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Issue Date: October 2007

MarketWatch: Microsoft makes a performance point

October 2007
Madan Sheina

After four years of development and over a year of beta testing, Microsoft has finally shipped its first serious entry in the performance management software market. Office PerformancePoint Server 2007 certainly brings much-needed clarity to Microsoft's piecemeal business intelligence and analytics strategy that is strewn across homegrown and acquired products.

But can PerformancePoint really do for PM what Microsoft's SQL Server Analysis Services has done for online analytic processing and commoditise the technology and take it mainstream?
It is no coincidence that Microsoft first announced PerformancePoint in June 2006, two months after it acquired ProClarity. ProClarity brought PM technology assets to the table including analytics, dashboard, and data visualisation tools that are designed to sit on top of the Analysis Services OLAP engine embedded in Microsoft's SQL Server 2005 relational database platform.
There are three main parts to PerformancePoint:
* Monitoring: scorecarding, dashboarding and reporting tools based on an upgraded version of Microsoft's Business Scorecard Manager 2005 application.
* Analysis: server and web-based analysis tools sourced mainly from ProClarity.
* Planning: homegrown planning, budgeting, forecasting, and consolidation and management reporting (statutory and GAAP) tools that come from Microsoft's internally developed and used 'BizSharp' project.
From a platform perspective, PerformancePoint relies on: Microsoft's SQL Server as an underlying data management platform for OLAP analysis and reporting (SQL Server Reporting Services); and Office tools, notably Excel, as its main user interface. The software runs on SQL Server 2005 and Office 2003 and 2007. Windows SharePoint Services, which is part of windows Server 2003, provides web access to PerformancePoint.
PerformancePoint also seems to have shifted the positioning of SQL Server Reporting Services, which is moving further down the stack into the back-office side in SQL Server, and away from the front-end user tools space. In PerformancePoint, ProClarity's software seems to have emerged as the dominant reporting tool, with Reporting Services relegated to line-of-business reporting.
The planning, budgeting, consolidation, and forecasting capabilities of PerformancePoint are brand new, but the application is not based on 100% newly developed code.
ProClarity's core server-based technologies form the analytic skeleton of PerformancePoint. But Microsoft has also fleshed out much of the product with in-house technology like the BSM software it developed in late 2005 and PM-oriented 'Accelerators' which it offers as part of SQL Server. The Accelerators also include a scorecarding tool.
PerformancePoint incorporates Microsoft's ubiquitous Office as a front end for PM. Excel remains the go-to client of choice for most of PerformancePoint's analysis and data visualisation capabilities.
Meanwhile, SharePoint is used for dashboard rendering, while Windows SharePoint Services, now part of Windows Server 2003, provides web access to PerformancePoint.
The combination of ProClarity technology propping up the back-end server and Microsoft technologies filling in front-end positions PerformancePoint as an intermediary server that links the back-end BI services of SQL Server 2005 with Office-based front-end BI user interfaces. It puts Excel on top of SQL Server multidimensional (OLAP) cubes. Excel can be used for creating budgets and plans that PerformancePoint takes and writes-back to SQL Server.
Microsoft has smashed together SQL Server and Office and recast both technologies into a set of focused applications for PM. However it is important to remember that PerformancePoint is first and foremost a scorecard-based BI application. It is designed to manage a hierarchy of interrelated and connected scorecards that cascade metrics and key performance indicators up to a unified corporate strategy or business plan. The scorecarding capabilities are tightly coupled with budgeting and planning tools that provide the necessary management and control levers for the metrics.
Customer considerations
Functionally, PerformancePoint is not the richest or the broadest PM platform on the market. But it has been widely tested. Microsoft points to over 10 000 participants over four so-called community technology previews (CTP), which is what the company calls its beta program. Arguably that makes PerformancePoint the most intensely beta tested PM product on the market.
Microsoft claims it has initially focused its development efforts on responding to CTP feedback, rather than trying to pump new functionality into PerformancePoint. That focus is reflected in the richness and sophistication of PerformancePoint's functionality, which reveals a few holes:
* Business content: PerformancePoint incorporates some content, including built-in business rules for currency conversion, consolidation of multiple general ledger types and systems, and basic workflow (approvals and escalation) that adds some degree of PM logic to the tools. Microsoft points out that it has been using PerformancePoint internally for financial planning and forecasting for over two years (as part of the three-year BizSharp project) and already has three published case studies.
* Business process frameworks: PerformancePoint seems to do little to address the complexities of treating and managing performance as a process. Microsoft claims that PerformancePoint is the first product of its kind to integrate planning, monitoring, and analytics.
Architecturally that might be true, but managing performance as an holistic end-to-end process requires more sophisticated workflow management and tracking software that links operations to financial performance metrics.
* Financial reporting and consolidation: PM software from Cognos, Hyperion/Oracle, and Business Objects provides broader and more specialised capabilities for financial reporting, including support for European consolidation rules and accounting nuances, for example.
* 'Techy' interface: PerformancePoint interface for building and using models is indicative of an immature release. It has a technical feel and lacks some of the slick data-entry and manipulation tools found in other PM products. Nevertheless, the use of Excel as a primary data input interface will still appeal to many users in finance.
* Integration: PerformancePoint's scorecarding and dashboarding interfaces and analytics tools could be more tightly integrated.
But that is not surprising as they were developed as separate products, one in-house and the other acquired.
* Lack of pre-built applications: PerformancePoint lacks the pre-built analytic applications, templates, and blueprints for vertical or horizontal PM applications like asset planning that are found in other PM offerings. It is likely that Microsoft will turn to industry-specific partners for this, but it could take many years to develop.
The caveat here is that all version 1.0 releases of new financial applications have historically proven to be problematic. Comshare, Hyperion/Oracle, Cognos, OutlookSoft/SAP, and SAS Institute can all testify to that. For example, it took Hyperion four major releases to get its Hyperion Financial Management consolidation software into a fit state. Microsoft is unlikely to issue new releases as frequently as do smaller vendors. Users therefore face a lengthy wait for missing functionality to make its way into PerformancePoint. The second major release will probably appear in the next major release of Office, which is tentatively slated for 2009.
Stacking up
Microsoft PerformancePoint works best when it is implemented as part of a full stack of Microsoft infrastructure that includes SQL Server 2005 (the Enterprise Edition required for planning applications), Office 2003 or 2007 (the latter preferred), Windows Server 2003 (which includes SharePoint Services), .NET, and Internet Information Services 6.0. It is that complete stack that gets the most out of PerformancePoint. And the newer the versions, the better the functionality.
While PerformancePoint is intended to be a single integrated application platform, some but not all of the ProClarity features have been included in the application. ProClarity views can be included in PerformancePoint dashboards, and can work off planning models.
A separate copy of ProClarity is also bundled in for the fullest functionality.
Microsoft is betting on the appeal of tight integration between PerformancePoint and its Office 2007 desktop. The question is whether small and medium-sized businesses, the sweet spot for PerformancePoint, will be inclined to buy deeply into that stack beforehand. So does PerformancePoint 'stack up' financially for a customer that has not shifted to Office 2007?
Microsoft strongly asserts that PeformancePoint does not explicitly require customers to upgrade to Office 2007 for web-based analytics.
A free version of SharePoint in Windows Server 2003 sorts that out. Microsoft might be challenged to position Office as a primary vehicle for its BI and PM strategy. Office 2007 might contain all the necessary tools for accessing and analysing BI and performance, but it can take years for a company to standardise on a single version of Office.
From a planning perspective there is also no functional difference between planning in Excel 2003 and Excel 2007. However, customers of the former will miss out on are the richer user interface (ribbon) and visualisation capabilities and native connections to back-end data sources. For planning, customers will also need to license the Enterprise Edition of SQL Server which comes with an enterprise price-tag.
In the back of customers' minds will also be thoughts of SQL Server 2008, which is expected to ship next year. Could PerformancePoint really be optimised for that release? If so, customers will again need to upgrade their database from SQL Server 2005 to 2008 to take full advantage of their PerformancePoint investment. Microsoft asserts this is not the case, but at the same time it is detailing new BI and data warehousing functionality. This includes intra-partition parallelism, higher data scales targeting 40-50 terabytes, indexing around partitions, and other improvements for scalability, performance and data warehousing workloads, in both the core engine and inside SQL Server Analysis and Reporting Services.
Microsoft says it will release service packs that will allow PerformancePoint to tap into the new functionality. However, it has not made it clear whether this is specifically for PerformancePoint users running SQL Server 2005.
PerformancePoint is optimised to work with OLAP cubes for analysis and reporting. The underlying data source for scorecards and Excel analysis is the same set of SQL Server Analysis Services cubes.
Some believe this exclusive arrangement of rendering planning models as Analysis Services cubes limits PerformancePoint's speed and flexibility, particularly when working in heterogeneous data environments and if there is a preference or requirement to work directly with non-OLAP data sources such as relational data.
This also means that PerformancePoint applications cannot be added to existing Analysis Services cubes. PerformancePoint must build its own Analysis Services cubes. Microsoft has introduced a workaround that lets users link Performance Point applications to existing Analysis Services cubes using custom-coded MDX rules or SQL Server's Integration Services data integration tools. However, the reporting options for PerformancePoint planning applications are flexible since data is held in Analysis Services cubes.
PerformancePoint does not offer any in-memory capabilities like Cognos (courtesy of its TM1 engine acquired from Applix) or QlikTech for speedy on-the-fly analyses. Microsoft argues that in-memory is not needed that SQL Server Analysis Services, with its proactive caching and realtime OLAP capabilities, still allows users to perform rapid what-if analyses in PerformancePoint.
Dearth of skills
PerformancePoint skills are rare and companies will be hard-pressed to find experienced consultants that can help them to implement the technology from scratch or migrate from older or other PM products. Implementing PM is of course a different ball-game than rolling out BI query and analysis tools. Implementers will need to demonstrate a deep knowledge of financial accounting and be comfortable using terms like eliminations and inter-company reconciliations.
Price point
Microsoft's trump competitive card has always been its competitive packaging and pricing. PerformancePoint is no different. Its pricing is aggressive and much simpler than competing PM software.
At $20 000 per server and $195 per client access license (CAL) the PerformancePoint is geared up for broad enterprise-scale deployment.
Importantly, the CAL pricing is independent of what features are used and the type of user. This means that someone building a high-end planning and consolidation system needs the same $195 CAL as someone just viewing a dashboard. This means that any licensed PerformancePoint user will not have to pay extra for scorecarding, planning and reporting; it is all included in a single license.
Nor do they need to pay extra to extend the analysis capabilities to the rest of the enterprise.
That packaging and pricing puts PerformancePoint within the grasp of SMB IT budgets; but only if Microsoft packages it correctly and perhaps offers a smaller, scaled-down version. SMB customers that already run SQL Server 2005 will also benefit from the 'free' built-in BI capabilities inside the database. And with Office more or less established as a ubiquitous tool on corporate desktops, the front end is also free. Companies are also largely saved from having to implement Analysis Services cubes and Reporting Services reports manually.
That all will be a boon to SMBs who might find it easier to shell out additional resources for PerformancePoint's core server-based analysis, dashboarding, and planning capabilities.
PerformancePoint is not only intended to be an SMB play, it also packs a considerable enterprise punch. For example, the Planning capabilities require the Enterprise Edition of SQL Server 2005, which is now hardly priced as a free give-away. For large enterprise deployments, PerformancePoint might not be as cheap as the vendor has suggested, though it is still less expensive than competing enterprise PM products. Most enterprise accounts will have licensing agreements with Microsoft, which mean that they pay significantly less than these list prices. Plus Business Scorecard Manager and ProClarity users are promised free upgrades.
Inevitably the price point of PerformancePoint will shift northwards in the future as Microsoft starts to dominate the PM market. Remember, SQL Server 2005 is not the 'steal' that it was when it was offered as SQL Server 7 nearly a decade ago.
Microsoft Office PerformancePoint Server 2007, which went into production on 20 September, is undoubtedly one of the Microsoft's most high-profile enterprise software product launches this year.
PerformancePoint represents an important milestone in Microsoft BI strategy because it provides a cohesive foundation for a piecemeal BI and performance management portfolio. When Microsoft acquired ProClarity in 2006, it found itself with a full six-pack of BI, analytic, and data mining tools. What was missing was a plastic widget that pulled them together. PerformancePoint does that to some extent, and users of tools will now benefit from a new level of cohesiveness through an ability to exchange information seamlessly without the need to export data from one application to another.
For instance, an Excel spreadsheet can directly link to multidimensional planning data from a scorecard application.
This puts the ProClarity brand to rest once and for all. ProClarity's BI technologies had muddied the waters of Microsoft's BI strategy, but PerformancePoint now absorbs ProClarity's data visualisation and analysis tools and Microsoft's older and lightweight Business Scorecard Manager software and blends it with newly developed planning, budgeting and forecasting capabilities.
PerformancePoint might not be the finished article today or the most sophisticated or functionally rich performance management platform on the market, but compared to the first lightweight release of Analysis Services, PerformancePoint packs an impressive punch.
And so it should after four years of development. Later releases are likely to close the early functionality gaps and improve its complex user interface.
The fact that it carries the Microsoft brand will garner significant attention, especially from companies looking to tap into investments they have already made in Office and SQL Server technologies. That said, the market will probably have to wait for a few major releases before it does to PM market what Analysis services has done to OLAP market.
PerformancePoint is unlikely to trouble large enterprise performance management players like Oracle/Hyperion and SAP in the short term, but it could chip away sales from lower-end Business Objects and Cognos accounts where traditional BI tools are still relatively expensive and complex to deploy.
Microsoft has so far downplayed the impact on BI specialists and BI partners despite recently declaring that it planned to compete more aggressively for its own SQL Server BI customers. Do not be fooled. PerformancePoint has all the makings of being a very disruptive release in BI, on price point alone. Microsoft is bundling a lot of capabilities into the PerformancePoint package at a bargain price, and as its functionality matures, PerformancePoint will keep BI-cum-performance management rivals on their toes, which can only be good for customers.
But PerformancePoint is not a sure slam-dunk for Microsoft. The company faces its own challenges. Unlike its simpler BI tools, PerformancePoint is a much larger and more complex business application.
Microsoft's field experience in applications is thin and this type of software is not something that Microsoft's sales and distribution channels have managed well in the past. The complexity is perhaps self-inflicted. Microsoft has built PerformancePoint from the ground-up to deliver broad planning, management reporting and financial consolidation functionality via a single product, while other PM vendors have broken that up. That is not something that is easy to digest, especially if all you are looking for is a simple and cheap way into business planning and PM.
Source: Computergram

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