2016 Marks a Changing of the Guard in the Gartner Magic Quadrant for CPM

Let me start by saying that the Gartner Magic Quadrant for CPM is a great resource for those considering making investments in applications for the Office of Finance.  Along with Gartner’s Critical Capabilities, these reports provide an understanding of the CPM market as well as the strengths and weaknesses of various vendors. (Read this short post for tips on reading between the lines of the MQ.)

While the Gartner Magic Quadrant for CPM has traditionally been a single report, this year Gartner has decided to split it into two separate Magic Quadrants: Financial CPM (FCPM) and Strategic CPM (SCPM).  You can read both quadrants here. In a nutshell, Gartner’s reasoning for the split is that there are different buying centers: one for accounting processes and another for planning and modeling.  I’ll get into whether I agree with that or not in a future blog post, but for now I want to focus on a different trend.

 

The Decline of the Mega-Vendor in CPM

Over the last several years we’ve seen the largest vendors in the CPM market losing significant ground to the Visionary CPM vendors. In fact, Oracle, SAP and IBM are all in a worse position now than when they first entered the Leaders Quadrant. All three broke into the Leaders Quadrant in 2008 through acquisition (Oracle/Hyperion, IBM/Cognos, SAP/Business Objects) and all three are still leaders in market share by a wide margin.

“Although commanding a dominant market share is certainly an advantage, Leaders are challenged to provide both innovation and customer satisfaction to their existing customers. As a result, the Leaders have invested heavily in either creating new cloud-based solutions or modifying their existing offerings to provide cloud options. However, they struggle either to sell these offerings or to create a value proposition that results in a significant level of in-production use.” *  Source: Gartner Magic Quadrant for Financial Corporate Performance Management Solutions, Gartner May 2016

 

Small Potatoes

But even with dominant market share, the Leaders’ CPM revenue amounts to just a small fraction of their annual revenue. The reality is that the future success of SAP, Oracle, and IBM is not going to be decided by how much CPM software they sell. Let’s face it: they are technology companies and their focus is on the high visibility, high growth markets that they have recently invested billions in and are betting their future on.

 

How Much Cash is Left in that Cow?2016 Gartner MQ for CPM suites

The Big Three have actually achieved a nice ROI on their CPM acquisitions over the last ten years and continue to milk their “cash cows” without a significant investment in innovation. 

But now we are starting to see their lack of innovation finally coming back to bite them.  Vendor loyalty (some would call it “vendor lock-in”) or what Gartner defines as “solution stickiness” to incumbent technology or ERP vendors is on the decline.  Finance organizations are making decisions based on business requirements, ease of use, and long-term total cost of ownership.  The days when “almost as good” was enough to sway a decision to a market leader are gone.

 

Misplaced Loyalty on the Decline2016 Gartner MQ for CPM Suites

Today, companies that were once dyed-in-the-wool SAP, IBM or Oracle shops choose the best solution for their business needs as long as that vendor can prove strong integration with their ERP. Large and complex organizations that previously felt an on-premises solution from a market leader was their only viable option now choose solutions from Visionary vendors that have higher customer satisfaction, lower cost of ownership, and (in some cases) more capabilities. In fact, Gartner points out that the number one reason cited for choosing a particular vendor is functional capability. This was followed by ease of use, even in large companies.

“Many of the vendors outside of the Leaders quadrant have built a solid customer base of SMB companies, and a number of them have been increasingly successful at attracting large organizations with more than $1 billion in revenue.” *

“Tagetik ranks among the highest for customer satisfaction among vendors with a high average number of users (58% of its reference customers had revenue of more than $1 billion).” *

 

Better for Business

There are many take-aways from this year’s CPM Magic Quadrants and the ‘changing of the guard’ from the megavendors to the Visionaries is certainly one of them. In my opinion it’s a good thing. Much of the CPM market’s upper end has been overpaying the big CPM vendors for years because they thought they had no other viable choice. Research like this shows that regardless of size, complexity, or deployment preference, it is current and future business requirements should drive your CPM selection.



* Source: Gartner Magic Quadrant for Financial Corporate Performance Management Solutions, Gartner May 2016

 

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