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"There has been an evolution in perception that BI is much more strategic," observes Bernard Liautaud, CEO of BI software powerhouse Business Objects. "It is becoming a critical investment - something that can make the difference between being competitive or not, being profitable or not."

Performance management has played a critical role in that evolution. On the technology side, it has come about through the combination of two distinct analytical software areas: BI has brought query, analysis, reporting and dashboards; financial applications have injected planning, budgeting and forecasting. Add to that the business management approach of balanced scorecarding for tracking performance data and a means of reading the business DNA has emerged.

"You need a holistic view of performance," says Godfrey Sullivan, CEO of performance management software pioneer Hyperion Solutions. "You have to be able to set goals, analyse the business from a financial modelling perspective; you have to be able to fix your plans and budgets, and monitor those through dashboards; you want to analyse the outcome, asking questions like 'why is that territory performing better than another?'; and then finally you have to report this information to relevant users."

"The hardest thing still is to establish linkages between goals and the status of your day to day performance," he says. "Businesses want to set high level goals, cascade those out, have those turn into departmental, functional or business unit objectives, and then have a system go out and tell them how they are doing against all of those. That is nirvana and that is still a hard thing to do. But that is where business leaders really want to take their companies. And you have to unify that BI with the applications to do that."

That unification has manifest itself in a spate of acquisition activity that has dealt with some of the fragmented nature of the sector but set vendors the challenge of building tightly integrated suites. The M&A activity has also been spurred by an appreciation that organisations want to reduce the number of BI toolsets they have built up over the years, says Graham Walter, head of Cognos in the UK, from an average of 15 to two or three major product sets.

Divers drivers

But the BI surge is also the result of a confluence of several other factors. For one, large organisations are now much less absorbed in their last mammoth technology adoption - enterprise resource planning (ERP).

Many have completed long-running and budget-draining ERP implementations but in numerous cases they have not obtained the kind of value from these transaction processing systems that they originally envisaged, says Jim Goodnight, CEO of BI giant SAS. "You can have those systems," he says, "but you might go bust if you can't get the data out of them and understand how well or badly the business is performing."

As a result, concurs Liautaud, "businesses are looking for ways to now extract more value out of all their big ERP investments. The natural step after automating a business transaction is to get the insight by putting analytics on top of these applications or on top of a number of business processes."

Picking up that theme, Renaud Besnard, SQL Server product solution marketing manager for Microsoft in the UK, adds: "There is a lot of information sitting in the back end that customers need to make sense of. We are moving from an era where you could get away with a few reports, to an era when this information needs interpretation in order to generate insight that can be effectively used in decision-making processes."

But outside of ERP, there is another catalyst sparking BI demand. "Compliance is a big driver," says Hyper-ion's Sullivan, "but not the 'sign off with three witnesses' Sarbanes-Oxley compliance."

"What is driving businesses to the use of performance management to address compliance issues is a need for faster financial period closing, the need for executives to see the numbers more quickly, the desire for visibility into the performance of the business and a need for confidence in that picture."

And that ripples right through the organisations. As Business Objects' Liautaud obser-ves: "People are asking how they can make sure everyone has the right information [to ensure compliance] and how that information can be escalated up the decision-making chain very quickly [when there is an issue] ."

Although they may be under less compliance pressure, European organisations seem to be embracing the performance management philosophy and its supporting software faster than their US counterparts, says Sullivan. He points to telecoms services giant Telenor in Norway and Dutch corporate financing group De Lage Landen, part of Rabobank, as two of Europe's flagship performance management adopters.

But as Cognos' Walter highlights, this is not simply a matter of adopting new tools, but the reinvention of business processes.

What these companies are shooting for is a world that has been talked about since the arrival in the mid-1980s of so-called executive information systems. It may have taken 20 years for BI to bring to market the first products that can begin to live up to that vision of a top-to-bottom management information fabric, but the upswing in BI buying suggests that the performance management tornado has only just started spinning.