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The developed world has an embarrassment of riches when it comes to information technology. Individuals walk around with far more computing power and data storage in their pockets than was required to send men to the moon. People routinely hold on their laps what would have been considered a supercomputer a generation ago. There is a wealth of information available on the Web. And the costs of these information assets are a tiny fraction of what they were decades ago. Consumer products have been at the forefront in utilizing information technology capabilities. The list of innovations is staggering. The “smart” phone is positively brilliant. Games are now a far bigger business than motion pictures.

VR Logo Bug Square BufferYet few business users are tapping the full potential of today’s systems. Most organizations have been slow to integrate IT innovation into their core processes. Companies have made considerable investments in information technology, but their business methods have been slow to adapt to the resources available. For instance, software for incentive compensation software and for planning and budgeting has made it possible to improve these processes, but most companies manage compensation, budget and plan in much the same way they did decades ago. To be sure, it’s much easier for individuals to adopt new tools for themselves than it is to align groups and executives in corporations to change proven approaches – even mediocre ones. But it’s also the case that business software must make it easier for individuals to realize more of the potential of information technology. And this part of the evolution of business software is only beginning. This is the context in which I took note of two emerging capabilities of IBM’s business software. One is its Concert user experience software and the other its emerging application (not yet officially named) designed to make advanced analytics more consumable. These are two important capabilities IBM highlighted at its recent Insight user group meeting and Big Data and Analytics analyst summit.

Integrating processes and data across a business has long been a challenge for IT departments. Some decades ago the issue of “islands of automation” emerged as companies implemented stand-alone business applications one by one to perform some function but then realized that it would be handy if these could share data and manage processes from start to finish. Initial progress toward this goal was made in the form of applications such as ERP that offer integrated functionality and enterprise data stores, although these often were difficult to implement and complex to maintain. Lately, software vendors have been refocusing to provide users with ways of facilitating end-to-end process management and making data more accessible.

IBM Concert is such an attempt. Announced in November 2013, it is a user interface IBM designed to be the central touch point across multiple applications and data stores. (It’s possible to link Concert to other vendors’ software, but it’s unlikely that a company would buy it on its own to link other applications.) It’s meant to replace menu-driven interactions between the user and the system with “I want to do this process” and a “day in the life” approach to organizing how individuals access applications and data. IBM Concert is an example of how we are only now beginning to achieve the longstanding objective of having IT systems conform to the user’s needs rather than the opposite. On a single screen Concert organizes personal task lists and presents metrics, conditions and dashboard elements configured to an individual’s preferences so the user can easily monitor conditions and enable more management by exception. Users can organize the data they need to support a given process right in front of them rather than having to go to some other application to fetch that data.

IBM Concert also has a social component that provides the ability for users to collaborate in context. Social applications generally have improved organizations’ connectedness. They offer greater immediacy than “copy all” email, greater inclusiveness than chat software and better communication in a mobile and geographically dispersed workforce. Initially, social applications took a broadcast approach similar to an unfiltered Twitter feed but as I pointed out at the time, that wasn’t a useful approach. As anyone who has used Twitter during an event can attest, the volume of messages quickly exceeds one’s ability to pick out the important ones. Moreover, not everyone wants to share information broadly, especially, for example, finance departments. Concert by contrast “understands” the area in which the individual is working and connects him or her to the conversations of others who are part of the group that needs to collaborate on that specific task. Users also apply hashtags to add a specific context to the message.

I think that Concert has the potential to become the nexus of business people’s computing environments and a sidekick that helps them stay organized and informed, get alerts, collaborate, find answers and explore their workday world.

Both at Vision and again at the Big Data and Analytics analyst summit, IBM previewed Project Catalyst Insight which is a not-yet-named application that is a significant advancement from its SPSS Analytic Catalyst software. Making big data and analytics more useful and consumable by the white-collar workforce (and even some of the blue collars) would be provide a major boost to organizational performance. By itself, a mass of data is not especially useful, and there are significant challenges to teasing out insights from large data sets, especially when that requires sophisticated analytical techniques. Another as-yet-unnamed application from IBM is designed to make big data and analytics more consumable and more useful. Typically large volumes of data are now accessible mainly to those with Ph.D.s in statistics or otherwise highly trained. The main objective of this project is to package advanced analytics routines for use, after limited training, by ordinary business analysts working in any department in any industry.

Big data has always been with us; it is just a question how much “big” is. Today the term refers to data sets so large and complex that organizations have difficulty processing them using standard database management systems and applications. Technology for handling big data has crossed a threshold, becoming more capable and cost-effective. Companies can now to tap into much larger amounts of structured and unstructured data. Big data has potential – and potential pitfalls – for improving a company’s performance, as I have noted. Big data is of little use unless organizations have the ability to use analytics to achieve insights not available through more conventional techniques. The ability to sift through large quantities of business-related data rapidly could set in motion fundamental changes in how executives and managers run their business. Properly deployed, big data can support a more forward-looking and agile management style even in very large enterprises. It will allow more flexible forms of business organization. It can give finance organizations greater scope to play a more strategic role in corporate management by changing the focus of business reviews from backward-looking assessments of what just happened to emphasis on what to do next.

vr_NG_Finance_Analytics_14_innovative_companies_adapt_betterThe challenge for many companies is that big data and advanced analytics are not readily consumable. Our research on finance analytics finds that fewer than one-third (29%) of companies use big data to support their finance analytics, even though this technology can handle the flood of data into today’s businesses and can help produce more useful analytics and advanced techniques. Although analytics is essential to finance departments, their focus remains on the basics. Fewer than half (44% each) use the proven newer techniques of predictive analytics and leading indicators. Nearly three out of four (73%) do not assess relevant economic or market data and trends, and fewer than half assess customer and product profitability; any of these could make analyses more relevant to the overall success of the company. The ability of finance organizations to master analytical techniques – especially advanced ones – ought to be a priority for senior executives because our research shows a correlation between competence in utilizing big data and analytics and the ability to adapt quickly to changing business and economic conditions.

IBM SPSS Analytic Catalyst Insight is designed to make it easier for business users who are not trained statisticians to create predictive analytical models just by answering a few preliminary questions about what they want to accomplish using the data. The new incarnation with IBM Project Catalyst Insight aims to simplify the process even further to bring it into the reach of a wider set of business users. It does so by packaging a range of standard routines that would be applied to data sets and providing even more guidance to analysts and even some business managers that know what they want to know but have a limited grasp of the analytical techniques necessary to find meaning in a mass of data. If IBM can create an application that enables more business users to utilize predictive analytics and other advanced analytical techniques, it would represent a big step forward in making big data a useful tool for many more functional areas than it is today.

Both IBM Concert and the new business analytics tool called Project Catalyst Insight “to be officially named later” reflect IBM’s strategy of achieving product differentiation in a rapidly evolving software market. The first decades of packaged business applications were characterized by a race to create new categories and load them with distinguishing features and functions. In the next decade competitive advantage will fall to software vendors that – in addition to features and functions – can provide business people with a user experience that is easily molded to how they naturally work. IBM Concert is a useful first step that is likely to be further refined. The new analytical environment derived from IBM SPSS Modeler and SPSS Analytic Catalyst Insight looks and sounds like a good idea, and it will be interesting to see how it develops when it is generally available.

Regards,

Robert Kugel – SVP Research

From my perspective, Infor’s strategy to accelerate revenue growth is to offer companies more innovation and a lower and more predictable cost of ownership than its rivals in the business software market; its products include the major categories of ERP, human resources and financial performance management. It aims to innovate by focusing on improving the user experience and to lower costs by redesigning its software architecture. The innovation stems from a fresh approach to designing interactions between users and business software: simplifying it and providing a more modern user experience that people have grown accustomed to in their personal software. The better cost-effectiveness rests on designing its software to reduce the expense of integrating and customizing it. One element of this is creating richer functionality for narrowly segmented micro-verticals. Another is offering cloud-based versions built on less expensive open source infrastructure and third-party commodity services. The software markets that Infor serves are mature and offer limited growth. So to be successful the company must increase both its market share and its share of a company’s IT spend (capturing internal IT spending and outlays to third-party consultants and systems integrators). To prove that the company’s strategy is working will require sustained organic growth (excluding new acquisitions) in revenues.

Infor’s transformation to this point has been a significant undertaking, requiring major changes in its product architecture to facilitate innovation and improve cost-effectiveness. Recently, Infor held an analyst meeting at its headquarters in New York. In this context, and being a native New Yorker, I was reminded that it took just one year and 45 days to build the 1,250-foot tall Empire State Building but more than four years to construct a 600-foot tunnel connecting the 51st Street station on the Lexington Avenue line to the 53rd Street IND subway station. The point relevant to Infor is that greenfield construction can happen quickly, but it takes much longer to build something when you also have to restructure a complex set of plumbing and wiring around it. Infor’s product portfolio grew through a long series of acquisitions. Connecting the past (a potpourri of stand-alone applications) with the future (a coherent set of applications and services) has been a lot of work.

Innovation is the more eye-catching aspect of the work in progress. Infor established Hook & Loop as its internal creative agency with a mandate to substantially improve the user experience of its products. This move is reminiscent of industrial design companies like Ideo that thoroughly rethink all aspects of a product to better address customers’ needs. Infor’s strategic approach attempts to achieve differentiation in the crowded and hidebound software categories in which it competes. The company’s software now has a new, compelling and intuitive look and feel. Its user interface, code-named Gramercy Park, is designed to address immediate needs in what the user is doing rather than enforce a hierarchical approach to navigation. Instead of exposing the complexity underlying an application, the UI focuses on what is relevant to the user at the moment and guides navigation in the context of what a likely to want to do next, filtering in only what’s relevant.

As I commented a while back, business software is undergoing a fundamental redesign on the scale of the shift from the command-line interface to the graphical user interface (GUI) that began in the mid-1980s. There are three forces at work. One is the retirement of large numbers of members of the baby boom generation and their replacement by a generation that grew up with computers and computer games from a young age. Also, software and technology vendors have been recognizing the need to “consumerize” business applications as mobile device interactions, gestures and other newer user interface  conventions gain prominence, and are incorporating these innovations in their stodgy products. A third factor, “gamification,” is changing the basic approach to routine tasks, making them less tedious and handled more productively, especially for this new generation of users. For the longer term, the user experience will be an important part of business customers’ software evaluation process. For the moment, however, the status quo still dominates in the approach companies take to buying software – but not always. As Infor CEO Charles Phillips put it at the event, “If the CIO is under 45, we win.”

There are three main ways that Infor is attempting to improve the cost of ownership proposition for ERP and HR software. Facilitating integration of the application with other systems and streamlining implementation reduce the amount that has to be paid to systems integration and consulting companies to get the software up and running. A third is to offer a multitenant cloud deployment option, which can reduce implementation and operating costs.

The purpose of transaction systems such as ERP, supply chain vr_infomgt_barriers_to_information_management_updatedmanagement and human resources management is not simply to collect information but to make it easier to use. Transaction systems aid efficiency when they reduce the administrative burden on collecting information and improve effectiveness by making this information readily accessible for analysis and decision support purposes. Many companies face barriers to efficiency and effectiveness in enterprise systems because of the difficulty of integrating processes across functional silos (particularly when a process requires systems integration) and when data generated by multiple systems and held in multiple locations (including desktop spreadsheets) is difficult or impossible to access. Our benchmark research confirms that this is an issue. Two-thirds of companies said data spread across too many applications and systems is a major challenge in information management. To address this issue, Infor has revamped its applications around its ION middleware and a publish-subscribe approach to integrate applications in a loosely coupled fashion. This approach makes it much easier to integrate applications from any single vendor as well as disparate vendors. All data published by an application is designed to include a robust set of self-explanatory metadata that enables any subscribing application to translate the data into its own terms. It allows companies to phase out silos of information and substantially reduce the time and expense required to maintain links between applications. In creating the user experience, it removes limits on what information or analytics an individual can access in performing a process, thereby providing a richer information context for that process.

Infor’s ERP portfolio includes a range of applications that evolved to address the specific needs of vertical (such as automotive original equipment and aerospace) and even micro-vertical (beer and machinery) business segments. Creating versions of ERP software for specific industries has been standard practice for many vendors for decades. It’s attractive for buyers because it reduces the amount of work that must be done during the initial implementation. As targeted functionality is incorporated into the software, it also reduces the need for users to customize their software to get necessary capabilities. Vertical specialization also tends to attract like companies to a vendor, giving the vendor an incentive to invest in additional features and functions needed by this group of customers. This happened to the various ERP packages that Infor acquired. Less customization also means that when an existing customer upgrades to a new release it requires less time, expense and disruption.

In addition to having advantages for on-premises deployments, having built-in functionality available for a specific type of business also better supports a multitenant cloud strategy. Generic multitenant ERP systems are useful for a segment of the market, but many cannot live with the functional compromises, especially those in manufacturing businesses. One of the impediments to deploying ERP systems in the cloud is that multitenant systems do not necessarily provide sufficient configurability to make this approach workable for individual companies.

Infor’s ION middleware architecture, coupled with its data vault, provides companies with a practical way of creating a data store of record that can address most data quality and availability issues. It can facilitate a more sophisticated approach to analytics in applying big data techniques and predictive analytics by making more company data accessible and useful. It can provide a richer and up-to-date set of data for dashboards, scorecards, alerts and decision support analytics.

Infor’s Ming.le architecture also supports collaboration in context – another rapidly evolving requirement in enterprise applications. In a work environment, individuals have multiple tasks in multiple roles. The list of people with whom they collaborate differs depending on the task and role. In some cases, it might be many people – a department, a division or even an entire company. In most others, though, it’s a small and evolving group working on an ongoing process (such as planning benefits or closing the books) or specific projects. Even business functions that initially weren’t thought to need “social” capabilities are fertile ground, especially finance organizations, as I have noted. Stand-alone collaborative software that is disconnected from a specific application can work, but it’s better when collaborative capabilities are built into or fully integrated with a business application. One with good collaborative features “knows” what the user is doing at any moment (a task and its context). It can automatically connect the user with the relevant group in ways that provide context to those brought into the effort (for instance, by pointing to data or providing text or charts) and facilitates the resolution of an issue or a task handoff.

Infor has accomplished a great deal, but will the investment pay off? For the past seven years I’ve been observing the transformation of Infor from a roll-up of a large number of often obsolete software packages into company with rationalized modern business applications. I’ve noted the incremental improvements that have taken place. The company has invested wisely in re-engineering the product line and the underlying architecture to improve the applications’ performance and reduce the cost of ownership. While it continues to support users of older apps as much as possible, it has winnowed its product line to four core applications that will also be the basis of its cloud offerings: healthcare and public sector suite (based largely on what is acquired from Lawson), discrete manufacturing (largely based on its LN application), process manufacturing management (based on M3) and midsize manufacturing and job shop (based on Syteline). By enriching these applications with additional vertical and micro-vertical capabilities to improve their appeal in a multitenant cloud setting, Infor can improve the value proposition for on-premises buyers. So, as a measure of progress, Infor appears to be at the end of the beginning of its transformation. The company’s next important step is to confirm that its strategy is working by accelerating revenue.

This said, however, Infor still faces several major challenges. Successful rebranding takes time, but Infor remains the world’s largest software company nobody ever heard of. Even though the name “Infor” is sensible (short, to the point and easy to pronounce and understand in multiple languages and cultures), it gets in the way of raising the company’s profile. A web search of “Infor” returns a cacophony of results related to information and companies whose names have the same root. I’m not suggesting that Infor go back to the old product names. More money spent on branding and top-of-the-funnel marketing would help, but that’s constrained by Infor’s capital structure. The company has been able to reduce the average interest rate on its debt over the past year, but it is still highly leveraged and has high interest payments.

The leveraged nature of the balance sheet and accounting rules obscures the company’s underlying profitability when measured by earnings before interest, taxes, depreciation and amortization (EBITDA). So Infor is struggling to get into a virtuous cycle: Faster top-line growth would enable it to restructure its balance sheet, replacing debt with equity (most likely through a public offering of shares) and thereby fattening pretax margins. The company isn’t there yet. The lack of name recognition hurts, especially when a sales cycle begins with older executives who have a preconceived short list of vendors that doesn’t include Infor. This stands in the way of an opportunity to sell on value and total cost of ownership, which is an essential part of its sales strategy.

Getting to an “escape velocity” rate of revenue growth in its mature markets will continue to be tough. The average deal size appears to have been increasing as a higher percentage of contracts include multiple products. This is one reason why its license revenues are growing faster than legacy ERP and human resources/human capital management companies such as SAP and Oracle in the large enterprise segment and Sage for midsize companies. But it’s about even with Microsoft Dynamics and lags SaaS vendors such as NetSuite and Workday. Moreover, given Infor’s large installed base, maintenance payments make up about three-fourths of its software revenues and about half of its total revenues, which limits the potential for top-line growth since the percentage increase in the number of users or customers from one period to the next will likely be in the low single digits. Infor can partly offset this by selling more categories of software to existing software customers, convincing them to switch from an on-premises deployment to using their cloud services or both.

Selling software that requires less customization to specific verticals and micro-verticals has been demonstrated to be effective, and Infor has had success in a range of areas. However, it’s not clear that the company has sufficient breadth of business coverage at sufficient depth to appeal to a wide enough range of potential customers. Over time, the company’s continued investment in its products to achieve maximum configurability with a minimum of customization will increase the potential market for on-premises deployments as well as in its multitenant software-as-a-service (SaaS) offerings. Infor’s ability to convert the concept into accelerating sales will serve as the proof point that it is working.

Infor’s approach to the user experience is the most important factor in addressing these challenges. The new generation of users expects software to wrap itself around the needs of the individual and require less effort to do what needs to be done. Their expectations of business software are better aligned to Infor’s approach to enterprise business applications. Companies with aging software that want to lower their information technology costs and enhance the productivity and effectiveness of their employees should look into what Infor has to offer.

Regards,

Robert Kugel – SVP Research

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