Selecting a Corporate Performance Management Vendor
A Road Map is Key
Corporate performance management has many components, from budgeting, strategic planning, consolidation, and reporting to dashboards and operational analytics. Without a well thought-out road map, you may address your current pain-usually budgeting- without an eye toward what follows next. Then, when you are ready to move on the next phase, you may discover your vendor is great in the area you attacked first, but weak in the functionality you want to add next. Prior to making that first purchase, the senior team really needs to lay out their long-term vision for CPM and then identify and prioritize the various phases. In addition, an audit should be performed of software currently owned by the company. You may find that you already own products that can address some of your CPM requirements. A gap analysis based on where you are compared to where you want to go will help identify the missing pieces that need to be purchased.
Business Requirements First
CPM is a strategic business initiative. It is not a back-office operational system. Therefore, the business requirements need to be front and center. Which technology is best is really a secondary discussion. Before you look at OLAP vs. ROLAP vs. hybrid OLAP or the like, you need to determine more fundamental matters, such as whether or not a piece of software can handle the complex allocations required by finance for the annual budget process. Some companies actually skip this step thinking they’ll know a good budgeting or reporting system when they see it. That skip is a big mistake. Avoid it. Interview the key stake holders, gather their detailed requirements for the new system, and then consolidate and prioritize results. You may also want to find out what they like and dislike about other systems they have used in the past to accomplish similar tasks. At this point, have someone experienced with corporate performance management give your requirements a sanity check. Unrealistic blue sky items on the list could cause you to filter out otherwise very capable vendors. your list probably will be focused on current pains and challenges and overlook some potential CPM benefits that you didn’t have time to think about or where simply unaware of. Now with your clean and prioritized list if business requirements, you are prepared to start the actual process of vendor selection.
RFP or Not?
The RFP (request for proposal) process is tedious and labor intensive for all concerned, and in the end, probably not very useful. So why do people do it? They need some way to filter down the long list of potential vendors to a more manageable handful of best fit candidates. There are other ways to cut down the list (see the next section), but if you must go through the RFP process make sure you do it right. The single biggest mistake people make is to not ask sufficiently detailed questions. For example, I can almost guarantee that if you ask every CPM vendor, “Does your product work with Excel?” you will hear nothing but “yes” straight across the board. Does that help you differentiate between the vendors? Of course not. However, if you follow up that question by drilling into the specifics (e.g., Do you have an add-in? is the interface an external load file? Can you execute commands from within Excel to directly access your database? Does your interface support both read and write access? Can I use existing models?), you begin to have enough information to differentiate the vendors. Also, customize your RFP for corporate performance management. Pulling out an old warhorse generic RFP that IT has used countless times before that asks question such as: “How many characters is the account field?” is not going to add much value.
Who will receive your RFP? Or, if you skip the RFP, how will you create your vendor short list? Some companies sidestep making a short list by just looking at the vendors with the biggest marketing budgets – mainly because they have seen or heard of them most often. If you do that, you run the risk of paying top dollar for features you may not need. Someone’s got to pay for marketing, after all, and it could be you. Or, you may miss out on a lesser-known vendor with a product that is a better fit. A little more in-depth research is in order. Most people start their research on the Web. A quick Google search will turn up any number of free whitepapers, reports, and buyer’s guides. Free research material is free for good reasons: whether it’s just marketing material in disguise, or it’s a high-level overview designed to entice you to purchase more detailed information. If you are going to purchase CPM software for hundreds of thousands of dollars, and probably spend an equal amount on services, shouldn’t you make a small investment to make sure you consider the right vendors? It makes sense to purchase in-depth reports from a recognized industry analyst or to look to a third-party CPM expert for guidance and advice.
Once you have identified your vendor short list, it’s time to put the vendors through their paces. With that in mind, let’s take a look at the actual vendor evaluations, scoring process, selection and negotiations.
Before you go any further, if you haven’t already put together a committee that consists of, or at least represents, the key stakeholders, you need to create one now. This group should have representatives from all major departments that will be impacted by the CPM solution, not just finance and IT. The key benefits of this are: taking advantage of the combined wisdom of a diverse group, achieving ownership and buy-in from the key stakeholders, and reducing the pool of potential naysayers if the system doesn’t turn out quite as planned. As a matter of fact, if there is someone strongly tied to any current system that is being replaced, that person should be on the committee as well in order to feel connected to the new system initiative.
Although you may want to spend some amount of time looking at the slick, canned vendor demos, you will want to focus the bulk of your time on scripted demos, or “proofs of concept.” In corporate performance management today, many of the systems, at least at a superficial surface level, look and feel very much alike. You will not get very far in differentiating the contenders without some customization focused on how you will actually use the system in your company. Either on your own or with the help of outside experts, you need to identify the most important and/or most difficult aspects of your planned use of corporate performance management. Then, develop a script that you want the vendor to follow that demonstrates how their product will uniquely meet your needs. For example, if you allocate certain expenses down to individual business units based on their percentage contribution to consolidated revenues, have the vendor demonstrate how their product can handle this sometimes tricky multistep process. Then, evaluate the various vendors on the ease with which this is accomplished. Of course, in most cases it will appear simple and straightforward when demonstrated. That’s why you need to ask to see how it was accomplished. This is where differences will become apparent. Some products will have complex logic rules that a consultant wrote to make this happen. Other will have created shadow accounts or entities to hold interim calculation steps. Those best allocations will have pre-built functionality to streamline the process and make it easier for you to administer and maintain. If you look at most of your key requirements this way, certain vendors will begin to stand out from the pack.
Just asking the vendors to create a custom demo or proof of concept will begin to shrink the list of viable contenders. Some will decline. The reasons can range from simple economics (the potential revenue from you is not worth the cost of this sales effort) to recognition by the vendor that your needs are not a good fit for their product. Also, in some cases, they are just too busy. Whatever the reason, it is better for you in the long run that they dropped out early. If the product was a good fit and they really wanted you as a customer, they would have found a way to accommodate your request.
Before the vendors come in and run through their custom demos, there a few internal steps that need to take place. First of all, you have to train all the members of the evaluation committee on what corporate performance management really is and how the company plans to use it. Without that knowledge they may not be on the lookout for important capabilities and may focus on irrelevant ones. For example, some of the committee members may be wowed by products that can produce fancy animated 3D graphics. If, however, your focus is on a system that can work with Excel and crunch numbers really fast, then there is going to be a disconnect.
You need to prepare a scoring worksheet that has columns for each vendor and rows identifying your key evaluation criteria. It would also be useful to include weighting factors, adjusting for the relative importance of each element. Whatever tool you use to create this scoring worksheet it needs to be able to quickly and easily consolidate the results from all committee members. When the vendors come in, each evaluator should enter their reactions in the worksheet. In the end, the scoring worksheet should highlight the top vendors as selected by your team.
In addition to evaluating how successful the vendors were at accomplishing the goals of your demo script, there is a key question you need to ask each vendor: What are the short-and long-term product plans? The long-term plans will tell you if their research and development investment is going to be aligned with your needs. For example, if they say they plan to rewrite the product for a hosted environment and that doesn’t interest you, you may want to consider a different vendor that is more focused on development in areas that are of interest to you. The short-term plans will tell you what is lacking in the current solution. If they say the next release will have even better integration between models, that probably means the market or their clients have said the current integration is not good enough.
When all the vendors have gone through their paces, you can look at the consolidated results. While it may appear obvious who the favorites were, be sure to watch out for any sizeable variances. That is, if a vendor received an 8 average on a 1 to 10 scale or a key feature, were all the votes around 8, or were there some 10s and some 6s. Those are very different situations. In the latter case, you need to take into account that some people were not thrilled with this vendor’s performance in a certain area and may not be excited by the prospect of choosing them for your CPM solution.
Once you have selected the best solution for your needs, it is time to determine the modules that you need how many seats, negotiate the best deal and determine who will assist with implementation. These topics are covered in additional articles available on the CPM Partners website.