring (BAM) concept, and in business process management (BPM) and associated business processing intelligence concepts and technologies.
We are likely to see a lot of activity in the performance management area over the coming year. As already mentioned, much of this activity will be focused on operational performance management. This will involve not only the business intelligence and data warehousing vendors, but also applications and vendors in other technology sectors such as enterprise application package suites (Oracle, PeopleSoft, SAP, etc.), enterprise application server suites (BEA, IBM, Oracle, Vitria, etc.) and business process management tools (IDS Scheer, Savvion, SeeRun, etc.).
Whichever acronym is used by vendors to describe performance management, be it CPM (corporate performance management), BPM (business performance management) or EPM (enterprise performance management), the key word to emphasize is "management." Many BI applications measure performance, but they don't manage it. The key to success will be to apply the business management concepts of strategic performance management to both tactical and operational BI and to provide an integrated BI environment (as shown in Figure 2) that can deliver business analytics covering the complete performance management spectrum from strategic to operational performance management.
Figure 2: Integrated Business Analytics for Performance Management
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