Gartner Magic Quadrant for Corporate Performance Management (CPM) Suites
(This is an extract from Gartner RAS Core Research Note G00172934, Neil Chandler, Nigel Rayner, John E. Van Decker, 25 January 2010, RA2 05092010. For more information or to purchase this article, please visit www.gartner.com.)
The market for corporate performance management suites continues to grow. Users should evaluate vendors carefully, according to business needs and their broader business intelligence and performance management strategies.
The market for corporate performance management (CPM) suites continues to grow rapidly. Previous years were marked by large-scale vendor consolidation and subsequent portfolio rationalization, while this year has seen a more stable market in which the vendors have focused on execution (particularly the large vendors selling into their existing customer bases). Demand continues despite the difficult economic conditions, primarily because CPM has helped to manage cost optimization efforts and is now increasingly employed in supporting growth-based strategies. Vendor offerings from larger vendors and CPM specialists are rich in functionality, with many potential benefits. However, the market is dominated, in terms of market share, by the three megavendors (Oracle, SAP and IBM); although they all have strong product portfolios, there is still some uncertainty among users about future product road maps. Additionally, specialist vendors continue to grow, and this year sees five new vendors enter the Magic Quadrant. The specialists continue to offer leading-edge functionality and licensing options that appeal to organizations that do not want to choose from the megavendors.
CPM suites can bring greater rigor, accuracy and transparency to many management processes, such as budgeting, planning and forecasting (BP&F), financials and regulatory reporting (and associated compliance challenges), and they can deliver a better understanding of the drivers of corporate profitability. Although awareness of the CPM concept has become more widespread, Gartner still estimates that nearly 50% of large enterprises and 75% of midsize businesses are using spreadsheets or legacy applications to meet their core management process for BP&F, financial consolidations and financial reporting. Furthermore, most CPM suite implementations have focused on improving the financial functions (primarily BP&F), and less on the strategic aspects of CPM (such as strategy management and profitability modeling). Clients that have established CPM solutions for BP&F and reporting are now increasingly looking at strategy management and profitability modeling to increase the sophistication and scope of their solutions; first-time adopters are also investigating the higher value of these less-adopted CPM components. Hence, there is still a significant and growing demand for CPM solutions. Therefore, conduct evaluations of the CPM suites based on their fit with these key business requirements, and on the ability of any solution to meet your performance management (PM) and business intelligence (BI) needs (see Figure 1).
MAGIC QUADRANT
Market Overview
CPM includes the processes used to manage corporate performance, such as strategy formulation, budgeting and forecasting; the methodologies that support these processes, including the balanced scorecard, or value-based management; and the metrics used to measure performance against strategic and operational performance goals. CPM also comprises a series of analytic applications, such as BP&F, financial- consolidation, and financial-reporting solutions, which provide the functionality to support these processes, methodologies and metrics, targeted at the CFO, finance team, senior executives and corporate-level decision makers (see the market definition below). CPM projects typically focus on BP&F, or on financial consolidation and reporting. But CPM applications are also key in linking strategy to operational execution; they also leverage BI investments to bring consistency to financial and operational reporting, which can improve corporate governance, and can help address compliance issues. Increasingly, CPM applications can be used to identify the drivers of profitability to help organizations pursue profitable revenue growth. However, there is a lack of knowledge among most finance and business users about the potential of these applications, and few companies appear to be leveraging them to their fullest extent.
The CPM suite market continues to experience strong momentum, growing nearly 28% during 2008. This is partly explained by an internal change in the way that Gartner analyzes the CPM market. In previous years, we identified the market as a composite of embedded CPM functionality in ERP and BI products, as well as stand-alone CPM suites. This year, we based market sizing only on stand-alone CPM suites. Figures for the previous year were, therefore, revised to account for this change in methodology, which concluded that the overall size of the market is now $1.867 billion, worldwide. This significant growth is due not only to acquisitions, but also to a strong execution by the top vendors’ cross-selling and upselling CPM into their large user bases. Smaller vendors (such as Clarity Systems, Tagetik, Prophix Software and Exact- Longview) continue to do well and have been able to capitalize on the opportunity created by Microsoft’s road map changes. Several factors contributed to the continued growth in CPM revenue during 2008:
- Following significant acquisitions, and the ensuing confusion over product road maps, the megavendors moved into a more aggressive execution phase, resulting in increased adoption within their large customer bases.
- Due to the economy, organizations are re-evaluating their internal costs to ensure that their operations are as efficient as possible. This has put pressure on budgeting systems and processes, leading to a drive to replace these with CPM applications. Also, the economy increased the focus on profitability modeling and optimizations. CPM solutions help organizations identify actual cost and revenue drivers based on the consumption of resources. More recently, we have seen the continued adoption of CPM to support return to growth strategies.
- Many organizations replaced difficult-to-maintain, inflexible or outmoded spreadsheets, and homegrown financial applications.
- Continued growth in large enterprises was fueled by the desires of many enterprises to achieve greater transparency and adherence to governance and compliance legislation. For example, Gartner has seen increased demand driven by International Financial Reporting Standards (IFRS) and eXtensible Business Reporting Language (XBRL) adoption in the U.S. More-sophisticated organizations are implementing strategy maps (linked frameworks of key performance indicators [KPIs]), using scorecard software to link CPM to other aspects of PM. Strategy management is, therefore, becoming an increasingly important aspect of CPM suites.
- There was increased demand from midsize businesses, representing one of the largest untapped and dynamic areas of the business application software sector.
- Advertising and public relations from increasingly large vendors and system integrators (SIs) is raising the CPM profile and generating greater demand for CPM suites.