Through the past few years, much has been written about the effect that business performance management (BPM) can have on companies' visibility into and control over their future. Numerous articles and research studies (for example, Ventana Research's 2004 "Budgeting and Planning: Improving Finance Organization Effectiveness") have documented the financial and operational rewards of implementing a BPM system. However, most businesses that have had success with BPM technologies are Fortune 1000-size companies.

Large enterprises are clearly gaining momentum in moving away from spreadsheets toward a more powerful set of tools for use in performance management. Given the cost and complexity of most BPM solutions, many emerging companies continue to wonder whether they too can obtain BPM's benefits. Their concerns are justified, but the answer is a resounding yes. Midmarket businesses -- which I define as organizations with $10 million to $500 million in annual revenue and 75 to 2,000 employees -- stand to gain just as much from BPM processes and technologies as any other organization. They must choose a product targeted to their specific needs, but more and more vendors are beginning to serve this niche, so finding a product that fits is becoming easier for midsize organizations.

The Need for BPM in the Midmarket

The goal of every BPM initiative is to strengthen the link between the company's strategic objectives and its operational and financial plans, to improve communication among managers, and to improve the alignment between the efforts of individual employees and the organization's overall goals. The ultimate benefit of BPM is to enable managers throughout the company to quickly identify, react to, and forecast the impact of changes as they occur within the business so as to maximize both top- and bottom-line opportunities.

Like other businesses, the vast majority of midmarket companies are interested in improving both their top- and their bottom-line performance. They are hindered in their efforts, however, by two primary constraints: They are resource-constrained, and they are time-constrained. While large corporations suffer similar constraints, midmarket companies have fewer internal systems and processes to act as checks and balances on decision-making throughout the organization. When combined, these constraints and the lack of supporting infrastructure make the gains from BPM especially valuable to midmarket companies.

Resource constraints, particularly within midmarket finance departments, make vital the improvement of performance management processes and the systems supporting them. Spreadsheet-based performance management is very inefficient, and this inefficiency, which is exacerbated by resource constraints, leads to ineffective performance management. Valuable time is wasted on non-value-added tasks such as formatting reports, distributing information, consolidating data, and managing the communication process. Inefficiencies in finance translate into less timely, and often less accurate, performance data in the hands of operational managers. Midmarket managers operate with fewer internal checks and balances on decision-making than their large-company counterparts, and thus their decisions have a rapid and significant impact on the success or failure of their company. Timely and accurate performance information is therefore critical to their decision-making process, and BPM can help to provide more timely and accurate performance data.

Midmarket companies must also be nimble; because they lack the resources of large corporations, midmarket companies rely on their ability to make fast decisions as a competitive advantage. Competitive pressures, changing customer demands, and expanding product lines and market segments -- combined with capital constraints -- all put pressure on these companies to continuously reassess their plans, measure their progress, and adapt to changing conditions within a short time frame. Reaction time is critical, and spreadsheets can significantly hinder their ability to evaluate alternative plans and scenarios and react quickly. Midmarket companies need decision-support systems that rapidly provide information throughout the company and allow managers to make rapid, informed business decisions.

BPM implementations offer many benefits for all businesses. At a high level, several tangible results can be expected: improved efficiency, which results in more data analysis and less data management; improved reporting and analytics, which leads to better financial visibility; improved collaboration; shorter cycle times, which improve responsiveness to change; fewer errors; and tighter process management, which results in improved control. Still, most midmarket companies have hesitated to purchase a BPM solution.

Challenges of Midmarket BPM

BPM implementations are challenging for all businesses, but those challenges are acute in the midmarket. The three areas that pose the most daunting concerns for midmarket BPM implementers are essentially the same as the areas that bring those companies the most potential benefit from BPM: budget constraints, resource constraints, and time constraints.

The most obvious challenge to implementing BPM in the midmarket is these organizations' limited budget. The entry point today for implementing a typical enterprise-class BPM solution is about $100,000, including consulting costs. This price range is simply beyond the reach of most companies in the midmarket.

At the same time, many midmarket companies lack the in-house resources and the technical knowledge of online analytical processing (OLAP) required to implement and maintain a BPM solution. Additionally, midmarket companies need to be able to configure and maintain the applications internally without bringing in a consultant every time a change is needed in the model, such as the addition of a new sales dimension. Ease of use for end users is one more key concern. Spreadsheets, while not ideal as a BPM application, are nonetheless familiar and ubiquitous. Many finance managers are reluctant to part with such a familiar tool, and are reluctant to require department managers to learn a new application. (See Long Live the Spreadsheet: Leveraging Microsoft Excel for Effective BPM on page 24.) Midmarket companies fear that a new BPM application will require hours of training for both finance staff and departmental managers. Because their finance staff is already overworked, midmarket companies can ill afford to increase their load with new application demands.

The amount of time required for a BPM implementation can also pose a big challenge for midmarket companies. Given their limited resources and fast-moving business environment, they cannot afford to move from spreadsheets to a BPM solution if the implementation process takes several months to complete. With limited IT resources to help them and finance staff members that are already juggling several key responsibilities, midmarket companies need to be up and running in a matter of days or weeks, not months. Consulting firm BPM Partners estimates that the average enterprise-class BPM implementation takes three to six months.

Can BPM Work in the Midmarket?

In a recent Gartner survey, 65 percent of midmarket CFOs ranked business performance management as a top project priority, second only to projects "supporting the CEO in creating shareholder value." The value of BPM is becoming clear to finance departments of this size. But now these CFOs must figure out how to overcome the implementation challenges and make BPM practical for their organization.

New midmarket-focused solutions are providing the benefits of performance management while alleviating many of its challenges. Midmarket companies shopping for BPM software should look for a solution that is affordable, that is powerful while still easy to use, that minimizes the need for internal IT resources, and that can be implemented and in production within a matter of days.

Today, applications that meet these criteria are finally available. In order to work within their budget constraints, midmarket companies should examine solutions that are designed to meet the needs of the midmarket. By focusing on those features that are truly required in the midmarket, midmarket BPM vendors are able to offer much more reasonably priced solutions than those offered by vendors targeting larger enterprises.

Additionally, midmarket buyers should consider the new breed of hosted solutions that offer subscription-based pricing, which allows them to access powerful BPM solutions with no up front capital investment and therefore lower risk. Such solutions make it easy for organizations to start small, with a handful of seats, and expand their use of the application as their needs grow. Rather than costing $100,000 or more, subscription-based midmarket solutions are priced to start in the thousands of dollars and to scale with the organization.

Affordable need not mean less powerful. Midmarket companies should look for a complete solution -- one that incorporates flexible, driver-based budgeting and forecasting; historical data integration; and powerful reporting and analytics within a Web-based application. The software should also be easy to use. Since most managers are familiar with spreadsheets, the ideal BPM solution has an interface that maintains the familiar spreadsheet look and feel. The interface should be configurable, with an eye on simplicity of design so that configuration need not mean an army of outside consultants is required. An easy-to-use and easy-to-implement solution will lead to greater adoption internally and more control over performance management even in the face of inevitable staff turnover.

Finally, it is important to evaluate and understand the time and costs associated with a BPM implementation. Many projects, large and small, are lost in the implementation phase. Given midmarket resource constraints, implementation cannot drag on for months. Applications that are quick to implement typically offer a simplicity of application architecture, which alleviates the need to integrate multiple application modules or develop complex multidimensional data cubes to develop a budget and a forecast.

The benefits of BPM are real, and applications that can bring these benefits to the midmarket are now available. Concerns about the relevance and cost of BPM solutions -- along with a perceived lack of time, staff, and expertise -- have all contributed to midmarket companies' resistance to the pull of BPM. Today, however, affordable BPM solutions designed for midmarket companies are making it possible, even essential, for these companies to finally gain the benefits of BPM.

Robert S. Hull is the founder and CEO of Adaptive Planning Inc., a midmarket, hosted BPM provider. He has 15 years' experience as a CFO for technology companies.