[From iSource Business, October/November 2002] Tom Saxe says that if all he wanted to do was map out business processes on a flowchart he wouldn't need software any more complex than Visio or another of the standard drawing applications. No big deal, right?
But when Saxe, vice president of systems engineering and program management at Otis Elevator, set out with his team to document the processes linking the company's 20 manufacturing facilities to its decentralized sales and field service forces around the world, he figured he needed a tool with a bit more firepower. "We were taking it a step beyond process mapping," says Saxe.
So Saxe and his team turned to an application from solution provider ProActivity that allowed Otis not only to map out and document the company's processes but also to design new processes and create an enterprisewide process repository.
As it turns out, ProActivity is just one of a host of software companies offering tools that address some aspect of business process management (BPM), and the solutions available today go beyond even documenting processes to actually executing and analyzing them.
Roots in Workflow Automation
BPM, traces its lineage back nearly two decades to the dawn of workflow automation, the technology created in the early 1980s to route documents and information around an organization. From the beginning, the object of business process management has been to discover and eliminate operational inefficiencies, whether that is an ungainly approval process for purchase orders or an unwieldy procedure for picking and shipping products.
Today corporations' continued emphasis on reducing costs and their increasing interest in integrating business functions are driving both the development of new tools for process management and the growing use of those new tools within enterprises. True, current adoption rates for the latest tools remain low, at about 10 or 12 percent, according to studies from technology consultancies Aberdeen Group and Delphi Group, respectively. The problem, in part, is that many companies have a hard time understanding what it is they do in terms of processes, as well as who is responsible for making a particular process happen, since processes typically involve multiple people, departments and applications, or even extend to business partners. In fact, Delphi, in its 2002 survey of the BPM market, reported that only 2 percent of companies had digitized all their processes, while about half had digitized less than a quarter of their processes.
But Delphi also reported that 54 percent of companies were evaluating BPM solutions, and Aberdeen has predicted that 40 percent of corporations would be using BPM tools by the end of 2003. Clearly this is "a market well on its way," as Delphi put it, and a host of solution providers currently offer an almost bewildering array of BPM applications. (See the sidebar "Finding the BPM Tool That's Right for You".)
Documenting Processes at Otis
Sifting through the myriad of BPM solutions, Tyler McDaniel, a technology analyst formerly with now-defunct consultancy Hurwitz Group, sees solution providers attacking this market with three different types of solutions. The first class of solutions, like those from ProActivity, focus on understanding business processes. These providers' tools are geared to understanding current running processes, analyzing their effectiveness and modeling those processes to be more efficient. This is just the type of tool that Tom Saxe was seeking when Otis Elevator set about documenting the processes that connect its sales force to its factories and field force.
Otis, a $6 billion, wholly-owned subsidiary of United Technology Corp., has sales and field forces serving clients in more than 200 countries, as well as 20 manufacturing facilities in the Americas, Europe and Asia. That decentralization presented the company with a technical challenge: "We didn't have a good infrastructure in place to facilitate communications between all these various entities," Saxe explains. "So we decided to put in a system that could help bridge the gaps."
As Otis set about writing the requirements for the new system, the company also undertook to document the current processes connecting its field offices to its plants. Otis had been mapping its processes for years using drawing tools such as Visio, but Saxe says that in this instance the company went looking for a more powerful application. Otis settled on ProActivity not only because the provider's tool would let Saxe's team produce "as is" and "to be" process maps, but also because the software allowed Otis to create a detailed central database, or repository, of processes. The database included a variety of information about each activity in a process, such as the data elements and information flows, the integration points with legacy systems and the types of processes (manual versus automated) associated with the activity.
While ProActivity's standard process involves a series of interviews with subject matter experts (SMEs) to "discover" a process, Otis' process team which included a specialist from the company's quality department who had experience with process re-engineering, as well as representatives of the IT, financial and supply management functions opted to first meet with SMEs at four representative plants to map out processes on a whiteboard and only afterwards enter the process information into the ProActivity tool. The process team validated the "as is" process at a subsequent meeting with the experts and uncovered process disconnects before plotting a "to be" process that would be put in place as the company deployed the planned system. In all, the process team spent about a month-and-a-half documenting the processes at the four Otis facilities and creating the "to be" state.
Saxe declined to disclose the cost of the project-based license that Otis purchased from ProActivity, and he says the company did not calculate a return on investment for how much time the company saved using the tool, although he is certain the process redesign would have taken considerably longer using manual methods. But the real payoff from the software, Saxe says, will come down the road, when the company's process engineers will be able to make use of the extensive information stored in the database created by the ProActivity tool.
Making Processes Executable at Swiss Re
The second class of solutions that McDaniel sees in the market includes applications that actually generate executable runtime code to drive processes. Providers of these solutions range from enterprise application integration (EAI) suppliers, such as TIBCO or Vitria, to specialized companies, such as eXcelon, Fuego, HandySoft, Metastorm and Savvion. These solutions are more sophisticated than the mapping and documentation tools, and they require a greater degree of IT support to understand, for example, how a process maps to the applications that fulfill that process or how the process maps to data stored in various databases.
Zurich, Switzerland-based Swiss Re, the second largest reinsurance company worldwide, turned to this type of solution recently when the company was looking for a way to enable electronic communications between its brokers around the world and Swiss Re's own business units, as well as within those units. Traditionally, the company had used phone, fax and e-mail to communicate with its brokers, and these processes made it problematic to obtain a real-time understanding of the company's accounts with the brokers. Brokers would send in reports that had to get routed manually within Swiss Re, meaning that a broker might ask for payment on a claim and the insurance company would pay, but the claim amount might be less than the outstanding amount of premiums due to Swiss Re from the broker.
Swiss Re hired Innovation Process Technology (IPT), a Zurich-based IT services company, to deploy a solution using a tool from eXcelon called Business Process Manager. This software is an XML-business document rules engine that allows users to build what eXcelon calls "composite business applications," solutions for executing, monitoring and changing business processes that span multiple systems across an enterprise and between companies. The solution that IPT built for Swiss Re allows the insurance company and its brokers to exchange business documents like claims reports, financial statements and premium statements, and it also allows Swiss Re to move those documents internally. Urs Tanner, IPT's CEO, did not discuss the cost of the Swiss Re project, but he says the time-to-payback for the solution was less than four months.
While Swiss Re elected to hire an IT firm to execute its BPM project, McDaniel says that providers in the business process management arena currently are moving toward offering tools that are accessible for process analysts or process owners within a particular function, such as a director of logistics or supply chain, rather than strictly for the techies from the IT department. That makes sense given that Delphi, in its BPM market survey, reported that "line-of-business managers are responsible for defining the rules and business logic involved with BPM" at 61 percent of companies. As the new tools emerge, just about any functional leader in a company may be able to use these new tools to effect process changes.
The other trend McDaniel sees in the BPM market is the emergence of the third class of business process management solutions, real-time analytical tools. With such tools, the analyst explains, "You take a running process, monitor it and build out key performance indicators for the process, then measure the success of the process as it's running. You're really helping yourself understand, am I running that process in the most efficient way, or if there is a problem a failure, a bottleneck or exception how can I quickly resolve that?" Further, by analyzing the process over time, these solutions can help companies gain a deep understanding of how their processes actually work and allow them to anticipate how they will have to modify those processes as business conditions change. These analytical tools are still "very, very nascent," according to McDaniel, with providers of existing BPM solutions working to add greater analytical capabilities to their current tool sets.
Of course, all the BPM modeling, execution and analysis tools in the world can't guarantee more efficient operations unless a company is willing to make the necessary changes in existing processes and, when necessary, adopt entirely new processes. But at the least the tools can point out where process changes are advisable and prepare a company for the day when the competition and the marketplace make those changes a necessity.
The Price of BPM
Business process management can help companies automate manual tasks, manage and monitor ongoing processes and improve operational efficiencies, but at what price?
Technology consultancy Delphi Group has reported that of the approximately 200 companies polled for its 2002 survey of the BPM market, half of the respondents expected to spend more than $100,000 on BPM software over the next three years, with most of these companies budgeting between $100,000 and $500,000 for these projects. About 17 percent planned on spending between $1 million and $5 million, while just 5 percent were budgeting more than $5 million for BPM.
"Successful BPM initiatives will likely involve at least $1 million investments for medium-sized enterprise, with larger enterprises spending in excess of $5 million," Delphi states in the study. Initiatives budgeted at less than $1 million are likely to be pilot projects.
The consultants expect the total market for BPM software to surpass $5 billion by 2004.
Finding the BPM Tool That's Right for You
The business process management market suffers no lack of solutions: A comprehensive and enlightening market survey put out earlier this year by Computer Sciences Corp.'s Research Services, entitled "The Emergence of Business Process Management," lists more than 170 different providers in the BPM space.
Technology analyst Tyler McDaniel offers this checklist to ease the selection process:
1. Who in your organization is going to be using the solution? "The ideal situation is that it's not just IT using the product," McDaniel says. "It's better to get the line-of-business people, those who really understand the relationships, to use the product." So the modeling environment must be powerful enough to capture the complexity of your processes, yet easy enough for a non-IT person to use it.
2. Do you need the solution to generate executable, runtime code so you can actually execute a process? Some of the solutions offer only documentation functionality, which in and of itself can be extremely valuable but won't help if you need to run a process.
3. What kinds of software already in place along your supply chain will have to coexist with the BPM software, and will the BPM solution be able to work with that software? "Sometimes it's a real challenge to make these things work together," McDaniel warns.
4. How easily can you put change into the system, and how quickly will the system change? Can it handle versions of processes, revisions of processes, concurrent running of processes and multi-stepped, long-lived, nested processes? "These engines have to handle very complex processes in real-time," says McDaniel.
5. And finally, how strong are the analytics in the solution? "Some of the real differentiation comes in the ability to understand a running process through the analytics," McDaniel notes, adding that some solutions provider better analytical capabilities than others, but it is often these capabilities that will let a company monitor and tweak its processes, as well as generate the most value, over time.