The Wizardry of Business Process Management - Part 2

Part 1 of this blog series provided a lengthy discussion about business process management’s (BPM's) necessary parts-and-parcels, and the software category’s value proposition.  At the end of that post, I mentioned my recent attendance of a witty presentation that attempted to explain the essence of BPM via a bit of humor and the metaphor of the classic “Wizard of Oz” movie.

Namely, on March 23, 2009, Alan Trefler, Pegasystems’ founder and chief executive officer (CEO), gave his luncheon keynote presentation at the Gartner BPM Summit in San Diego. His theme was “Don’t just Survive…Capitalize.” Trefler began by reminding the audience that in today’s turbulent economy we are all “not in Kansas anymore,” and may just need some ruby slippers to find our way back home to profitability. If you have 14 minutes to spare, you can recapture the spirit of the event here.

But before I start to paraphrase the spirited presentation, some introduction to Pegasystems and Trefler is in order. Pegasystems provides BPM software to drive revenue growth, productivity, and business agility to over 760 of the world's most sophisticated organizations in financial services, insurance, health care, government, life sciences, communications, manufacturing, and other industries. Headquartered in Cambridge, Massachusetts (US), the company employs over 900 people in its offices in North America, Europe, and Asia.

Pegasystems’ Genesis

Much has evolved at Pegasystems (a.k.a. Pega) from its very first customer Citibank in 1983, which used Pega’s first-generation product written in what now is the seemingly ancient assembler language. The product was rewritten in the mid-80s in the less ancient PL/1 imperative programming language, and in the mid-90s in C++. For the next 10 years, the vendor sold a number of packaged (but still separate and disjointed) customer relationship management (CRM) applications for financial services and health care, and was doing sort of OK.

While those applications dealt with process issues, they were not BPM solutions per se. But the latest inflection point took place in 2004 when Pega rewrote its product suite yet again, this time with the idea of empowering both business users and IT staff to “Build for Change (BFC).” The idea behind this now trademarked slogan is that companies can deliver value more quickly and nimbly, and thus outperform their competitors.

The current SmartBPM Suite makes business processes easy to build and change by directly capturing business objectives and eliminating manual programming. The suite also unifies business rules and processes into composite applications that leverage existing systems (IT assets).

Moreover, a library of best-practice frameworks complements the unified BPM suite. These solution kits are tailored as jump-start enablers in target industries. The solution frameworks reportedly drive 60 percent of Pega’s overall business and contribute significantly to both its revenue and to customers’ more rapid return on investment (ROI).

Last but not least, the suite is built on a quite open and standards-based architecture to meet the challenges of the world’s most sophisticated and distributed enterprises. Consequently, Pega has enjoyed success in terms of unprecedented growth since 2005.

In 2008, Pega had revenues of US$212 million, up 31 percent from US$167 in 2007 (more than twice than the BPM industry’s compound annual growth rate [CAGR] of 13 percent that was mentioned in Part 1). There was a 50 percent license revenue growth with only a 16 percent growth in professional services revenue. Half of Pega’s revenue last year came from increased adoption at existing accounts. The early 2009 numbers in this regard seem to be even more impressive.

Expansion’s Opportunities and Challenges

Pega’s growth rate, total revenues, focus, and financial stability argue for the vendor’s bullish posture and a goal of becoming a US$1 billion software company, although I will believe it when I see it. There is certainly much room for expansion for Pega, in terms of new international presence, penetrating new industries, and relying more on partner delivery (rather than via its direct force).

Pega markets its software and services primarily through its direct sales force. Strategic partnerships with consultants and systems integrators (SIs) are important to the vendor’s sales efforts because these firms influence buying decisions, help identify engagements, and complement Pega’s BPM software with their technology and domain expertise.

Sure, the vendor could increase its reach via original equipment manufacturer (OEM) alliances (i.e., to have parts of SmartBPM embedded in other vendors’ offering) or a value added reseller (VAR) channel. Nonetheless, at least Pega can substantiate its increasing reliance and success via strategic SI relationships.

Namely, there are nearly 3,700 total consultants in Pega’s partner ecosystem (a 1,740 percent increase from 2004), while partners delivered over 168 projects in 2008 (up 50 percent from 2007). In 2008, Pega also saw a 75 percent increase in software license deals sold together with partners as compared to 2007, to around US$30 million (which earned over US $250 million in 2008 partners’ professional services billings).

These partners may deliver strategic business planning, consulting, project management, and implementation services to Pega BPM customers. Currently, Pega SI partners include Accenture, Booz Allen Hamilton, Capgemini, Computer Sciences Corporation (CSC), Cognizant Technology Solutions Corporation, IBM Global Business Services (GBS), PricewaterhouseCoopers (PwC), Satyam Computer Services, Steria, Virtusa, and Wipro Technologies. Three large global SIs–Accenture, Capgemini and IBM GBS–made significant investments in their Pega practice in 2008 and together they reportedly contributed the lion’s share of the new software license bookings in 2008.

The Chess-BPM Connection?

Coming back to Pega’s CEO Alan Trefler, it would be an understatement that he is an interesting and colorful person. Back in 1975, as a 19 year old “dark horse” player Trefler became the major upset case in international chess tournament history.

Namely, in the open section of the World Open chess tournament, Trefler, with the official rating of 2075, 125 points below the lowest master rating), and ranked 115th in the tournament, scored 8-1 to tie for first place with International Grandmaster Pal Benko, rated 2504, and ahead of Grandmasters Nicholas Rossolimo and Walter Browne. OK, being a chess aficionado, I can nitpick and say how the heavyweights of the time such as Bobby Fisher, Anatoly Karpov, Boris Spaski, etc., were not at that tournament, but his success still speaks volumes.

In our one-on-one informal conversation at Gartner’s Summit, Trefler told me he abandoned chess because of poor pay (the winner’s prize was a measly US$ 2,000 at the time) and a dearth of ladies in geeky chess circles. Therefore, he switched to teaching computers to play chess at first, then to teaching computers to improve business processes. Well, it is comforting to know that the IT field appears less geeky and more attractive to the fairer sex than chess.

One thing that struck me about Trefler, in addition to being gregarious and quite approachable for a founder of a large and successful company, was his humility. He even admitted that at least once in the company’s history, he almost seriously screwed up, but apparently that has not been the case in the recent past.

In order for some of you to be able to follow the parables and metaphors in Pega CEO’s presentation, bellow is a description of the company’s current offering. Pega provides a comprehensive rules-based BPM suite intended to help its customers plan, build, and manage BPM solutions. Pegasystems’ abovementioned BFC mantra is delivered through a SmartBPM suite of patented rule-driven BPM capabilities.

Pega Products

PegaRULES Process Commander (PRPC) is at the core of the SmartBPM Suite and provides capabilities designed to model, execute, monitor, and analyze results of processes. The product includes an application profiler that allows a business process to be defined based on business goals and objectives, with simplified “fill in the blank” forms. PRPC also simplifies business process modeling, allowing business users to graphically describe and test an intended business process within the system itself.

The software uses the results of the application profiler and process modeling to create a new business solution, including user interface (UI) and executable business models. PegaRULES Process Commander also provides a Web browser-based graphical development environment, execution engine, and management dashboard for rapid business application and solution development.

The SmartBPM Suite offers additional capabilities, including business process analysis, process simulation, enterprise application integration (EAI), portal-based integration, enterprise content management (ECM), and case management to the PegaRULES Process Commander capabilities.

As mentioned earlier, Pega additionally offers dozens of purpose- or industry-specific Solution Frameworks built into the SmartBPM Suite. These frameworks allow organizations to more quickly implement new customer-facing practices and processes, bring new offerings to market, and provide customized or specialized processing to meet the needs of different customers, departments, geographies, or regulatory requirements.

The Wizard of (BPM) Oz

For those who might not have seen “Wizard of Oz,” a quick synopsis follows. Dorothy (played by Judy Garland) and her dog Toto have been swept away by a tornado from her lush farm in Kansas to a wonderland of munchkins, flying monkeys, and different-colored horses. The Good Witch of the North, Glinda (Billie Burke), advises Dorothy to follow the Yellow Brick Road to the Emerald City and the all-knowing Wizard of Oz to find her way home.

Along the way, she meets the Scarecrow (played by Ray Bolger), the Tin Man (played by Jack Haley) and the Cowardly Lion (played by Bert Lahr), who help her fend off the Wicked Witch of the West (Margaret Hamilton), while hoping to receive what they lack themselves (a brain, a heart, and courage, respectively). The Wicked Witch of the West is attempting to get her sister's (the Wicked Witch of the East) Ruby Slippers from Dorothy. If memory serves me well, the Wicked Witch of the East was killed when Dorothy's house landed on her due to the tornado.

In his luncheon presentation at Gartner’s BPM Summit, Trefler started with acknowledging that these are indeed interesting times to be in business, to say the least.  Namely, all of us are facing unprecedented challenges of not only how to survive, but also how to possibly capitalize on opportunities.

When we think of metaphors to describe the times we are in (some might refer to the Great Depression, others to the New Deal, etc.), Pega came to the Wizard of Oz metaphor after reviewing the past year. Namely, if we go back 12 to 18 months, like Dorothy in the movie, we were all in a beautiful green and verdant place, where businesses could easily enter new markets, people could buy houses without putting any money down, etc. Everything looked up at that time, and we recently sadly learned that these practices were unjustifiably (and irresponsibly) overutilized.

Consequently, during the last 6 to 12 months, the economic maelstrom, the tornado of change, has ripped off our traditional foundation and roots, and taken us from profitability (way up there), so that we all are “not in Kansas any more.” And, while we all get back to our senses about where we are, who is really suffering? IT departments and staff are certainly under pressure to keep the engines running, but wide-eyed and innocent business users (like Dorothy) are at the greatest point of inflexion trying to figure out how to go forward and bring their businesses back to profitability and their comfort zone (a beautiful Kansas farm).

But in these times with hardly any profit margins, when IT folks are overworked and when business management has become defensive and insular, what can rank-and-file business users do? Business users need some useful advice, and to that end, Trefler said that good news is that there is a good source: the BPM Summit host, Gartner (the Good Witch), with all its insights, visions, affable speakers, magic wand, etc. One piece of advice that analysts like Gartner preach to companies is that they need to espouse and achieve their viable business goals before they can get back to the mystical land of profitability.

Many companies realize that the “Ruby Slippers” that will take them back to the comfort zone are a magic combination of processes and rules, and if one can figure out how to put them together and “click their heels,” one can have tremendous results even in the darkest and the most dour times like nowadays. As the best proof of concept, it is interesting to note that in the midst of all this economic disaster, Pega’s stock is at a nine-year-high.

As was said earlier on, the vendor grew 31 percent in 2008, with a whopping 70 percent software license growth in Q4 2008, despite the fact that it sells significantly to the currently embattled sector of insurance and banks. Indeed, insurance providers and banks do not seem like they're on the Yellow Brick Road to Oz (a road back to profitability), but these are (somewhat surprisingly) conservative environments (except for top executives’ pays) that only go for solutions that have been proven to work.

All joking apart, these service organizations buy only what they can put together easily, so they can get to work and benefit quickly. To that end, this blog series will explain shortly how Pega allows these organizations to avoid the time and expense required to create lengthy policy manuals and system specifications by automating the rules-based creation of system documentation.

The “BPM of Oz” Main Protagonists

The conclusion thus far is that with the right team, IT tools, and a bit of analyst magic (know-how) to improve processes, things are possible for business users even during these dour days. So, who should be the faces and main protagonists of this journey to profitability?

For one, every project needs a business sponsor who is senior enough to set the direction, get courage, and keep on path despite the quagmire. In his funny presentation, Trefler assigned the following task to the Cowardly Lion: to be the chief operating officer (COO) that has to acquire courage and sense an opportunity to go forward.

Although Pega is a staunch proponent of BPM being aimed at business users, companies also need a sound technical infrastructure to make sure that technology is brought to bear. To that end, the Tin Man is appointed as a service-oriented architecture (SOA) IT architect with a SOA heart to handle all the master data and processes (blood and nutrients moving throughout the corporation’s body and feeding it).

But the sponsor with courage and the SOA technical and data infrastructure heart (and a cardiovascular system) are not enough. What is that other crucial piece that is necessary? Well, companies need the brain or the place to capture the business objectives and intent. BPM suites with all necessary metadata, rules, and processes (i.e., the institutional knowledge) are the brain, and of course, the Scarecrow would be in charge of that.

Humans are visual creatures, and engineers and technologists especially like to draw pictures and diagrams, and the brain needs to understand how the business should use those intertwined data. The brain needs to easily espouse the business intent and know how to use the data to that end, especially when times are tough and users are under pressure.

Businesses need to do this team exercise quickly and on the fly. In reality, the competition has never been darker, and those ominous flying monkeys in the movie represent today’s competitors that will sweep everyone away... everyone is hungry these days.

The Yellow Brick Road of BPM

In the main part of his presentation, Trefler maintained that the Yellow Brick Road, which will lead any business to Oz (and back to profitability), consists of three capabilities, starting with the ability to directly capture business objectives into the BPM system by the business users. The BPM system is actually an integrated database of rules and processes that is able to expand to the extent of the business.

At this stage, I have to depart from Trefler’s short and focused presentation to explain how directly executable business requirements put business changes in the hands of the business users. To capture new objectives, enterprises need an environment that is adaptable and “change-aware” so that processes are dynamically impacted by ever-evolving corporate business objectives.

Accordingly, SmartBPM processes use an open, relational database of rules to organize enterprises’ business thinking with visibility and control. Processes and rules become assets of the enterprise that are organized by roles, with an audit trail, versioning, and security built in. This includes the ability to capture and document new changes without “wiping out” previous definitions, thus allowing organizations to find and re-execute historical definitions as required.

Their business processes are built out of small, granular definitions, each structured to address a specific policy or procedure. These elements are linked together by logical names that reflect the intent of every process step or sub-step.  This allows the processes to be change-aware, i.e., to have the repository of rules (RuleBase in Pega’s lingo) to figure out for itself how to insert a change into the right places.

Each new business rule adds a specific refinement to specialize previously defined objectives. New rules are automatically “slotted” into other procedures and decisions that they impact.

This automatic positioning is more efficient and error-free than the typical alternative of laboriously locating and coding changes across dozens of separate software modules or updating manual procedures in three-ring binders scattered all over the place. Change-aware processes capture the new objectives of management in an active database that gives processes and rules the same visibility and reusability that organizations get when they centralize key master data such as the enterprise’s customer or accounting master information.

Moreover, easy and safe Web browser-based forms are designed with familiar metaphors to match the processes with decisions that are being changed, thus helping guide business user-driven changes. The forms define the “Concepts” that drop into the RuleBase in bite-sized chunks. To edit the rule that defines a process, users use the familiar Microsoft Visio flowchart tool, which dynamically interacts with the SmartBPM execution engine to gather all the needed information.

The flowchart tool captures the diagram and its details in the RuleBase as operational instructions. The built-in stencil on the left of the flowchart form (see figure below) includes augmented workflow shapes and facilities that interactively prompt for the information needed to make the diagram executable. In other words, the act of specifying this process actually automates the process.


Even a Business User Can Do IT

Another option is to create special rules within a Decision Table form (see figure below) with rows and columns. In this matrix form too, business users maintain business rules, just like in a spreadsheet. Business users can invoke the decision table form (or a decision tree) by clicking on the particular Decision shape in the flowchart form. These intuitive “Fit for Purpose” forms make accessing the authoritative RuleBase easy and safe.


Specialized forms ensure accuracy and allow interactive testing with sample data to ensure they do exactly what users intend. Business users quickly learn to understand what a rule definition like the following one does: “IF the Balance Amount is under $1,000 AND the State equals Massachusetts, then the Rate is 2.5.  But, if the State equals New York with the Balance Amount between 1,000 and 5,000 THEN call a special additional rule for New York.”

This ability of forms to guide the user for safe and easy delegation to the IT staff is of critical importance. One big problem with conventional programming is how little support in terms of specifications a programmer gets when creating and editing a new module. The forms make the job easier in SmartBPM, allowing the system to guide the definition and prevent errors.

There are dozens of available specialized rule structures to facilitate an easy and safe way to record business objectives.  Pega also allows customers or partners to add their own structures into the very core of the BPM engine, should a special need require another specialized rule type.

Last but not least, working models hereby replace traditional voluminous paper specifications and requirements. Coming back to Trefler’s words, there is no longer a need for large and thick Microsoft Word documents and sign-offs between business and IT users.  This is the case even when we are talking about documenting rich objectives and workflows, such as multichannel customer service.

Part 3 of this blog series will conclude Trefler’s presentation and provide even more details on Pegasystems’ value proposition. In the meantime, your comments, thoughts, suggestions, or individual experiences with BPM solutions are more than welcome.
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