We believe this year will see some of the most dramatic changes in performance management since the acquisitions of 2007 (IBM/Cognos, Oracle/Hyperion, SAP/OutlookSoft) remade the vendor landscape. We're not saying that all or even most of the changes will involve mergers and acquisitions, although some will, but the available choices in 2017 will look quite a bit different than they did even just last year.
The basic feature/function trends that we have seen over the last 12-18 months will continue: a focus on ease of use, integration with Office, support for operational as well as financial planning, expansion of analytics capabilities, vertical applications, and the continued move to the cloud. What will be different are the available products, and in some cases, the vendors offering these products.
New Cloud Product Options
In the past year or so the largest vendors have jumped into the cloud-based performance management space with both feet. While continuing to support their legacy on-premise offerings they have brand new offerings that are cloud-only. Over time this will greatly expand the options available for companies looking for a true cloud-based performance management solution. For now though, most of these products are first generation solutions that can't yet match the feature robustness of their on-premise predecessors. Several other vendors with established on-premise products have introduced or ramped up the marketing effort for hosted versions of those same products. In fact it is hard to find a successful vendor today that doesn't offer a true cloud or hosted option. The cloud buyer has more options than ever. In addition, those that aren't ready today to make the move to the cloud can purchase an on-premise product from a vendor that will be able to offer them a clear path to the cloud when they are ready. However, when specifically looking for cloud-based performance management keep in mind that the established cloud-only performance management vendors have the most mature product sets having gone through the most upgrade and enhancement iterations.
What about the vendors themselves? There are recent changes to the vendor landscape that are beginning to show themselves and other changes that we anticipate happening as the year progresses. Let's start by looking at new vendors. Although some would argue this is a mature, established market with a high barrier to entry we have seen new vendors entering this market every year for a while now. This year is no exception. Two successful European performance management vendors that have been dabbling in the North American market for the past year or two should be coming into their own this year. Both have staffed up their U.S. headquarters with experienced senior teams ready to challenge the existing players. They also approach the market slightly differently than the competition. As opposed to offering a handful of fully developed modules these vendors offer a performance management platform with a library of frameworks or models that cover the basics today. The promise is that the library of these application models can quickly grow covering a broader range of solutions that can target specific processes, functional areas, or verticals. By their nature these models aren't as fleshed out as fully developed modules, but that also makes them more customizable. In addition these vendors start with a built-in operational focus supported by expanded business intelligence and analytical capabilities.
Additional changes we expect to see to the existing vendor landscape in 2017 are based on observations we made over the past year. These observations fall into three main categories: vendors that were too successful for their own good, vendors that are looking to grow more rapidly, and vendors that were struggling. Let's start with the vendors that were 'too successful'. Is that even possible? Can you have too much success? The answer is yes, because if not handled properly it can lead to a quick flameout. At least two vendors fit into this category. One has had several years of rapid growth with many successful customers. The problem is they fell into the trap of overselling the product's out of the box capabilities. While their many customers have used their product in many different ways, the pre-built functionality is somewhat limited. This offers the flexibility to address a wide range of needs, but puts them in a weaker position when competing with vendors with more robust solutions for specific processes. Their sales force, flush with success, may not have highlighted this distinction when competing with these other vendors. The problem is that this created customer expectations that the product was simply not designed to deliver on. Result: unhappy customers. This can and did lead to management distraction while trying to turn around these situations. It can also lead to highly vocal negative references. If this continues this vendor may see its' momentum grind to a halt. We'll be keeping an eye on this vendor to see if their sales force has learned their lesson. The other vendor in this category was simply not prepared for their growth and success. We have seen them win many deals with a solid product, but then fall down on the implementation side. They simply didn't have enough experienced in-house consultants or partners. As in the first case this resulted in management distraction and negative references. It was also costly having to provide free expert consulting to fix problems created by junior consultants or clients left to their own devices. The vendor does recognize the problem and has added resources, but the experience part of the equation requires time. We'll continue to watch to see if they have solved their problems in this area. We hope both of these vendors remain as viable options.
Mergers and Acquisitions
On a somewhat more positive note there are vendors that have been very successful and looking to quickly build on that success. While organic growth is an option it can take too long. We have seen vendors in this category looking to address specific verticals, market segments, or functionality gaps by acquiring smaller vendors that have had narrowly focused success in those areas. This type of acquisition would benefit both parties. The smaller vendor would have access to a stronger sales and marketing team and the larger vendor would be able to quickly enter a new market. We anticipate at least one merger of this type in the performance management space in 2017. There are also several vendors around the edges that haven't achieved the levels of success desired by their shareholders. They may have the latest technology innovations but limited domain expertise and related functionality built into their products. Other vendors have very feature-rich product sets but haven't kept up on the technology front and now have products that are viewed as tired and outdated by the market. Again, a merger of vendors in this category could clearly benefit both, but would require significant product development work to achieve those benefits. We expect to see at least one merger of this type in 2017.
In summary, performance management in 2017 will see new product options, new vendors, vendor mergers, and a couple of vendors addressing their issues or beginning to fade away. The opportunities and choices for performance management buyers are greater than ever, but so are the risks. Go in with your eyes open, leverage experts, and thoroughly evaluate your options.