2010 Predictions for Performance Management

It is the time of year when we all reflect on the year that was and speculate on what is in store for the coming year.  In the interest of brevity I've limited my predictions to 5 rather than the customary 10.

First off, I think most of us are happy to bid adieu to 2009.  It was a tough year for many with jobs lost and spending curtailed.  Performance Management was certainly not exempt from the impact of a down economy but I'm optimistic that 2010 will be a better year in general with some significant changes in Performance Management.

When I look into my crystal ball here is what I see:


#1.  Purse Strings Loosen
There has been a backlog of demand for performance management solutions over the last 18 months.  Spending that was approved and earmarked for EPM in 2009 was held back due to spending constraints.  This money will be freed up in 2010.

The due diligence (and even vendor selection in many cases) has already been done which will reduce the cost of sales and compress the sales cycle of these opportunities.  Based on the compressed sales cycle and lower cost of sale, profit margins on EPM revenue will trend higher.


#2.  Mega-vendors Will Have a Big Year by Targeting Pervasive Performance Management
The mega-vendors in EPM (IBM, Oracle, and SAP) will have banner years in selling EPM into their existing client bases and adding EPM into the scope of large technology purchases and strategic initiatives.  These vendors have spent a couple of years integrating acquired EPM products into their platforms and this effort will pay dividends during 2010 as their architecture catches up with their marketecture.

These (and select other vendors) will be successful in expanding the scope of their clients' performance management initiatives to include profitability analytics, strategy management, sales performance, supply chain performance and other operations areas. Pervasive Performance Management is the holy grail for the large vendors as they strive to increase deal size and differentiate their performance management offerings from smaller, niche performance management vendors.  However, due to the sheer size and breadth of these vendors, performance management will remain a small percentage of their revenue when compared to BI and other core product lines.

#3.  Best of Breed Makes a Big Comeback in the Mid-Market
As the mega vendors strive to expand the scope of performance management, many niche vendors are squarely focusing on the traditionally core components of performance management (budgeting, forecasting, and financial reporting).

Many customers (especially in the mid-market) have a significant and specific pain point to address in these areas and are not ready (or able) to expand their scope to a strategic performance management initiative.  Some prefer a smaller vendor that specializes in addressing their key pain rather than a software conglomerate.  They want the attention, responsiveness and "skin in the game" that smaller vendors provide.  In short, some prefer to be a big fish in a small pond.

The last year has seen many smaller vendors pop up to fill the void left by the acquisition of so many best-of-breed vendors.  There will be a "smack-down" between all the new vendors and the mega-vendors in the mid-market.  The increased number of options for mid-market clients will result in the return of the "bake-off" and "dog and pony show" as clients struggle to decipher the differences between the plethora of options.


#4.  The Cloud Gets Bigger But Finance Lags
The impact of the cloud is being felt all over the software industry.  In my opinion the cloud will gain significant traction in 2010 as it moves from the stage of Early Adopters to Early Majority.  The cloud will become a viable option to many, many more organizations this year.

I believe this is true in many areas including Business Intelligence but not for Performance Management.  As we all know finance people tend to be a just a tad risk averse and not quite as cutting-edge as other parts of the organization.

Therefore, I see finance lagging behind the rest of the organization when it comes to embracing the cloud.  While I see the cloud entering the early majority stage of adoption during 2010, those in Finance who embrace it will still be considered innovators.  In my opinion in 2010 Finance should wake up to the fact that the cloud is here and it is here to stay and they should be more open to considering cloud options for performance management.


#5.  There Will Be No Acquisitions in 2010
I'm not saying that Oracle, IBM, SAP and others will not make any acquisitions during 2010 - they will.  But I do not see any performance management vendors being acquired during this year.

The mega-vendors will continue integrating what they have acquired and niche vendors will continue targeting their specific markets and trying to grab additional share in those markets.  I don't expect much turmoil in the performance management vendor landscape this year.