Down in the dusty, dry streets of Laredo, Texas, a truckload of furniture arrives at a Lacks Valley Store. Unnoticed by the dock workers as they scan each product are the myriad exceptions typical in a large-ticket retail business: missing items, special customer orders and items that were never ordered but that showed up anyway. However, behind the scenes, a business process management (BPM) application is monitoring the warehouse and receiving systems, identifying each exception as it occurs.
The BPM application then goes beyond monitoring and actually prioritizes the exceptions and launches tasks for various employees (for example, walking an employee through the steps to review and address an expected order that did not arrive). The exceptions persist as tasks, or “in flight” processes, in the system and are monitored until they are resolved. The business analysts who actually deal with the problems are able to tweak the resolution processes in real-time as they learn more efficient ways to improve operations.
In Extreme Competition: Innovation and the Great 21st Century Business Reformation, author Peter Fingar describes the rise of intense competitors from around the globe who “innovate by how they operate” and who are attacking markets both large and small—including small Texas border towns. To respond to these new competitors, companies like Lacks Valley Stores must transform and evolve their operations faster than ever before.
BPM helps them do that. “The biggest impact has been catching exceptions early enough to actually do something about them,” says Lee Aaronson, CEO of Lacks Valley Stores. “Before, we had to rely on a customer complaining about an issue or accidentally discovering that something was wrong.” Now Lacks employees either receive e-mails alerting them to take action or they log in to a portal to manage exception tasks and resolve them before customers even notice.
BPM can transform customer contact operations as well. American National Insurance Co. (Anico) was one of the early adopters of BPM and has used it to streamline customer service processes across four business groups, resulting in a CSR workload capacity increase of 192 percent. “Our BPM initiatives have paid huge dividends,” says Gary Kirkham, VP and director, planning and support division for Anico. “We eliminated the need for CSRs to ’dive bomb’ into multiple mainframe applications to handle customer and agent requests and built rules into our process to guide them through a single view of the customer’s information across multiple systems. BPM allowed us to both keep up with huge growth in our customer base and improve on all of our customer service metrics at the same time.”
Of course, seasoned CIOs understand that no single new technology will be a cure-all for complex process issues. It often takes significant effort just to define who owns a process and how it actually works. If a process is bad, automation may only get bad results faster. Like Lacks Valley Stores and Anico, however, a diverse group of companies has achieved real results by leveraging BPM technology in their process improvement efforts.
A New Way to Build and Manage Processes
There is an old story about a clever university planner who waited to pour concrete sidewalks on the new campus until students had worn paths between the buildings. Traditional IT infrastructure has evolved in much the same way: Experienced practitioners now try to thoroughly understand user requirements before deploying automation that can be as intractable as concrete. Conventional approaches to reengineering and application development, however, can no longer meet stakeholder demands for rapid and ongoing process change.
BPM emerged as a response to this “move the sidewalks now” requirement once easier integration technologies finally caught up with management’s ongoing push for operational improvement. Although hundreds of vendors may each define it differently, most agree that BPM gives an organization the ability to define, execute and manage processes that: a) span multiple applications and involve human interactions, and b) handle dynamic process rules and changes, not just simple, static flows.
Software vendors eventually caught on and started providing platforms that integrated process modeling, execution and management reporting of process-specific metrics. Organizations now have the tools to automate and change processes across previously isolated applications, databases and people.
Gartner defines BPM as a structured approach to managing an organization’s process environment and employing methods, policies, metrics, management practices and software tools, which today are known as business process management suites (BPMSs). These integrated platforms pave the way for an organization to continually improve a process that was previously inefficient and difficult to manage. They do this by leveraging integration technologies with visual process modeling, real-time monitoring, Web-based applications and management reporting—all working together to support rapid process innovation.
BPMS adoption has spread quickly, in part because of the speed of deployment. Forrester Research estimates that the market for BPMS software is growing at a compounded annual growth rate of more than 20 percent. Between 2005 and 2009, Forrester expects annual sales of BPMS to grow to $2.7 billion.
A Diverse Product Space
Because the promise of BPM is so enticing and the target business problems are so diverse, software vendors have charged into the BPMS market from a variety of backgrounds. Each frames the problem a little differently in order to present its solution in the most appealing light. For example, workflow vendors tend to emphasize the human-to-human aspects of BPM. Middleware and infrastructure vendors focus on the importance of underlying systems integration. Enterprise content management vendors focus on the document-centric nature of processes found in financial services and other back-office operations. BPMS pureplay vendors often highlight their architectural elegance and independence from legacy product and infrastructure constraints.
The truth is that BPM will typically require elements of all of these approaches, so CIOs must thoroughly understand the types of processes they want to transform and how the BPMS will fit into their unique enterprise architecture.
The category is maturing: 2006 has seen continued growth in the number of formal BPMS RFPs issued by corporations. Because most of the leading BPMSs can easily address the requirements found in a typical package selection or pilot project, CIOs must expand on typical due diligence to include real-world scalability testing, hands-on involvement of business users, and careful evaluation of similar customer implementations. Many vendors will be able to meet the functional checklists; the goal is to ensure a good fit with the organization’s approach to operational innovation.
Integration Is Key
BPMS solutions should be integrated for reasons of both speed and innovation. Be wary of BPMSs that require the process definition to be exported from one module and then imported into the next (such as between definition, simulation, execution and reporting modules). This “bucket brigade” approach increases development time and discourages process innovation. According to Anico’s Kirkham, every BPM solution must go through multiple iterations both to discover the right process and to change with the needs of the business. This requires tight coupling between the process models and the actual execution and management of those processes.
As important as the BPMS feature set is how well the platform brings people and other applications into the new process. Cincinnati Bell leveraged the ability of Bluespring Software’s BPMS to bring Microsoft Office apps into its quote-to-cash process. The new process reduced deal cycle time by 65 percent and finance labor time by 75 percent by eliminating manual activity related to the interaction between sales and finance on the viability and pricing of custom orders (see related graphic on www.051506.com).
In part of the new process, financial analysts receive prepopulated spreadsheets via e-mail. They conduct the necessary analysis and then e-mail the spreadsheet back so that it can go on to the next step in the process. The Bluespring software orchestrates this process and provides the necessary linkage to financial data and other systems. “The benefit is that you don’t change the way people work, you just eliminate the administrative tasks and let them focus on the parts of their job that add value,” says Chip Burke, VP of IT for Cincinnati Bell.
BPM and SOA
A good first step to implementing a BPMS is to “develop a simple and flexible integration architecture, especially if the BPM application will be used as a monitoring or orchestration layer placed on top of existing transactional applications,” says Dennis Korevitski, former director of supply chain systems for T-Mobile. If a service-oriented architecture (SOA) or middleware layer already exists, BPM platforms can leverage this investment by rapidly orchestrating available services into a business process. For example, T-Mobile implemented Lombardi Software’s TeamWorks BPMS to recover lost revenue from a complex returns process. The process involves customers and OEMs as well as internal financial and customer care groups. TeamWorks was able to take advantage of some existing integration points in T-Mobile’s Tibco infrastructure, allowing the BPM team to focus on improving the process.
Sometimes BPM drives an organization towards an SOA. “We would have gotten there eventually,” says Doug Schwinn, CIO at toy maker Hasbro. “But BPM gave us the justification to open up to our partners in a secure manner with SOA.” If an SOA is not available, many BPMS platforms provide toolkits for legacy systems integration.
Although the emergence of improved integration technologies and SOA have made legacy integration easier, “you need to have respect for the hard-core challenges of integrating to legacy systems,” says Phil Gilbert, CTO of Lombardi Software. “It is hard work, and it takes more time than most businesspeople would like.”
Gilbert recommends that BPM initiatives decouple the integration effort from process design—in other words, IT should manage the underlying systems integration while the business analysts are working on process design. This approach gets functionality into the hands of end users faster, even if additional systems integration shows up in later releases and further streamlines the process.
Process management challenges can arise as BPM spreads throughout an organization. Changing process flows or data sources can cause unintended side effects. But the potential to measurably improve overall organizational performance makes it well worth the effort to manage those risks. Gilbert says that the industry has only begun to scratch the surface. “The strategic value of BPM technology is process governance and providing a holistic view into all of a company’s running processes—whether [the BPM platform] executes them or not.”
“The ideal BPMS essentially will be a database management system for your business processes,” says author Fingar. “The real breakthrough is in creating a definition of your process as abstract data.” To remain competitive, organizations will have to build the capabilities to manage processes as quickly and effectively as they currently manage data.
EDITOR’S NOTE: Athens Group clients include two of the companies mentioned in this article: Lacks Valley Stores and Lombardi Software.