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Summary
With Microsoft starting beta testing of its PerformancePoint analytics suite in earnest, we expect many potential users to ask whether they should purchase (or continue to invest in) the company’s FRx applications, which have similar capabilities, or move to PerformancePoint instead. Leaving aside the issue of the desirability of being an early adopter of the technology, Ventana Research thinks the two products are aimed at different buyers. Software companies and even some analysts often use the term “midmarket” as if it were a monolithic group, whereas in our experience there are several strata of organizations between small businesses (those with fewer than 100 employees) and large (with 10,000 or more employees). In our view, some companies will have to evaluate both products, but we think the vast majority will find they will be comparing one or the other against other vendors’ solutions.

Assessment
Microsoft has been putting the final touches on its beta release of PerformancePoint and expects to make the software generally available in mid-2007. PerformancePoint offers businesses a suite of software tools for analysis, scorecarding, budgeting and planning, and reporting. One of its most appealing features is its close integration with Microsoft Office as an interface for gathering, analysis and dissemination of data, and with SQL Server for data storage. Ultimately, it will be integrated with Microsoft’s Dynamics enterprise resource planning (ERP) suite also. One question that is bound to be asked frequently is whether PerformancePoint will supplant FRx, another application for reporting and budgeting. The quick answer, from our perspective, is no. Each is better suited to a different size of company: PerformancePoint for larger midsize companies (those with between 1,000 and 10,000 employees) and FRx for smaller midsize companies (with between 100 and 1,000 employees).

Microsoft acquired FRx when it bought Great Plains Software in 2001. FRx is a staple of smaller midsize companies and the partners that cater to them worldwide. (Since the partners implement and maintain the software, they have considerable influence in what the end-user customer buys.) One important attribute of smaller midsize companies is that they need highly capable software but have limited resources (financial or people) to devote to operations and support. At the lower end of this size range, a company may not have any formal IT staff, relying on a part-time contractor. Even a company with 1,000 employees may have only one or a few generalists. FRx is designed for organizations in this size range.

In our judgment, there are no absolutes when it comes to the requirements and preferences of midsize companies. It is conceivable that PerformancePoint will be used in companies with as few as 100 employees or more than 100,000 employees. However, for the first several years we expect the majority of sales will be into companies with 1,000 to 10,000. They will receive the full benefits of having the integration of Office, multidimensional analysis and reporting in a single environment – and the greatest payback. Larger organizations usually have systems for analysis and reporting already in place, and the value proposition of replacing them with PerformancePoint is not clear. Most (but not all) organizations with fewer than 1,000 employees will find buying and maintaining the full stack of software – even in its simplest configuration – not cost-effective or practical for their situation, in our opinion.

Market Impact
For the next several years, we expect Microsoft will focus its marketing efforts for PerformancePoint at larger midsize firms and departmental deployments of Global 2000 firms. An important strategic objective for the product is to develop a direct sales and support effort that can rival those of the major business intelligence (BI) players that have direct sales forces and systems integration partners, namely Business Objects, Cognos, Hyperion and others, as well as IBM, Oracle and SAP. Under the circumstances, we see Microsoft maintaining two similar but separate products aimed at two different types of buyer.

Recommendation
Companies that have limited in-house IT resources and budgets should concentrate their evaluations on FRx and directly competing products, while larger midsize firms should begin to consider whether and how they might use all of the capabilities of PerformancePoint for analysis, reporting, budgeting and planning and scorecards. In either case, companies that are heavy users of spreadsheets for repetitive, collaborative business processes – such as periodic analysis and reporting or budgeting and forecasting – should consider the time and effort they can save with applications such as these, which may enable them to avoid the pitfalls of using spreadsheets for purposes they are not designed to handle.