Business Process Management 04 - Market Research Reports

Summary:

BUSINESS ISSUES There are nine factors that contribute to the success of a business, as recognised by PIMS. Whilst these include critical factors such as customer preference for products and services, market share, people and culture, innovation/differentiation, market growth, and vertical integration, there is no mention of business processes. In short, areas of the business that add greatest value cannot typically be constrained by a core business process. Contrary to the hype, BPM is not going to completely revolutionize the way a business operates - it will however, help to gain a level of management and control over processes, and over time, simplify the task of adapting processes in line with the strategy of the business. It is essential that realistic expectations are set and managed - too many projects have over-promised and under-delivered and now is not the time for repeating this unfortunate trend. We are therefore calling for solutions that place a greater emphasis on the fundamentals of defining, communicating, and critically managing business process information. As standards continue to erode the lower levels of the technology stack, replacing proprietary elements with service- and component-based elements, it is at the process and information management layer that battles will be won and lost. The key business issues in the BPM market are: Regulations, Compliance, and Governance - meeting regulatory and code of practice requirements is a pressing need. It is not just a one-shot initiative since; compliance, like the drug testing in sports, is something that could be assessed at any point and time. BPM gives the business a framework for managing complex processes, and ensures that process changes can be made in-line with regulations. Without some form of process control, the costs and risks associated with compliance and governance in general could spiral. Consequently, compliance-related issues will dominate IT budgets during 2004. There is a raft of regulations being passed down to organizations on both sides of the Atlantic. These include the new Companies Bill, Freedom of Information Act, Electronic Communications Act, Digital Rights Management, Sarbanes-Oxley (SOX), Data Protection, and Human Rights Acts. Whilst they differ in structure and impact, a common thread that they share is that they mandate that businesses understand, manage, and control business process to a greater extent than they have previously. Regulators will expect to see certain elements of IT infrastructure, monitoring, producing reports and audit trails in place to ensure compliance with legislation. But more importantly they will expect to see auditable process and procedures that run from the top to the bottom of organizations. The business therefore needs a framework to support compliance initiatives in general, not just isolated occurrences. Our belief is that BPM can provide this framework. From a vendor point of view, increased regulations are fantastic news; they need no longer hype a market to create an interest or try to sell solutions based on soft, potential benefits. The risk of legal exposure from failure to comply is such a compelling force, particularly within the financial services and Public sectors, that it can even force ROI on to a back-burner. Organizations do not really have much choice over compliance. The smarter business will therefore look to offset to cost of compliance with the benefits of closer process control and management. Extraction of Value from Investment in Enterprise Applications - This is perhaps the most often quoted driver for the BPM space, and there is no doubt that organizations are building business cases and investing in solutions based on it. It is a controversial point and one we would argue needs to be very closely evaluated. The theory is that BPM allows organizations to realise ROI from their CRM and ERP applications by abstracting processes to a higher level, thus allowing them to be connected and orchestrated by a BPM solution. Such arguments are based on the view that the applications need to be joined together, are currently isolated or inefficiently connected, and that opportunities for increased automation will not have already been taken. Contrary to this theory, we believe that organizations will have taken opportunities to realise increased efficiencies/reduced costs some time ago. Enterprise applications generally do an excellent job of automating vanilla processes; re-engineering them through a BPM solution will only be an exercise in repetition. Where increased efficiency may be found is in the joining of these vanilla processes, not the re-working thereof. This is particularly true in organizations that have held-off making an investment in Enterprise Application Integration (EAI) solutions. Improved process control - It is our opinion that the ability to achieve greater process control and visibility is a more accurate and substantial market driver. It recognises that BPM is not necessarily a short-term proposition but can become a tool for helping the business manage change through a process- and information-centric manner. BPM will therefore be able to demonstrate its real value when the business needs to adapt or change in order to minimise a threat or maximise an opportunity, in support of its long term-strategy. In order to do so, it goes without saying that it must be able to recognise that the threat or opportunity exists in the first place. This is why we are arguing that BPM needs to be tied in with the overall information strategy of the business. Our model of verticalisation shows how Business Intelligence and process performance metrics can be built in to BPM solutions, which in turn need to integrate with data analysis solutions. In this way, information about a particular business process can be collected and monitored relative to other processes and the business environment in general. Clearly, accurate information forms the basis for any kind of proper management and control. Indeed, as BPM continues to develop and mature, we anticipate the development of products and solutions that help the business to integrate its process management, performance management, and information management strategies. From a position of closer process management, businesses will be able to respond more rapidly and with greater confidence. Information generated at the process layer will be fed back for analysis, giving the necessary management controls and a closer understanding of the cause-and-effect relationships that exist between process elements and indeed between disparate processes. As a consequence, change management will become less fraught with risk and danger. TECHNICAL ISSUES From a technical point of view, BPM is being driven by the formation and rapid acceptance of key industry standards. As the top level in a deep and complex technology stack, BPM relies on the ability of underlying components to pull together the necessary components in a way that is cost effective and of suitable performance. Trying to execute a business process without Web services, XML, and component-based application integration techniques would be out of the question. Currently emerging standards will carry this trend forward, hopefully ensuring that solutions become even easier to use and more focused on the specific needs of the business. For example, Business Process Modeling Notation will make it easier for business users to create models of business processes, thereby capturing domain expertise and knowledge. The new generation of integration architectures, typified by the Enterprise Service Bus simplifies the task of application integration, giving it a process-centric, service-oriented flavour. Top-down vs. bottom up - Business differentiators tend to not be driven out of the IT aspects of a business process- it is the application of intelligence that gives organizations an edge. Therefore, whilst there may be cases where a BPM solution helps users in terms of managing their workload, or reducing manual intervention, it is not going to create long-term competitive advantage, simply because value-adding human activities cannot be adequately incorporated into BPM. The problem with taking a bottom-up, technology view of BPM is that everything is seen in terms of applications, components, workflows, rules, and logic. The same holds true for application integration - it needs a rationale; a compelling reason for doing it and clear expectations of what it will achieve. Our belief is that a top-down, process-centric view of the business will foster such a sober and realistic backdrop for application and data integration. Applications will be connected in order to satisfy a particular process, just as data will need to be integrated in order to support management of the process. Verticalisation - One of the issues with the top down approach is that it can seem rather ambiguous. Where does the business start? Just as packaged applications aim to speed deployment and time-to-value by focusing on key capabilities, believes that BPM solutions need to target specific pain points within the organization in order to get a foothold. Furthermore, we think our model of verticalisation presents the ideal architecture for supporting this approach. Within industries and markets, vanilla processes tend to be very similar across different businesses - what we would term common practice. What is more, these companies will broadly tend to use similar applications to support operational functions, some of which may be highly specialised for that sector. When it comes to reporting, analysis, and real time activity monitoring, these businesses will also have a typical portfolio of information needs. Clearly, these will never be identical, but the theory of verticalisation in a BPM sense is to give customers a framework, based on their market sector of point of pain, which addresses a large proportion of the basic 'plumbing', from a process, integration, and data point of view. This leaves the business free to spend its time on more valuable BPM-oriented activities, working on the unique elements of a particular core process. Model-centric BPM -’s view is that the further the business can move away from the management of interfaces and technical micro-detail, the better. However, if we are to successfully manage processes from a model level, we have to have the necessary technical plumbing in place to fill the void between model and low-level technologies. As a consequence, we believe that a model-centric view of BPM means more than just modeling the required business processes. There are other modelling requirements at the application integration and data integration levels. Furthermore, by capturing domain and market expertise into models, vendors can provide solutions targeted at key industry sectors and issues, such as compliance. Other benefits include reduced deployment time, persistence of models, a reduction in the impact of changes in underlying technologies, and an integrated approach to analysis and real-time monitoring. MARKET ANALYSIS Discussions surrounding business processes are not new. In the early 90s, the market saw an explosion in the much-maligned Business Process Reengineering (BPR). BPR was used as the sheep in wolf's clothing to legitimise many of the sackings and redundancies made during the last recession. The problem with BPR is that it failed to reflect the complexities of business processes and as a result oversimplified some of the most fundamental issues. After all, business processes are strange things - a mixture of experience, intuition, and rational analysis. Whilst BPR aided detailed analysis of processes, it typically failed to incorporate a wider set of inputs. Existing processes that incorporated many years of experience were often swept away with no regard for the embedded knowledge they contained. BPM therefore needs to be a lot more than just a rebadging of old technology, some of which has previously proved to be restrictive in its own right. EAI, for example, tends to see a process as being composed of pure IT elements (applications, message brokers, adapters, etc.) and workflow as the sequencing of steps and activities between individuals in a process. BPM, if it is to be taken seriously, must be able to combine and integrate the best bits of all of the relevant disciplines and technologies required to satisfactorily manage every aspect of a business process, regardless of its scope, complexity, and time scale. The BPM market has been 'formed' by the merging of separate pockets of IT, together with a maturing influence from the opinion that businesses need to be managed from a process point of view. Vendors from a range of disciplines including application integration, workflow, and even document management have recognised that their solutions have a part to play within the BPM jigsaw - the amusing part being that they all feel that they play the central role. Beneath the covers many cracks exist and thus, whilst there are in the region of 200+ software vendors claiming to be able to fulfil your BPM requirements, our view is that only a small fraction of these have the complete functionality required to be a serious contenders. The market therefore still has to be seen as being immature. We would expect the market to reach mainstream adoption phase within the next 3 to 4 years, by which time the boundaries between application integration, process integration, and data integration will no longer be distinguishable. This continual maturing is reflected in our evaluation of leading vendors in the market. webMethods has worked extremely hard, with aggressive development and acquisition strategy in order to reach the position it has now. Similarly, SeeBeyond is thoroughly deserving of its position, having developed an excellent product and clear vision. Fuego has a strong and recognised history in the BPM space and has made great strides to complete the picture with technologies for facilitating application integration. These vendors have taken different routes to BPM, but both should be proud of their accomplishments. They are joined by IBM who is providing BPM solutions that we consider to be Outperforming the rest of the market.