How does Hyperion Solutions intend to reap the rewards of the explosivegrowth opportunity in business performance management (BPM)? Madan Sheina reports.

"You get a lot of creative ideas when you are on the back of a horse for 15 hours," says Godfrey Sullivan, president and CEO of Hyperion Solutions and a keen equestrian endurance rider. One idea that came to him while in the saddle was to give employees $5000 towards the purchase of any vehicle that is green enough to do 45 mpg. Hyperion's car park is pretty green these days as a result.



But working for a greener environment is not Hyperion's main drive: the company is pushing the values of business performance management (BPM) software. Just as hybrid cars can force a change in people's attitudes towards the environment, BPM seeks to drive a change in how enterprises run and manage their business.

Hyperion Solutions was born out of the 1998 merger between Arbor Software and Hyperion Software. The company had a rough start, struggling to integrate two companies with a big cultural divide. Arbor was a small, fast-growing Californian online analytic processing (OLAP) start-up. Hyperion was a larger, conservative East coast provider of financial analytic applications. Through a series of well-thought out acquisitions, it has grown the company, its customer base and product portfolio. Today, the Hyperion brand is synonymous with BPM, and with annual sales of $622m and healthy annual growth of 22%, it is now established as a leading BPM pure-play.

Sullivan joined Hyperion as COO in 2001 after stints in senior executive roles at Autodesk and Apple Computer. He was promoted to the top job in 2004 after Jeff Rodek stepped down after five years in charge, leaving behind a company that was flush with financial success. Many credit Rodek with a turn-around in Hyperion's fortunes, successfully steering the company through a sluggish economy.

With Rodek casting a critical eye on his successor from the wings (Rodek remains as executive chairman of the board) Sullivan must have felt a considerable weight of expectation on him when he took over the helm. "Jeff's biggest legacy was a highly referenceable customer base built on principles of ethics, integrity, success and innovation. These remained the key metrics for our progress."

By that time Hyperion had already undergone a profound transformation. Recognising that the OLAP server market was being commoditised by the entry of Microsoft's SQL Server 7, Hyperion decided to shift the goalposts to stay ahead. Instead of battling it out in the mainstream business intelligence market, it adopted a new mantra, BPM, and set about carving a position of dominance in a market estimated by analysts IDC to be worth $2,1bn by 2008, growing annually at 11%.

"BPM is a very exciting market and an expansive opportunity. The momentum of the company shows that," Sullivan says. "We have 9000 customers, two-thirds of which are expanding their BPM deployments."

Definitions of what BPM is vary depending on which vendor you speak to. Sullivan defines it simply as 'linking strategy to execution'; or more specifically translating strategies into plans, monitoring execution and providing analytic insight to improve financial and operational performance. But he warns, "In many corporations this is not a unified activity," pointing to the proliferation of point IT solutions and loosely coupled business processes. Sullivan sees the end-game for BPM to deliver a "connected performance enterprise; one that connects past, present and future." He adds: "It is about running your business on a look-ahead basis. To get the big picture you need to gather data from the past, model the future and apply to the present. The driving business forces are financial visibility, transparency and accountability."

Hyperion's decision was no doubt influenced heavily by its domain expertise around financial analytics, which is the core of BPM. "We are an automatic first port of call for companies looking to kick-start a BPM initiative," Sullivan says.

Not surprisingly, Sullivan and his senior colleagues at Hyperion share a bullish disposition about BPM, pointing to market forces working in favour of the company. "The stars have aligned in our direction," observes John Kopcke, chief technology officer at Hyperion. "All the key drivers around transparency and visibility of numbers and disclosure play well for us given that BPM is all about insight."

Increased concerns over corporate compliance and governance have also helped. According to Sullivan, the creative accounting of some executives at Enron, and the legislation that resulted, notably Sarbanes-Oxley, "has been a tailwind for what we do since performance visibility is the heart of compliance. CFOs are now being financially scrutinised in ways that compel them to focus on performance."

Sullivan explains that to effectively cope with new regulatory pressures, companies need a combination of people, processes and systems. "Many people look towards Hyperion as the technological face of compliance-enablement."

BPM also fits in nicely with the current return on investment mentality among the IT buying community. "The urgency around fast ROI is pretty high right now," says Sullivan. "If you add macroeconomic pressures then acceleration towards BPM makes sense."

A glance at Hyperion's product list reflects its strong BPM positioning. Hyperion maintains two parallel suites focused on BPM and business intelligence; each consisting of various application modules. But Sullivan believes the company is more focused on the high-level strategic planning than most of its mainstream BI rivals.

Kopcke describes Hyperion's BPM suite as a layered solution built on the concept of business planning, which he regards as the 'heartbeat of BPM'. Layered below the actual financial and operational plans, are applications focused on financial consolidation, statutory reporting, budgeting, forecasting, custom analytics and management reporting. Kopcke points out several main entry points for BPM. "Planning and budgeting, consolidation and analytic dashboards/management reporting, and dashboards; those are the three key drivers," he says.



Technology melting pot

Of course the challenge is to bring all this together into a cohesive system. "I feel we have done the best job of anyone in pulling together all the pieces," Sullivan asserts. Hyperion's task has been made both easier and harder since it has acquired several companies and technologies to broaden out into adjacent applications and strengthen its core platform.

In April 2003 it swooped for Alcar, a specialist provider of financial modelling software that now forms the basis of Hyperion's Strategic Finance offering. The software is used by CFOs and business development departments to model and understand the financial impact of, for example, an acquisition on a merged P&L sheet.

Meanwhile, the acquisition of Brio Software (a provider of query, analysis, and reporting software) in July 2003 and, a year later, QIQ Solutions (a dashboard development tools vendor) both served to strengthen Hyperion's core platform. "Many people thought we bought Brio as a reaction to Business Objects' acquisition of Crystal Decisions earlier that month. That is not true. Our BPM platform needed relational reporting capabilities and better dashboard technologies."

Hyperion has not cornered the BPM market. Competition is heating up, with traditional business intelligence vendors such as Cognos and SAS Institute, specialists like OutlookSoft, and SRC Software, and mainstream ERP vendors all jostling for a share of the action.

Sullivan became CEO at more or less the same time that Hyperion's nearest BPM pure-play rival Cognos promoted its own COO, Robert Ashe, to the chief executive role. The similarities do not end there, despite Cognos preferring to call it CPM (corporate performance management). Like Hyperion, Cognos has fleshed out key parts of its BPM suite with acquisitions: Adaytum (budgeting) and Frango (consolidation). Sullivan has a lot of time for Ashe - "He is a smart guy and running a good business" - and welcomes the healthy competition, which can only benefit customers.



Other market players

PeopleSoft, now owned by Oracle, has been dabbling in this space for some time with its enterprise performance management (EPM) suite. But it is SAP that Sullivan should be keeping a close eye on. The German business applications giant ranks second on IDC's BPM charts, with 7% market share (ahead of Cognos, but behind Hyperion, which leads with 20%) and had been developing its strategic enterprise management (SEM) suite long before BPM became a hot topic.

Mid-tier vendors such as Geac and Lawson have also added BPM capabilities to their suites through respective acquisitions of Comshare and Closedloop Solutions. But Sullivan does not lose sleep over these players. "The reality is that most enterprises operate in heterogeneous environments. Most large companies have five up to 100 data sources they need to pull together. There is a lot to be said for being an independent and best-of-breed in this market.

"We are number one in financial BPM right now," says Sullivan. "But there is a wealth of opportunity to expand beyond the finance department into sales and marketing, workforce, supply chain management and IT asset management." But Hyperion will not go it alone. "We will reach into these areas through a combination of partnering and adjacent acquisitions like Alcar."

While Sullivan admits Hyperion's analytics business has declined over the last couple of years, he insists the company is not about to take its eye off the BI ball altogether. "I think that is more because of our focus on BPM business. We still own the market-leading OLAP server [Essbase] and are confident that we can grow that business if we pay more specific attention to it."

Kopcke admits that the company still has some catching up to do in the red-hot enterprise reporting space, despite having the Brio tools under its wing. "We are planning to address this space more aggressively and will be running a fairly significant campaign to raise the visibility of Hyperion Performance Suite and Hyperion SQR."

But developing great software is not enough for Sullivan. "We want to create a culture of thought leadership that both defines and drives forward an exciting new category of business software that creates unprecedented value for companies. We are passionate about BPM and we are in it for the long ride."



CBR opinion

Analytical software for tracking business performance may not be the most exciting area of IT but it is an increasingly vital one for ROI-conscious companies doing business in a post-Enron world. As one of the pioneering financial consolidation vendors, Hyperion Solutions is well positioned to benefit from market pressures working in its direction. Building on its extensive domain knowledge and experience in financial analytics, Hyperion is now pushing BPM into areas beyond its traditional financial niche.



Hyperion's BPM helps Stork fly

Stork NV is a highly diversified euro 1,9 bn ($2,4 bn) Dutch conglomerate that has business interests in machines for textile printing, convenience foods, aerospace and technical services. The company, which employs over 13 000 employees worldwide, turned to Hyperion's software in the mid-1990s initially to get a firmer handle on its financial reporting process.

"At the time, our performance was sub-optimal because of our diversified activities. We simply did not know where we stood financially at one time," says Bram van Iddekinge, Stork's manager of corporate strategy and control.

Financially, Stork was an Excel-driven enterprise and was finding it difficult to get an holistic picture of its diverse business. "It was not easy to get at financial data. We spent a lot of time getting all the numbers to add up and, when we did, found ourselves arguing over differing versions of the truth," van Iddekinge says.

Stork's first move was to implement Hyperion's Web-based Financial Management application for financial consolidation, reporting and analysis. The benefits were impressive. "The centralised system allowed us to reduce our financial reporting cycles, turning a task that took weeks into literally hours." Stork then looked to link the system to Hyperion's Strategic Finance, a financial modelling and planning application, to help the company understand the financial impact of alternative strategies and guide its business moving forwards. "We now knew where we stood financially on the sixth day of every month. But we also wanted to know where we stood in relation to where we wanted to be, and which business drivers needed to be managed in order to get us there.

"Because all our financial systems from consolidation to planning are now linked automatically to our ERP systems, we estimate this has saved us up to euro 1m a year in both cost savings and more streamlined business decisions. Before starting this project we were making a loss. Now we are now making a profit [euro 75m last year]."

While Stork's initial deployment is targeted at the finance function, van Iddekinge says the company is looking to push BPM into other business areas, sales and marketing and human resources. Perhaps most important is the impact of the system on overall corporate strategy. "BPM has allowed us to focus on our most profitable business units and drive future divestment and acquisitions. We are now in the midst of cutting down to two core businesses," says van Iddekinge.