Integrated and Process-oriented Solutions Are Required for Competitiveness
Integrated solutions that optimize only at a company- or department-level are no longer sufficient for success in today's highly competitive, integrated supply chain environment. Every department contains mountains of data, but without an integrated and process-oriented solution, all this valuable information is often lost to the company as a whole. What is needed is a real time solution that goes beyond integrating the content and processes of individual sales, marketing, or support department data.
Companies need a higher level of agility to respond to the different types of customer behaviors and over the last several years, cleaner, more reliable data has become the mantra of organizations seeking to improve their customer focus. As a result, user organizations are now swimming in improved data, which are still stored in disparate applications, data marts, operational data stores, and data warehouses. Companies have even attached sophisticated analytic tools to this scattered data with the hopes of gaining insight into customer attributes and behaviors (see Why Are CRM and Analytics Intrinsically Connected?). Despite these efforts, many companies have still failed to link data to business processes, and only a few companies have changed their business processes to reflect the insights gained from the data side. Even fewer have harvested this knowledge to make the most of every interaction with their customers.
Due to commoditization, a company that does not have a competitive product- or service may still be able to compete, if it has a nimble enterprise information system and process. The same holds for relationships with supplier on the other side of the supply chain, not to mention relationships with employees within the four walls of an organization.
Linking data and content to processes falls in the realm of business process management (BPM), a technology that coordinates the data and actions of disparate information technology (IT) systems and should allow companies to transform potentially damaging customer interactions into revenue opportunities. An ideal enterprise system in an ideal world would have a single software vendor providing 100 percent of the data, content, business processes, and connectivity to the outside world, and would accommodate changes instantaneously when required. However, this is a utopian ideal. Unfortunately in the real world, communication is impeded because content silos exist everywhere, and engineers, production, and sales people do not talk the "same language" and do not always use the same software.
Reality tends to fall short of ideal situations and processes on paper, because many issues can crop up at any time such as delays; "black holes", where information disappears; human errors; different context and semantics within different departments; and regulatory and compliance issues that must be addressed, etc. For example, it is not uncommon to see an invoice sent several days after the goods have been shipped. Thus, coordinating systems should help companies respond to key business events in real time (or close to it), and to minimize the risk of lost revenue. For example, a sales representative can contact and offer a customer discounts to pay bills on-line. Ultimately, by responding with the right action at the right time, companies can become real time enterprises (RTE).
BPM is a methodology backed by software used to manage businesses at a higher efficiency. It has emerged from the rising complexity of doing business in a competitive economy, where margins continue to narrow and the pressure to respond to market shifts is greater than ever. Companies are under increasing regulatory and investor scrutiny and must be run successfully, both in the short and long term.
A BPM high-level mission lets business processes become as manageable as data. To that end, BPM has to integrate existing applications, Web services, and people in a such way where it can quickly change, destruct, or construct processes, which is a capability that is far beyond the traditional enterprise application integration (EAI).
BPM: A Crash Course on What It Entails
As a nascent software category, BPM often means different things to different people. One could, in great part, blame this on the slew of budding pure-play software providers that refer to themselves as full-fledged BPM providers, but really only cover a niche or two of the entire BPM realm. One should also distinguish clearly between BPM as a management activity and BPM as a modeling tool, since these definitions are often used interchangeably. Below are the typical high-level tasks that a comprehensive BPM solution should cover (listed sequentially):
- Process definition or modeling, which maps and defines business process;
- process execution, which is a critical task that requires a core database and engine that contains process rules, and automatically initiates and manages processes;
- process monitoring, which enables managers to see potential bottlenecks and monitor work in process (WIP);
- integration layer, which, logically, links an organization's diverse business applications; and
- user interface (UI), which enables people to interact with the process engine.
There is an ingrained belief that BPM is the enabler of agility; flexibility; increased competitiveness; compliance; actionable information sharing and collaboration; and workflow execution. To satisfy these assumptions, BPM software should be
- event-driven, since it is triggered by internal and external events;
- orchestrated, since predefined process flows must enable complex process steps that can be completed without human intervention;
- enable internal processes, inside the organization's firewall; and
- exchange process information with external user groups.
Further, despite the need for orchestration, a human-centric workflow is still necessary in many instances. Therefore, BPM should support both exception-based human interaction and human decision-making. And last but not least, business analytics in the system must enable real time business event processing through management dashboards and similar decision-making tools. BPM also often includes integration capabilities including extract, transformation, and load (ETL) tools, multi-channel integration, and support for enterprise mobility, though these are available through other functions.
Some pundits believe that the enterprise software world is being revolutionized by two big complementary developments: service oriented architecture (SOA), and event driven architecture (EDA). SOA is a formalized approach for managing Web services, which means that some kind of platform is needed to orchestrate how services interact, and to ensure that processes are auditable, flexible, scalable, and secure (see Understanding SOA, Web Services, BPM, BPEL, and More). On the other hand, EDA is about giving applications the ability to handle unexpected events and events that occur in conjunction with others. Full-fledged BPM systems exhibit many of the same functions on both sides (see The Future of Business Process Management Where is BPM heading?).
Moreover, business processes should by no means be viewed within the confines of departmental or even organizational boundaries, as businesses are becoming increasingly horizontal in terms of cross-departments (not to be confused with a vertical industry focus, which remains paramount) and role-based. Therefore, what is needed is an enterprise system with holistic, "big picture" answers for the entire enterprise, if not the entire supply chain. Basic questions like "What is the profit per product line?", "What is our current sales pipeline and how does that compare to last year?", and "Who are our most profitable customers?" need to be answered. With BPM-enabled and integrated solutions, these answers might come naturally, since BPM aims to formalize intricate business processes into highly manageable and visible workflows.
These processes already exist, but vary from department to department, by function, and as well as in their requirements to interact with various software products and business partners. This creates a management and training burden, stymies attempts at holistic reporting across the business, and often results in the duplication of information handling as the information moves from one department to the next.
Conversely, BPM forces common business process methodology across the enterprise, and if everyone uses the same system, a commonality occurs that should considerably reduce training requirements, simplify compliance efforts, and enhance internal communications. Duplication can also be eliminated because everything is under the same system, and in cases where information must exist in duplicate form, the BPM-enabled system can be configured to replicate it.
BPM: Why Use It?
Why anyone would want to consider deploying BPM? Some reasons include the potential to dramatically reduced operation costs, reduced lead times, streamlined outsourcing, improved performance visibility, better management of global operations, faster time-to-market, exceeded customer expectations, and so on. The Business Project Management Institute reports that an effective BPM strategy can
- reduce product design time by 50 percent, resulting in faster time-to-market, more competitive products, and increased revenue;
- reduce order time by 80 percent, leading to cost savings, improved customer satisfaction, and revenue gains; and
- help organizations achieve efficiency gains of 60 percent in call centers, resulting in improved asset management, reduced customer service costs, and improved customer satisfaction.
An Accenture report claims that a BPM-enabled enterprise resource planning (ERP) system can cut inquiry response time by 70 to 90 percent, decrease customer order lead time by 50 percent, increase inventory turns by 35 percent, and cut manufacturing cycle time by 40 percent.
An added benefit of BPM (combined with analytics) is that it can improve compliance with initiatives such as the Sarbanes-Oxley Act (SOX). In particular, the sheer number of provisions contained within the legislation is daunting, and although it is possible to use checklists and spreadsheets to achieve compliance with all of SOX mandates, most companies recognize that specialized software and systems can streamline the process of tracking tasks and managing the overall process (see Attributes of Sarbanes-Oxley Tool Sets). To that end, BPM technology should improve management control by automating processes and enforcing business policies. Management dashboards also assist executives in spotting problems earlier, through greater visibility of critical business information.
In the past, tweaking a current ERP system to simplify a job would have customarily involved costly custom programming. Today, BPM can streamline business processes within and between systems, because it is a mix of workflow, EAI, and application development that makes it easier for companies to codify current processes, automate their execution, monitor performance, and make "on-the-fly" adjustments to improve the processes.
BPM Cautions and Caveats
We do not necessarily see BPM as a significant enabler for reinventing mature, "cut-and-dry" ERP or computerized maintenance management systems (CMMS) processes, particularly not in a single-site environment (although it remains important to automate and keep these routine processes in check). Indeed, how many ways can one think of to pay vendors, create invoices, book debits and credits, or schedule maintenance? However, with respect to more "extrovert" collaborative applications like supply chain management (SCM), product lifecycle management (PLM), and customer relationship management (CRM), it is important to be able to model the application exactly to how an organization does business with its trading partners, and not be constrained by software. The need for SOA, Web services, and BPM has been boosted by these external processes, which are most often automated workflows that involve multiple companies and a diverse, existing enterprise systems.
The still emerging BPM market has resulted in a number of point solutions that excel in only a few of the aforementioned components of BPM. Therefore, following the same route as ERP players in the older ERP market, niche BPM vendors will have to partner to deliver a more comprehensive BPM solution, and mergers and acquisitions (M&A) and market consolidation are bound to happen in the future.
In addition, though BPM vendors come from different backgrounds, and they can basically fall into three groups, each having typical strengths and weaknesses. These groups include traditional enterprise application vendors; enterprise content management (ECM) or infrastructure/EAI vendors, such as IBM, Tibco, Stellent, FileNet, SeeBeyond, and WebMethods; and BPM pure-play specialist vendors like Fuego, Savvion, Ultimus, IDS Scheer, and Pegasytems.
The first group appears in every software category related to process and consists of traditional enterprise applications vendors, such as Oracle, SAP, or Microsoft. Owing to their expertise in enterprise-wide business processes, these vendors have typical strengths, such as astute offerings for initial software releases and tight integration with (their own) ERP systems; good control and risk documentation; and good reporting and monitoring tools. A typical weakness of these vendors' solutions is that they have entered the market late, and consequently have had less time to mature, and offer poorer integration with existing document and records management systems.
Exact Software could also be categorized with the traditional enterprise vendors, although it does display some of the best traits from all three worlds. Namely, though it lacks modeling, the Exact e-Synergy product exhibits the typical strengths of a BPM or ECM offering. For example, it offers collaboration, document management, and records management functions, and Exact has a good track record of BPM implementations. Furthermore, the product has certainly not been late coming to market (on the contrary, it has been abreast, if not ahead, of the curve), and has been maturing ever since. Below is a summary of the benefits e-Synergy users have experienced.
- Improved consistency, as fewer issues are inadvertently overlooked and everyone is operating with the same information to achieve a common end;
- lower training costs for new staff;
- paperless office is possible, if desired;
- increased productivity;
- continuous process improvement, as one can tweak processes as needed, and institute lean concepts even in white collar, "ivory tower" environments; and
- reduced organizational stress and frustrations, by preventing many errors and resolving exceptions that typically fester unnoticed.
SoftBrands evolution is another extended-ERP product worth pointing out. In contrast to many complete peer ERP systems sold in a standardized form, evolution is designed to allow customers to customize the system to their own unique operations. It offers a wide range of functionality and tools that can tailor the application, and evolution provides businesses with a platform for business process improvement and growth. Having been built on SOA principles, and by using BPM tools to model, design, configure, and implement user enterprises' unique functional requirements, the product allows customers to tailor the application without modifying underlying source code.
A great example of a vendor within the pure service industry, is Unit 4 Agresso, a fellow Dutch competitor of Exact. Pure service sectors, such as professional services or local governments, offer "know-how" based products rather physical goods. Unit 4 Agresso's architecture is quite malleable, largely because the solution was, from the onset, designed to drive business from the top down, and uses business goals to shape business processes.
While a carefully selected, well thought-out, and meticulously implemented BPM will likely become a powerful tool for improving business operations and can expand with the company, BPM should not be regarded as a "magic wand" that will remedy all corporate maladies. Simply buying a BPM system, installing it, and turning it on will not transform business processes into a clean, efficient, and holistic business management system overnight. Part of the challenge in evaluating and deploying BPM is that multiple capabilities like integration, workflow, and process modeling tools must be assessed. The challenge is also to fine-tune the system so that it can dynamically combine event and contextual data.
BPM deployment takes work, commitment, users' buy-in, discipline, and careful change management, all of which entail thorough planning and dedication, and a well thought-out implementation. The goal of BPM should not only focus on solving processes through technology, but also focus on a cultural shifts within a company that encourages information sharing, because BPM promotes the notion that a business moves forward based on the collective information that is stored, shared, and circulated among employees. It makes information available to all those who can use it, and enhances the investment that some businesses have already made through the implementation of ERP or SCM solutions, allowing for greater efficiencies throughout the entire value cycle of a business.