Forecasting a BPM revolution

June 16, 2003 by admin

Bill Gurley

Bill Gurley

You believe Business Process Management (BPM) will not just change the software industry but also industry in general. Please explain?

Gurley: I haven’t ever seen a piece of enabling technology that has had a business impact so quickly. The customers that I have met with are seeing real-world improvements in business metrics 60 days after engaging with the software.

How do you envision BPM working in real world situations?

Gurley: Almost every company, regardless of industry, has hundreds of business processes that underline what they do everyday. Those may be functional and non-strategic, such as HR related or financial related, or they may be super-strategic, such as customer service or product development. To date, there has been a lack of an ability to apply a Deming-like philosophy of continuous improvement to those processes. (W. Edwards Deming helped revolutionize global manufacturing, bringing concepts such a continuous improvement and just-in-time (JIT) to, first of all, post-World War II Japan.)

In terms of best practices, it has been very difficult to outline best practices, “Define, Measure and Improve them” – or Plan-Do-Check-Act, as Deming would say – and then start the cycle all over again. By using BPM systems to define and automate these processes within an organization, all of a sudden there is the ability to define best practices. Deming-types of practices have long been done on the factory floor, but you haven’t seen that type of automation and rigor applied to how you deal with, for instance, customer service exception handling. Now all of a sudden you have that opportunity.

Customer service exception handling is a type of process that companies are automating with BPM; can you give some more real world examples?

Gurley: Exception handling turns out to be an extremely good fit for BPM. I think part of it is because customer service systems, developed by companies like SAP, already have a certain amount of rigor. Let me give you an example of how BPM actually works. A computer company I know has problems with the addresses on one percent of their shipments. The addresses can’t be read and no-one can figure out where the products should be delivered.

Historically those systems all came back to the company, where they had to
be considered used, and they tied up all kinds of resources. So the company extended its support structure to its shipping partners, which now says: Oh if you have a problem with an address, log in here and start through this BPM code to tell you what to do next. Now the company is solving three-quarters of those address problems in the field. You may think, well its only one percent, but it’s those exceptions that end up taking as much as 80 percent of the company’s resources.
Elsewhere I have seen BPM working on tax and audit processes. Also accounts receivables management is one area that I have seen multiple customers using multiple BPM vendors. For example, companies can set up a structure whereby the minute an account goes to 30 days, a trigger is generated and an email goes to perhaps the sales person, to the treasurer, maybe to the bank, and you start through a methodology of working on the collectables. I think in this day and age people know if you can move AR up, you are increasing cash flow and that’s a pretty powerful thing to focus on.
I have seen quite a bit of professional services automation. Also in the financial services area, I have seen examples of exception handling on disputed orders, for example. BPM is really all over and that is one of the reasons I find the technology so powerful. It’s not limited to a business function or a type of industry.

You say the word Business is the key word in Business Process Management. Will that affect the way software vendors try and persuade companies to buy into the concept?

Gurley: The customers I talk to, who are having the most success with BPM are business users interested in time to impact. I haven’t heard anybody talking about web services or any of the technical features that vendors are talking about. For instance, the guy who wants to make his accounts receivables go from 60 days to 45 days is interested in just that. If there is a piece of software that can help him do that and the time to implementation is months and not one-to-two years, I don’t think he cares particularly what the core technology is. I think some of the vendors are putting the cart before the horse. They are leading with the technology message, and I’m just not sure that is what is so important here.

Large vendors such as SAP, IBM and BEA are making a commitment to BPM, as are quite a number of pure play start-ups. Do you have a feel for which approaches have an advantage?

Gurley: I think that organizations that are heavily committed to a specific ERP vendor, such as SAP, will likely find it easiest to use the solution from that vendor. I think the stand-alone vendors will pitch the importance of connecting multiple data silos and therefore pitch a kind of open standard solution and suggest to customers they do not want to get locked into one vendor. I then think everyone has to keep an eye on IBM, BEA and eventually Microsoft, because I think those companies understand the potential opportunity here. They are not as far along in bringing product to market as some of the pure-plays, or a vendor like SAP, but I think they certainly understand that this could be the next enterprise programming paradigm. There was client-server, and then you had applications servers and I get the sense that, for many organizations, BPM will be the next applications paradigm.

From a technical view, what would you say makes a good BPM product? What components?

Gurley: Clearly you want to have an easy-to-use GUI to outline the workflows. This is the common language between the IT team and the business team. One of the really cool things about BPM is, even if your IT team gets in and does some hardcore coding, the workflow map is easily interpreted by the business users. So all of a sudden you have this common ground whereby the business user and the IT team can evaluate what they are doing and how useful it is. That really is different from any previous applications paradigm.

I think the directory is going to be a point of differentiation and competition among the vendors. I don’t think businesses want to have multiple directory stacks lying around the organization. BPM requires you have roles clearly defined and people assigned to those roles. There has to be a high level of security, because you can’t pass a critical business element from one person to another if they are not the right person. I think this will drive people to want to have a single directory of defined users.
Reporting is critical. When I have asked customers if they could improve their
chosen BPM product in one way they all say more reporting, more reporting, more reporting. As an example, if I automate my professional service organization with BPM, I want to be able to drill down and look at productivity by professional. I want to look at sales growth rates. I want to look at the average time it takes for an engagement. I want to look at revenues relative to hours. Reporting is something I hear people talking about a lot.

BPM is still very much evolving. From a customer’s point of view what would you say is the Holy Grail of BPM?

Gurley: Almost every company I talk to would like you to believe that a business manager with very few IT skills whatsoever can sit down with a flow chart and just piece this thing together and make it work overnight. I don’t think that’s an impossible goal over time but its just not there today. It might take 10 years. I definitely think that what will differentiate the best BPM solutions from the rest will be the ability for business users to codify processes with very little help from their IT organizations.

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