Robert Kugel's Analyst Perspectives

Over the past six years big technology corporations have been acquiring all sorts of software companies, accelerating a general consolidation of the software industry since the dot-com boom ended in 2001. The consolidation has been driven in part by the deceleration of technology innovation in the business software market. Technology evolution, however, has been steady and progressed far enough now that I think we’re about to witness a revolution in how companies use analytics in business processes. I don’t used that overworked term lightly: I expect this to be as revolutionary as the impact that client/server computing had on transaction processing and related systems such as ERP and CRM. These analytical processes address performance management processes of all kinds, including planning, budgeting and reviews. The revolution in analytics-driven business processes will come about because of the convergence of in-memory computing, big data, mobile computing and the cloud. In all areas of performance management, including planning and budgeting, companies will be able to work more interactively and in context with “the numbers,” which will broaden to include operating as well as accounting data. Through its acquisitions, IBM has assembled the necessary components to be an important player in the revolution. IBM recently briefed analysts on upcoming product releases and its technology direction. Since the specifics are covered by a nondisclosure agreement, my comments are intended to connect what I see as general market trends to the company’s existing capabilities, which I believe it will strengthen in the coming months. Cognos Planning has been an important dedicated planning and budgeting application. The addition of the TM1 server from Applix gave it in-memory capabilities. With in-memory computing, planning and review sessions can be more dynamic, enabling users to shift quickly from what drove exceptions to its possible impact on future results. It’s one reason I expect budgeting to evolve into what I call integrated business planning and our research shows as critical to optimizing business processes. Executives will be able to get fast answers to detailed what-if questions and go beyond determining what happened. In that case, monthly planning sessions can shift from a rear-view-mirror focus to one where the main objective is to decide what to do next. People will be able to anticipate what happens, for example, if the price of copper stays where it is or if it goes up 10 percent. If sales exceed expectations, they can consider how many people the company will need to hire in which positions in order to increase production by a certain percent within two months. It used to take days to get answers to these questions. Now, thanks to technology, they can be answered in moments and not just in terms of a basic income statement. A revised budget, cash flow statement and balance sheet can be available at the same time to determine the financial implications. In-memory computing goes hand-in-hand with being able to handle very large data sets (“big data”) and gives organizations the ability to work with an unprecedented range of information about operations in addition to the financials. Performance indicators can be built around a more comprehensive set of non-financial data and ratios as well as a better integration of financial and operating data. The ability to work with large data sets will bring predictive analytics into the mainstream (as my colleague David Menningercommented in a recent blog. IBM’s acquisition of SPSS has given it the ability to incorporate predictive analytics in performance management processes. Predictive analytics can be especially useful in spotting anomalies and exceptions fast and to drive real-time alerts, rather than waiting for period-end reviews. Mobility and cloud computing give executives and managers the ability to use these more capable management analytics wherever they are, not just in a boardroom or behind their desk. More informed discussions can take place in context, wherever and whenever they occur, and decisions can occur immediately. Mobility is a quality software vendors need to incorporate in software design and, as our Value Index assessment of Financial Performance Managementapplications shows, IBM has done well in a range of areas including mobility. IBM’s acquisitions of Cognos, Applix and SPSS supply the ingredients for it to be a significant player in the coming revolution in how companies execute analytics processes. I expect we will be hearing a lot more from IBM over the next year about specific products that will support the revolution. Best Regards, Robert Kugel – SVP Research

Robert Kugel's Analyst Perspectives

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