As anticipated by industry analysts, the business performance management (BPM) movement continues to expand across North America. However, what started as an effort to help large corporations leverage past investments in data warehouses, customer relationship management (CRM), and enterprise resource planning (ERP) solutions has evolved to include comprehensive, out-of-the-box analytics capabilities for midtier companies. Some BPM vendors are now focusing on the midmarket, offering features of particular interest to companies of that size, such as vertical-specific functionality, online analytical processing (OLAP) capabilities, and Excel interfaces.

This new attention from vendors corresponds with growing demand for BPM in the midmarket. The needs of today's midsize organizations are strikingly similar to those of large corporations, because the business pains of midtier and large companies trying to capitalize on market opportunities are identical. In general terms, a CEO's business pains relate to the organization's core processes -- such as issues in pricing, sales management, product- or service-line management, and cash flow. In each of these areas, midmarket CEOs must regularly make critical decisions that profoundly impact the future of the business. Basing these decisions on incomplete data or on their gut feel is potentially lethal.

Three Core Elements of Midmarket BPM

Midtier companies evaluate performance management tools based primarily on traditional enterprise software criteria -- factors such as scalability, flexibility, and implementation speed. These characteristics are important, but midmarket companies must also identify the business challenges that are unique to organizations of their size and determine which performance management applications are best designed to alleviate them. As they evaluate the business problems that different performance management software packages might resolve in their organization, midmarket executives should keep three key selection criteria in mind.

Department-oriented, rather than IT-oriented, functionality. Midmarket companies have stayed away from large ERP and CRM deployments for a good reason: Solutions for large companies tend to be built around the IT department. This can create tremendous business pain in organizations of all sizes -- but especially in midsize organizations where staffing is extremely tight. In companies that deploy these systems, business units such as finance are forced to rely on IT to access data and run reports. This means that reports are often delayed and are frequently missing the key performance indicators (KPIs) which finance and senior management desire.

The CFO at one midmarket company put it to me this way: "We are an electrical distributor for the business and consumer markets, and we have numerous locations throughout the southern United States, including Arizona, New Mexico, Texas, and Louisiana. Our IT team is called upon regularly to provide data from separate sources for the company's finance group -- particularly for me and my people. A business intelligence solution could be a welcome addition if it would reduce the reliance of finance on the IT area and speed up reporting."

Performance management tools that are department-oriented, rather than IT-oriented, can eliminate this challenge because they are set up to pull data and run reports based on standard Excel formulas and calculations. This dramatically reduces user training requirements and makes the entire finance team comfortable with creating and revising their own KPIs in a dynamic environment.

Because a department-oriented solution requires no IT involvement beyond the initial implementation, the finance team can run reports and pull data based on any parameters that they deem important. Weekly reports, monthly reports, or ad hoc reports based on uncommon parameters do not require weeks of IT programming and report building to achieve. Not only does this departmental autonomy ensure that finance is running reports on the specific parameters desired, but it saves substantial time and money within the organization. Enabling finance to be self-sufficient should be an absolute requirement for BPM within all midmarket organizations.

Efficiency and flexibility through an Excel integration tool. Most midmarket companies manage a large portion of their data in Excel spreadsheets. And there are tremendously compelling productivity reasons to stay in an Excel environment (see Long Live the Spreadsheet: Leveraging Microsoft Excel for Effective BPM in the March issue of BPM). CEOs and CFOs aren't interested in investing in systems that require their staff to learn new software and implement new processes.

At the same time, Excel can be very problematic when used as a data warehouse in a business environment. As one executive shopping for business intelligence software told me, "Being a law firm, we prepare lots of reports, and data mining is of extreme importance for us. Manual processes based on spreadsheets comprise our primary pain." What's more, industry experts have proven that Excel spreadsheet data tends to be riddled with errors and incomplete entries. Companies using only Excel produce poor reports and analyses, which can ultimately affect performance.

CEOs and CFOs in midtier organizations want to be able to analyze data stored in Excel without dealing with time-consuming data imports every time. A BPM tool that provides seamless integration with Excel can enable the finance team to create standard reports with the full functionality of Excel -- but connected to other data sources -- within a matter of minutes.

OLAP technology for flexible data modeling and scenario planning. Due to the highly competitive nature of business and today's external economic pressures, companies need to produce thorough and detailed business analyses. This is most critical to midmarket companies because for them the distance between success and failure is a finer line. To address this critical need, companies must be able to perform sophisticated modeling that caters to multiple what-if scenarios. For example, this modeling might address complex business rules, such as foreign exchange issues; competitive market pressures; new product development; and/or sales opportunity analysis.

The most flexible and efficient technology platform for analyzing data and performing scenario planning is an OLAP architecture. OLAP's data-modeling capabilities enable users to dig into details and generalize, filter, sort, and regroup data at the time of analysis. Organizations that adopt multidimensional OLAP (MOLAP) technology realize the most value from their performance management system because the data cube's input and analysis functions are extremely efficient -- even when analyzing enterprisewide data. MOLAP engines deliver significant benefits to midmarket companies because complex calculations are predefined and stored within the data cube. In MOLAP, complex calculations based on department-specific analysis and reporting requirements have a faster query-return rate than they do in other OLAP technologies.

One vice president of finance recently told me, "Our company is in the automotive industry and has approximately 1,000 employees. We are seeking a BPM tool that will help us in terms of financial planning and budgeting. We specifically require that the solution enables finance to run through various scenarios in terms of financial figures. We are using Excel spreadsheets now and have SQL [Server] as our database, which massages some of the data but doesn't drill down far enough. We also have unique databases that were designed for the automotive industry. About 90 percent of our data resides in these databases. We would need to have a solution that can access this data and filter it into Excel."

When combined with a prebuilt enterprise planning solution, MOLAP databases can import information from a variety of data sources and resolve reporting issues like the challenge of this automotive company. However, MOLAP cubes can also be preconfigured easily to meet the needs of midmarket managers -- so that those managers do not have to rely on IT for reporting and data analysis. The result, for finance, is enhanced scenario planning, which facilitates more detailed operational budgets (e.g., sales, overhead costs, investments, loans) that automatically connect balance sheets, income statements, and cash flow statements.

Next-Stage Considerations

All three of these criteria center on alleviating a common pain in midmarket companies: decision-making. Midtier organizations want business performance management to drive a more efficient and effective decision-making process. To be effective, managers need information fast so that they can act on the CEO's goals, and each department within the organization needs the right technology to provide that information. In its earliest stages, BPM must deliver the tools needed to meet the day-to-day challenges of all departments. That's why midmarket companies should focus on selecting software that enables departments to model their own data, provides Excel integration tools that enhance the efficiency of data management with limited user training, and delivers an OLAP/MOLAP architecture that dramatically improves reporting and facilitates one consistent view of the truth.

Beyond these criteria are numerous additional questions that companies of all sizes must ask about BPM software. For example, they need to carefully assess the scalability and flexibility of the software. And, if they expect to grow substantially, they should look for the ability to deploy additional packages, such as consolidation, subsidiary management, and risk management. A rigorous request for information (RFI) process will address questions related to these topics, questions that prudent companies of all sizes must evaluate before making a final purchase decision (see exhibit 1 below for some sample questions).

Rolf Gegenmantel, Ph.D., is BI director, North America, for Systems Union Inc. Before moving to North America, he spent eight years with MIS AG in Germany.

Combining midmarket-specific considerations with standard enterprise-application concerns, all while keeping an eye on potential future needs, is the most effective path to identifying the right BPM software for any midtier business. It is also the purchase process that will deliver the flexibility, efficiency, and understanding that a midsize company expects to reap from its performance management strategy.