Speed to Business

Loosen the twist-tie, spin open the plastic bag, and out tumbles a most user-friendly invention: sliced bread. Could there be anything as great as this?

Increasingly, professionals in both business and IT communities today would answer "yes" — perhaps even greater. The focus of their excitement is business process management (BPM), a gathering mass of technology and methods that could produce the next great productivity boom in the application of information technology. BPM addresses how organizations can identify, model, develop, and manage processes between systems or involving human interaction. Automation is a major BPM goal, not only to save money and time, but also to give organizations (and their business partners) the bandwidth to bring efficiency to the most complex processes and put greater energy into activities that are most strategic to their mission.

BPM isn't startlingly new: In many ways, BPM stands on the shoulders of an ancestry full of valiant attempts to apply engineering structure and scientific rigor to the challenge of aligning strategic business objectives with the most efficient means of achieving them. Nor is there a specific breakthrough development in technology (such as microprocessors, PCs, or in software or relational database systems) that companies simply can buy to be part of all the excitement. Instead, BPM is a synthesis of progress made in both business and organizational thinking and key IT developments, such as the digitization of content and the collaborative potential of the Internet.

Some locate BPM's roots as far back as 1911, to Frederick W. Taylor's groundbreaking Principles of Scientific Management, which had such an enormous influence on early 20th century factory planning and industrial management. Others look to "a new math and a new computer science," according to Howard Smith and Peter Fingar, that's maturing to anchor BPM just as relational algebra did for database management. "The math is pi-calculus and it underpins the computer science of distributed mobile processes," write the authors in IT Doesn't Matter — Business Processes Do (Meghan Kiffer, 2003), citing the work of ACM Turing Award winner Robin Milner. "Over the past four or five years, this established body of computer science has been repurposed from scientific uses to commercial business uses and serves as the basis of new information systems capable of handling the dynamics of business processes."

Looking at the recent history of our IT age, many will recall the excitement — and alas, along with progress, the disillusionment and unintended consequences — of computer-aided software engineering (CASE), total quality management (TQM), and business process reengineering (BPR). When a small group of consultants, academics, and visionary business executives began talking about BPM in the 1990s, they had to battle both weary skepticism about bold ideas and, as the decade wore on, an overwhelming urgency to devote nearly all monies to system remediation and replacement in the face of Y2K fears and the dot-com mania.

Y2K in particular fueled an explosion in packaged, enterprise resource planning (ERP) applications. The late 1990s also featured massive buying in manufacturing, supply chain management, call center, customer relationship management (CRM), e-business, and other applications. The number and diversity of such systems in turn opened up a burgeoning market for enterprise application integration (EAI) middleware, which attracted process-oriented thinking but attacked the problem at too low a level. Meanwhile, coming from the top down, organizations invested in workflow, business-rule engines, and other design and modeling systems, which have enjoyed isolated success in structuring business goals, processes, and collaboration into models and languages for transformation into something IT developers could execute and, with any luck, reuse for future applications.

Something in the Air

Throw in content management, and you have just about all the players yearning to breathe a rare fresh breeze blowing through the confines of tight IT budgets at most organizations. "In 2002 and 2003, the majority of our business came from projects where the budgeting was associated with workflow or EAI," says Tom Meyer, CEO of Intalio, a "pure play" BPM system (BPMS) provider. "Through persistence, we were able to get companies to look beyond the obvious requirements and consider how they could use BPM to extend far beyond those original implementation models. Since the latter part of 2003, however, the projects we've been doing are blatantly BPM. Companies with the resources to track and qualify BPM technology have seen enough reference stories to know that they can move forward with vigor."

According to a January 2004 report by Forrester Research, one-third of the firms it surveyed are "currently using or piloting BPM technology today, compared with only 11 percent in mid-2002." Yes, but what kind of BPM? The sector includes pure play vendors, such as Intalio, Lombardi Software, and Savvion; content management players, such as FileNet; enterprise application vendors, from Oracle, PeopleSoft, Siebel Systems, and SAP on the high end to Lawson Software and Epicor Software in the midmarket; and EAI and other integration specialists, such as BEA, IBM, Tibco, Vitria, and WebMethods. Business rules management and analysis products from such vendors as Fair Isaac, Ilog, Mega International, Pegasystems, and RulesPower are also a key part of the BPM sector.

The frenzy of vendors, analysts, buzzwords, and acronyms is sure to temper natural excitement with numbing confusion. Just about all participants would agree, however, that BPM's timing is good.

First, the growing acceptance and implementation of a universal technology infrastructure of Web services, service-oriented architecture (SOA), XML, SOAP, and other open standards gives BPM a chance to be much more than what CASE and BPR were: that is, proprietary approaches that run aground when they can't bend with changing business and IT conditions. "James Martin and other CASE visionaries had the right idea — they were way ahead of their time," observes Meyer. "The challenge was that you'd never get such proprietary tools to be accepted across industries. With BPM and process modeling, many of the concepts are the same: but now we have a pervasive, open technology platform. We aren't asking companies to make a huge leap to some proprietary product. We're talking about leveraging something to which more and more companies have already made a commitment."

Businesses Mean Business

The second driver is business necessity. Wasted efforts at business/IT alignment are no longer just an overhead cost; poor understanding of processes reduces visibility into business performance, meaning that organizations discover customer and business partner relationship problems only after it's too late. Corporate governance regulations are also spurring demand for BPM solutions. Finally, under market pressures, business leaders are taking a hard-headed look at their application portfolios and asking for IT's collaboration in formulating and executing plans to drive costs down.

To effectively reduce costs through outsourcing, offshoring, divestiture, and other means of restructuring, companies must identify routine decisions and actions: in other words, processes ripe for automation or undertaking by lower-cost providers. Like most business processes, these cross functional and application boundaries and require process understanding to identify them. Of course, the last thing most companies want to do is divest processes that are critical to their core competencies. They must discover: What processes strategically differentiate them from competitors in the marketplace? Which processes deserve nurturing, if not legal protection as intellectual property that could become a source of revenue generation in collaborative partnerships?

"Business processes are the main intellectual property and competitive differentiator manifest in all business activity," write Smith and Fingar, "and companies must treat them with a great degree of skill and care." As the authors observe, the haphazard treatment to which business processes are traditionally accorded by many organizations — "cast in stone through point solutions, one-time projects, habitual work practice or the straightjacket of business software" — is coming back to haunt their every effort at attaining greater agility and flexibility to change. The big question is whether the popularity of consolidation, done to rationalize application portfolios, will help or hinder the objective of identifying, modeling, and managing critical business processes.

ERP uber Alles

When first introduced, many organizations felt that packaged enterprise resource planning (ERP) applications were the greatest thing since sliced bread, certainly better than the specter of business-critical back-office systems grinding to a halt with the century date change. Many years and long installations later, organizations have gained perspective on ERP's potential and its limitations. Though brought in primarily by business executives, few had much to do with the ERP implementations once they began. This difficult task fell to IT and armies of systems integrators. Rather than unify strategic business directions with IT, ERP implementations often exacerbated the differences.

Despite the challenges, ERP and packaged applications have generally won the "buy versus build" debate for systems of record. Control features in ERP systems have come to play an essential role in compliance to governance and financial reporting regulations — in fact, some workflow controls introduced by ERP systems are now required by law. It's been a battle, but the majority of ERP customers now see the light about reducing customization and promoting stability in ERP implementations.

Advances in storage, database systems, and ERP design are in fact encouraging many organizations to further consolidate — even into a "single instance" of the ERP system that once and for all leaves behind the typical large organization's manifold "best of breed" portfolio. In other words, all order entry, financials, purchasing, supply chain, and even CRM back-office systems would come from one vendor and ideally be based on a single, enormous database instance.

SAP, the industry leader, stands to gain massively from this trend, which should figure into how antitrust regulators view potential mergers between other combatants. Oracle and PeopleSoft are also trumpeting consolidation - but live in fear that they could be on the wrong side of the debate. Although it has a way to go, Microsoft Business Solutions is moving quickly to try to dominate back-office application consolidation in the small to midsized business (SMB) arena (see Stewart McKie's "Something's Gotta Give").

While some analysts assert that the move toward single-instance ERP could quash enthusiasm for building systems based on Web services, XML, and open standards, it's more likely that the two approaches will complement each other. The Web services approach will be essential to quickly integrating diverse systems that don't easily lend themselves to consolidation. Over time, some of those systems can be drawn into the greater ERP realm. SAP and the other leading players are organizing their solutions to support such an evolution.

ERP and BPM

What will be the impact of ERP consolidation on BPM? Competitors vulnerable to consolidation are scrambling to deepen functionality in key industries. Others, such as Epicor, are improving their tools for analyzing data and business performance, developing modules to help customers with trend analysis, planning and forecasting, and other strategic activities. But a key impulse is to get on board the BPM train before it's too late.

Some question whether the ERP vision can embrace BPM, which is focused in many ways on ERP's opposite. Certainly, BPM is critical in streamlining ERP implementations and identifying processes inside the ERP realm that could be automated or in other ways made more efficient. A 2003 AMR Research note observes that "the real problem is that packaged applications have been designed from the inside out, focusing on internal process improvement."

The BPM vision is ultimately focused on more than automating routine processes. It's about aligning business goals with IT implementations to capture innovation, so that companies can push rapidly outward and seize competitive advantage as soon as possible. BPM systems must make it easier — not harder — for organizations to be agile, respond quickly to market changes, and even structurally grow or shrink to fit objectives. "Jobs that call for simply following recipes will become scarcer," said MIT professor Erik Brynjolfsson, quoted in MIT Enterprise Technology Review (March 10, 2004). "Demand for an innovation-driven workforce will continue to grow." Companies that employ innovators will depend on BPM to turn vision into reality.

David Stodder is editor-in-chief and editorial director of Intelligent Enterprise.