In-Depth

Sorting out the meaning of BPM

• By Wayne W. Eckerson
• March 1, 2004

When I first heard the term business performance management (BPM) two years ago, I thought, "Oh no, not another acronym." To me, BPM was just another term to describe business intelligence (BI), which I view as the processes and technologies to turn information into insight and action. I thought the vendor community was up to its old trick of defining new markets in which to sell existing technologies.

Despite my initial skepticism and intrinsic bias to BI, I've come to realize that BPM is real and distinct from BI. The main difference: BI is enabling technology, whereas BPM is a business process that leverages BI. However, BPM does make extraordinary demands of BI, and most organizations will upgrade their BI capabilities to implement BPM.

Like me, many people today are confused about what BPM is. Much of the confusion is that BPM is a new category to describe multiple apps that many firms have implemented, including planning, budgeting and KPI reports. When introduced to the concept of BPM, many managers exclaim, "We've been doing that for years!"

However, most organizations haven't pulled these applications together using a common strategic and technical framework to drive all parts of the organization toward a common set of goals and objectives. Today, companies implement individual BPM applications in isolation.

As a strategic and technical framework, BPM is still in an early adopter phase, similar to data warehousing in the mid-1990s. Gartner Inc. estimates that the percentage of enterprises adopting BPM will increase from 10% in 2002 to 40% in 2005. And IDC estimates the market for financial and BPM apps will grow at an annual compound rate of 10% a year from 2002 to 2007, faster than most segments of the software industry.

When I attended a BPM conference in November 2003, I also discovered that people used the term BPM as shorthand for something else. One equated BPM to budgeting, another to financial consolidation and a third to Sarbanes-Oxley compliance. In addition, some attendees thought BPM meant financial reporting, scorecards or BI (as I first thought).

In researching this column, I discovered that these folks are both right and wrong. Budgeting, scorecarding and business intelligence are all components of BPM, but BPM is much broader and bigger than any of these components.

After much research and some soul-searching, I decided to put a stake in the ground and define BPM. My "big picture" definition: a series of processes and applications designed to optimize the execution of business strategy.

The concepts behind managing a business are straightforward: Executives set strategy, managers develop plans to achieve the strategy and employees execute the plans. Everyone then continuously monitors their progress toward meeting goals and objectives using reports and analysis and makes course corrections as needed to stay on track.

But defining a good strategy and managing it are two different things. BPM processes and tools enable good management by making it easier to identify, communicate and monitor key drivers of business value.

BPM helps organizations to focus on the few things that drive business value, instead of the many things that generate activity but don't contribute to the organization's long-term health. Thus TDWI's definition of BPM does not contain the word "performance." Once an organization understands its key value drivers and communicates and calibrates them, it can then execute business strategy by managing performance.

Despite the current confusion about its definition, BPM is gaining adherents. Early adopter companies are deploying BPM initiatives to better communicate and execute business strategy, and to gain greater visibility into organizational performance. These early successes are stoking red-hot interest in BPM. If your company is not already embarked on a BPM initiative, it will be soon.

Please see the following related stories:
"Getting real about real-time BI" by Alan R. Earls
"New wrinkles in data integration business" by Alan R. Earls
"DB design and app development: Why can't we be friends?" by Alan R. Earls