When business performance management (BPM) was first introduced into the vocabulary of business intelligence (BI), confusion existed as to what the actual differentiators were between both sets of terms. Was performance management the next generation of BI – a next-generation approach to gleaming value from a data warehouse - or were there more valuable differentiators between the two? How did both differ from and overlap with one another? And how has that changed now that business intelligence encompasses more than data warehousing, reporting and OLAP cubes?
Consequently, this debate never brought clear focus to the benefits of using both performance management and BI to increase an organization’s efficiencies. Alternatively, it never showed the benefits of using BPM to manage financial or other processes, while implementing audit functions to ensure organizations have a way of tracking accountability to help meet compliance and other requirements. In reality, both set of terms and how they differentiate is not as important as understanding the value one or both bring to the organization.
This article identifies the differences and similarities between business intelligence and performance management and how both intersect. Aside from developing an understanding of how both sets of applications have evolved, this article highlights the real differences between BI and BPM and how those differences play out in an organization’s use of one or both.
What is business performance management?
According to BPM Magazine, the technical definition of business performance management is “a set of management and analytic processes, supported by technology, that enable businesses to define strategic goals and then measure and manage performance against those goals. Core BPM processes include financial and operational planning, consolidation and reporting, business modeling, analysis, and monitoring of key performance indicators linked to strategy.” In many cases, BPM software is tailored to address the needs of those responsible for planning, budgeting, activity-based costing and the like. In addition, with acquisitions and the need to consolidate multiple businesses into one, BPM aids in merging company data or in properly articulating the relationships between parent companies and their subsidiaries.
With the goal of BPM being the ability to support business processes (i.e., financial or operational) through the use of technology, solutions developed focus on moving through a set of steps to enable the completion of those processes. For instance, when planning specific initiatives or projects and allocating budgets, many people may be responsible for the overall planning of the organization. With performance management solutions, each person’s responsibilities can be built into the overall design by taking into account dependencies (such as person B not being about to start their task until they receive the required information from person A). Also, overall collaboration enables end users to communicate with one another at each stage of the process, whether to approve or deny an employee’s actions, or simply to comment on an action taken. The idea surrounding the concept of performance management is to create a more holistic approach to the way financial and other processes are handled within the day-to-day tasks of decision makers within the organization.
Where does business intelligence fit?
When looking at how both business intelligence and business performance management fit with one another, it becomes important to look at their roles within the organization and not at how each is defined. Instead of a focus on the intellectual debate about the differences of each and how they work with one another, the overall significance is the focus on each one’s role and how they can be used to help companies become better.
In general, the value of business intelligence becomes obvious when organizations want to move beyond capturing transaction-based data and towards the understanding of those business transactions, how they affect the organization, and how to optimize internal processes. What this means is that within BI, information is captured, analyzed, and pushed out to end users through analytical applications enabling these end users the ability to get a better view of the organization. Whether this is for trends-based analysis, forecasting or to help increase sales, the infrastructure usually remains similar across the board. Even within organizations that do not use a traditional data warehouse, the normal BI uses still include some sort of data collection. As the role of BI starts to shift towards maintaining an operational view of data, the convergence of BI and performance management increases.
In these cases, BI can be seen as the BPM infrastructure. A business intelligence framework and set of tools are used to implement and maintain performance management applications. Whether in the form of a data warehouse to contain and access information or in the guise of front-end BI tools such as reports or scorecards or dashboards, performance management solutions leverage these tools to help enable their processes.
The convergence of BI and BPM and the creation of business value
The use of BI and BPM together enable organizations to move to the next level. By combining their business processes and analytics framework, organizations can gain a broader view of their organization and see the way their planning, budgeting, etc. affect other activities within the organization. For instance, by looking at budgeting and forecasting and combining these activities with sales trends analysis, decision makers can identify where the smartest investments may be and how to plan accordingly. Customer satisfaction ratings and planning activities can be combined to create a program that is customer focused and that integrates the organization’s overall strategic goals. Without the use of business intelligence it becomes difficult to get a full view of the organization and how it performs against set targets. Adding business performance management to the mix means that forward-looking planning and daily activities can be combined with analysis to increase the likelihood of a full view of what is happening within the organization.
Putting it all together
Although, the combination of BI and BPM gives organizations a broader view of whether they are meeting or exceeding their goals and defined targets, the use of one or the other can be a valuable tool for organizations depending on their business requirements. The application of BPM enables decision makers to evaluate their planning and budgetary requirements against organizational goals and set targets. BI helps organizations analyze performance and identify how to better apply business strategy based on the discovery made through these analyses. Organizations should understand the value proposition of each separately as well as how a combination of BI and BPM can benefit their organization before jumping ahead and thinking that a fully combined solution will benefit their company.
About the Author
Lyndsay Wise is an industry analyst for business intelligence. For over seven years, she has assisted clients in business systems analysis, software selection and implementation of enterprise applications. Lyndsay is the channel expert for BI for the Mid-Market at B-eye-Network and conducts research of leading technologies, products and vendors in business intelligence, marketing performance management, master data management, and unstructured data. She can be reached at lwise@wiseanalytics.com. And please visit Lyndsay's blog at myblog.wiseanalytics.com.
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