Happy New Year and a Look Back at 2008

With the holidays and 2008 behind us, I thought I’d take a moment a review my predictions from 2008 to see how accurate I was. Of course, nobody is perfect and I certainly missed a few. However, I managed to get a couple right. Below are my 2008 predictions along with my 2009 commentary:

January 2, 2008: The Economy: In my opinion, the “Big Kahuna” of predictions has to do with the economy. I may not be an economist, but I’ve been around long enough to know the signs of recession when I see them. A quick look in the local (US) newspaper tells part of the story: numerous housing foreclosures and auctions. I haven’t seen that since 1992. In addition, rumors a of a weak holiday retail season abound. Coupled with the current and unfolding lending crisis, a dismal Q4 earnings report could seal it. If I’m right, this means that 2008 budgets will be flat to down – especially for IT. The rest of my predictions are either caused by or accelerated by this prediction.

January 12, 2009: When I made this prediction, I had no idea how right I was going to be. From where I sit right now, I would suggest that we’re on the brink of an economic “depression” (aka “severe recession”). Having recently read Paul Krugman’s “The Return of Depression Economics”, I’m hopeful that, with appropriate intervention, things will stabilize by the second half of the year, even though it’ll likely be at a much lower level of economic activity. Earnings announcements due out soon will tell us how bad 2008 really was and will set the tone for the first half of 2009.

January 2, 2008: Market consolidation: As everyone is already aware, 2007 was a year of massive consolidation for BI and EPM software vendors. Although Hyperion, Business Objects and Cognos are gone, the fun’s not over yet. As the big guys feel even more pressure to boost revenues and profits, I believe they’ll gobble up any remaining, above-average software vendors of size (> $100M USD).

January 12, 2009: I was less accurate on this one. Acquisitions were far fewer than expected in 2008. This was likely due to a general lack of available credit, which made acquisitions harder to fund. The only BI/EPM acquisitions worth noting for 2008 were FAST and DATAllegro – both by Microsoft and few assorted smaller ones by Oracle (e.g., ATV). Not much else has happened on this front – even though there are some pretty good bargains out there. Perhaps as credit starts to flow again, the hunt for acquisitions will resume in 2009. Of course, I’m not suggesting that this is necessarily a good thing but, instead, a market reality.

January 2, 2008: Leveraging Existing Investments: With a combination of lower budgets and real urgency to improve business performance, I expect many organizations to try and get more value from software and systems they already own. This would be especially good news for systems integrators – especially those with deep expertise in key vertical and functional areas. So, I would anticipate consultancies become even busier than in 2007 and for a whole new crop to emerge in 2008. Caveat Emptor!

January 12, 2009: Certainly, doing more with less was a central theme in 2008 and will continue to be throughout 2009. However, I’m not sure that consultants have been the main beneficiaries. Budgets are flat to down and less will be spent during 2009 than in 2008. I saw a recent study from an analyst organization suggesting a 50% decrease in IT spending in 2009. I find that difficult to fathom. I believe a decrease of 10 – 20% is more likely. In spite of this, BI and EPM are still top priorities and organizations will concentrate efforts upon these and other critical business challenges - while working to save money whenever possible.

January 2, 2008: Rise of the Business Buyer: I don’t want to give Nick Carr (Does IT Matter? Information Technology and the Corrosion of Competitive Advantage - Harvard Business School Press) too much credit, but many IT Departments have become alienated from the business and less relevant than they could or should have been. An exclusive focus upon the largest software solution providers doesn’t help. In defense of IT, much of this may not be their fault and they may find themselves in an impossible situation. Nevertheless, emerging software vendors and consultants have caught on to the trend and are focusing selling efforts on business management – with the promise of implementing business solutions faster than IT can. Of course, these vendors may eventually have to deal with IT, but will avoid it (if at all possible) until business management is “on board”.

January 12, 2009: While some on the business side continue to seek BI and EPM solutions independent of IT, I have seen greater pragmatism on the part of some organizations and a more conciliatory approach between IT and business users. Having said that, BI and EPM initiatives will continue to be driven by both business and IT departments (often independently) with economic buyers and influencers varying by organization. Irrespective of who drives the initiative, I expect that there will be greater urgency and immediacy associated with it.

January 2, 2008: New Approaches Map to the Emerging Market: On-demand, open source and software appliances have been around for a few years and have experienced varying rates of adoption and success. However, with the above forces changing the shape of the market in 2008 – these options - offering lower cost and fast deployment - become vastly more appealing – especially to business users! Expect to see lots more of each at the expense of traditional software offerings.

January 12, 2009: Given the current recession, I’ve observed a growing interest in open source and Software-as-a-Service as alternatives to traditional enterprise software. Interestingly, some of the enterprise software providers have taken steps to address this by offering to match the open source total cost of ownership (TCO). However, given the different economics surrounding the two business models, I remain skeptical that they can succeed. In general, I believe that 2009 will be a good year for solution-providers offering rapid time-to-value, and a lower cost structure. Right now Software-as-a-Service is my top pick.

Best wishes to you and yours for a healthy and prosperous 2009!

Howard

Solar Array in Place!

For those of you interested in the progress of our green energy project, we're happy to report that our solar array is now in place!

It's hard to tell the size of the array from the photo. But, it's pretty large - measuring about 3 meters x 5 meters (10 ft. x 16 ft.).

Our SkyStream wind turbine has also arrived. Now we're just waiting for the 15.2 meter (50 ft.) tower that it'll be mounted to. There will be a great deal of ceremony and fanfare when the wind turbine is finally raised! Expect photos and a video to be posted.

We've come a long way since October and we're still on target to go "live" in January.

Notice the patch of white in front of the array. That's right. It's a bit of snow. Winter has arrived!

Will keep you posted!

Best,

Howard

A Fresh Look at Strategy (and a green energy update)

Most of us have been fixated on the current economic crisis that seems to worsen by the day. But, how many have used this as an opportunity to revisit strategy? At a moment when we're all riveted to current events it's also the perfect time to think about the future.

By way of an analogy, here's a quick update on my green energy initiative. BTW, thanks to those of you that have given me such positive feedback on it.

As you can see from these photos, we're continuing to make great progress and should be generating electricity very soon. The concrete pad is now sufficiently cured, the base of the tower is ready and the frame for the photovoltaic cells is in place. We already have the photovoltaic panels on site and are awaiting shipment of the tower and wind turbine - which should arrive within the next few weeks. And, the paperwork for "net metering" is being submitted, which will enable us to sell excess electricity back to the local utility.

The second photo offers a view to the west - the dominant source of wind. We're very fortunate to have such a great site - with an average wind speed of 10 - 12 mph! If you look closely, you might be able to see the the wind turbines (there are 12 of them) from New Hampshire's first commercial wind farm, which is about 10 miles away. This wind farm recently went online and will soon be generating 24 megawatts of electricity - enough for 10,000 homes!

Our wind turbine is the first residential one to be constructed in our town and will generate about 3KW. Like the commercial wind farm, ROI won't be achieved for 30 or more years!

As I mentioned in an earlier post, this is our investment in the future and an important contribution to our community and the world. It is "strategic" - in the truest sense of the word. In light of the current economic maelstrom, it is tempting reduce costs and scale back our efforts. However, I am not willing to retreat or change my "strategic plan" for green energy. Of course, in parallel, we've also been (tactically) pursuing energy conservation. For example, we've replaced most incandescent lights with fluorescent or LED equivalents, we unplug appliances when not in use, and we've super-insulated the house and updated the heating system for optimal efficiency.

Likewise, in the business world, it's tempting to completely abandon long-term strategy in favor of short-term tactics (e.g., cost reductions). However, I believe that we can't allow ourselves to lose sight of our goals for the future. Do you expect your company to be around in 25 years? If so, what sort of future do you envision? How will you achieve your vision? What sort of scenarios have you developed to help think about the future?

In fact, I believe that the current crisis is the perfect time to revisit strategy, and to update, enhance or totally recreate it. In my book, The Performance Management Revolution, I cite strategy as one of the four tenets of any performance management initiative. The use of scenarios - which consider political, economic, social and technological possibilities - will help direct any strategic thinking exercise.

With a compelling and credible strategy, the current crisis need only present a temporary set back, instead of allowing it to redefine the enterprise, ultimately hampering its future.

Best,

Howard

Check out my website for details on where I'll be speaking, presentation abstracts, articles, my book and more!

Why Performance Management and Business Intelligence are Crucial at this Moment

Now that the US elections are behind us, we can start to refocus on the biggest single issue facing businesses (and individuals) right now – the economy. In January, I started talking about an economic recession:January blog posting

I think it’s now unanimous that a global recession is upon us with more bad news emerging each day. In fact, today the OECD issued a statement saying that its 30-nation member area “appeared to have entered recession”: OECD Press Release

Even Asia is not immune, with China announcing that annual industrial output growth has slowed to 8.2 percent for October. And, I think we’re just getting started! All signs point not only to a meager Q4 but a Q1 that likely won’t be much better.

In the corporate world, we’re seeing many respond with a “kneejerk” reaction to this malaise: budget cuts, RIFs, financial guidance reduced, assets sold, bankruptcies, etc. These organizations have adopted a sort of “bunker mentality” to face the threat. As a result, they overreact, shedding more “ballast” than they need to stay afloat. By exaggerating the challenge and overcompensating, they weaken the enterprise for the future. One doesn’t have to look far to find these sorts of companies – for example: a number of companies in the auto and telecommunications industries. A friend of mine, who works for a large telco, shared with me extreme frustration concerning ongoing and across-the-board RIFs. Seasoned employees have been eliminated in favor of cheaper, less experienced labor, making it hard, if not impossible to get important work done. While this may please Wall Street (in the near term), this sort of tactical approach doesn’t bode well for their future.

In contrast, the wise organization carefully analyzes the current threat, developing multiple scenarios for the future and creates suitable short and long term plans. This forward-thinking approach allows management to proceed strategically, with an eye to the future, but still grounded in the present. Of course, organizations may still have to take measures to reduce costs – perhaps dramatically. However, they will do so with greater precision – ensuring they haven’t seriously hampered their future ability to execute. It’s also reasonable to expect that this sort of sober, yet visionary direction will expose new opportunities to invest in, which will have been obscured to less sophisticated organizations. A good example of this, in my opinion, is Alcoa. Hit with an industry-wide surplus of aluminum (and a dramatic decline in price), it took aggressive action to reduce costs, employing “a four-part model that spreads the curtailments across [the] global system and minimizes the costs associated with plant shutdowns and re-starts and, in turn, minimize the impact on plant communities.” You can read their press release here: Alcoa Press Release

Of course, the title of this posting has already given away my core message – that EPM and BI are critical during this time. This is true. However, I don’t mean just the technology. I mean the philosophy! This begins with transparency and accountability. Without those as core tenets of an organization, the best technology won’t help. However, under the right conditions, BI and EPM can work wonders – allowing an organization to quickly develop perspective, to assess strengths, weaknesses and capabilities. To plan, execute, analyze, re-plan, alter strategy, and plan and execute again in a continuous cycle – matching the changing dynamics of the real world.

So, I encourage organizations to avoid the reactive and tactical approach to a worsening economy and take a more strategic outlook – embracing transparency and accountability - with BI and EPM as enablers – delivering true perspective, precision of execution and agility and a better chance to survive and see the next era of growth.

Best,

Howard

Check out my website for details on where I'll be speaking, presentation abstracts, articles, my book and more!

Sustainable energy update

We've made great progress on our renewable energy site - including running all of the electrical "chases" and pouring 15 tons of concrete for the pad including the base for the wind turbine tower and piers for the photovoltaic arrays. Now the concrete has to "cure" for thirty days before the tower can be erected. So far we're right on schedule for going live in January!

-Howard

Sustainable energy as a starting point

Let me start this posting, by talking about one of my pet projects that I'm very excited about. I've invested in a sustainable energy project, which will go live early next year. We're installing a wind

-driven turbine and solar photo-voltaic (PV) arrays - for a total of ~5KW/year of electricity generating power. This is something I've wanted to do for a very long time. So, I'm realizing a dream of mine. It's a modest project by most standards, but it's my investment in the future of my community and the Earth.

Right now, it's just a big whole in the ground. However, by the beginning of next year, it will start to generate electricity and will serve as a new energy source for the local utility when it produces excess power. In any event, it will reduce our dependence on the electric company for power and reduce our carbon footprint. Here's a picture of what it will look like when it's done. If our initial project is successful, we will plan to expand it to generate even more power in the future. For those that are interested in learning more about the wind turbine we're using, check out http://www.skystreamenergy.com

So, why am I telling you this? Well, as some of you may be aware, we are in the midst of a global economic mess. Some of you may be wondering how we got here and have probably heard various politicians and economists promoting their theories. However, I think it's amazingly simple. Most people these days are not focusing on the long term, say 50 years or more. Our thinking has become frighteningly short term. Most businesses (especially those that are publicly traded) focus upon near-term results and are tactically driven to deliver positive top and bottom line growth. This is exacerbated by the demands of Wall Street and discourages companies from investing long term. It takes courageous leadership to turn a blind eye to Wall Street to do the "right thing" because of the immediate and inevitable negative response - resulting in a lower market cap, class action law suits, and a potential hostile takeover. Not for the faint of heart.

Back to my sustainable energy project for a moment. If I had had a short-term mindset, using ROI as the sole criterion for investing in renewable energy, I never would have done it. Even with government incentives, the ROI is between 30 - 50 years out. Some people think I'm crazy. Why bother investing 50 years out when I will (undoubtedly) be gone from this world? It's because I'm betting (hoping) that people will still inhabit the Earth after I'm gone. It's my attempt to go against the grain of conventional wisdom and do what I know is right.

The bottom line is that if everyone thinks that someone else will worry about the future, then no one will! Each of us is responsible for thinking, planning and investing for the future - now! This means individuals, families, communities, nations - and businesses. Fifty years is a good starting point. A century would be better. If everyone had this perspective, imagine how different and better the world would be. We would be forced to think beyond our own lifetimes and personal interests and would collaborate on a scale unknown before to ensure the future of the Earth and our civilization.

Perhaps I am an idealist. Or maybe crazy. Or both. In any event, I'll keep everyone posted on my little sustainable energy project. If you have a sustainable project of your own, let me know!

All the best,

Howard

Don't forget to check out my website for details on where I'll be speaking, presentation abstracts, articles, my book and more!

Summer is over and it's time to get back to work.

Well, it’s the end of the summer here in the Northern Hemisphere and time to get back to business. Summer and vacation are always a nice change, but it’s good to be back working – writing, and talking about Business Intelligence (BI) and Enterprise Performance Management (EPM)!

So, now that we’re back, I’ve been pondering: what will business look like at the end of 2008 and going into 2009?

I don’t want to appear like the harbinger of doom, but businesses continue to be profoundly affected by a declining economy. Overall spending is down and RIFs abound. Although many have not officially cut budgets, they aren’t being allowed to spend them either. One client of mine referred to their spending plans as "fluid". Of course "fluid" implies "flowing", which is certainly not what she meant.

In a recent study that I participated in, almost all organizations are hoping to use EPM solutions to reduce costs. For small enterprises, this means operating more efficiently and better leveraging existing resources. For larger enterprises, it means being able to reduce the workforce and continue to function.

On the brighter side, a slow economy represents an ideal opportunity to focus upon implementing performance management solutions, which will help right now by delivering greater efficiency, but also better position companies when the economy begins to improve.

Still on the brighter side, EPM is enabling new kinds of organizations to emerge and thrive. In a case study that I presented last week at TDWI, I spoke of a young company that outsourced nearly every function – using EPM as the “glue” to hold it together. In Tom Malone’s The Future of Work, he talks about new organizational structures becoming possible as the cost of communications decreases. Well, the cost of communications these days (i.e., The Internet) is practically free. A dividend of this phenomenon is that EPM is now available to any organization – using the Internet.

Accordingly, innumerable Software-as-a-service (SaaS) vendors have emerged, offering less expensive EPM solutions that are relatively easy to buy and implement. Now, I don’t want to seem like a cheerleader for SaaS, but that same study indicated huge interest and openness to SaaS solutions across the board: small and large organizations, IT Departments and business users. So, what does this mean, exactly? Well, at least two big things that I can think of:

1) Smaller, innovative organizations can emerge – anywhere – and rapidly become serious competitors in most any market and

2) The very notion of software is going to change for everyone.

On the supply side, I expect to see a growing number of SaaS-based solutions appear on the scene. Back in 2000, you had to be a dotcom to get funding. Today you have to be a SaaS solution. The large enterprise software vendors will also offer SaaS solutions, but only half-heartedly.

You see, SaaS competes with the dominant enterprise software model (e.g., higher margins). So, for a time, it’ll be like the “wild, wild west” with a myriad of offerings from many smaller suppliers. This is a good thing. There will be amazing innovation until consolidation begins. If you're interested in hearing more about the subject, I recently participated in a webcast with DMReview: http://www.dmreview.com/dmradio/10001661-1.html

So, in spite of a difficult economy, there are some hopeful signs – with EPM as a key enabler of whatever the emerging business and software paradigms turn out to be.

Next month I'll be a keynote at Palladium's Business Performance Conference 2008, in Boston, September 9th - 12th:

http://www.thepalladiumgroup.com/events/exec/Performance/Pages/Keynotes.aspx

Hope to see you there!

All the best,

Howard

Check out my website for details on where I'll be speaking, presentation abstracts, articles, my book and more!