Research Publication Date: 16 February 2006
ID Number: G00136533
Gartner's Position on Business Process Management, 2006 Janelle B. Hill, Jim Sinur, David Flint, Michael James Melenovsky
This report presents Gartner's latest position regarding the developments around business process management. BPM represents a fundamental change in how businesses manage and operate their processes.
© 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartner's research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.
TABLE OF CONTENTS 1.0 Gartner's Position on Business Process Management ............................................................... 4 2.0 Defining Business Process Management.................................................................................... 5 2.1 BPM as a Management Discipline ................................................................................. 6 2.2 BPM-Enabling Technologies .......................................................................................... 7 2.2.1 Process Modeling ........................................................................................... 7 2.2.2 Executing the Process.................................................................................... 7 2.2.3 The Business Process Management Suite .................................................... 8 2.2.4 Accessing Underlying Resources via Service-Oriented Architecture ............ 8 3.0 Key Predictions............................................................................................................................ 9 3.1 Business Management ................................................................................................... 9 3.2 IT................................................................................................................................... 10 3.3 The IT Department ....................................................................................................... 12 4.0 The BPM Scenario .................................................................................................................... 12 4.1 Stages of Value Creation.............................................................................................. 12 4.2 The Value of the Discipline........................................................................................... 14 4.3 The Process Revision Cycle......................................................................................... 14 4.4 The Value of the Technology ....................................................................................... 16 5.0 Drivers and Enabling Factors .................................................................................................... 16 6.0 Implications................................................................................................................................ 17 6.1 Industries ...................................................................................................................... 17 6.1.1 Market Leadership........................................................................................ 17 6.1.2 Business Process Outsourcing .................................................................... 17 6.1.3 Processes as Business Services ................................................................. 18 6.1.4 Boundary Problems ...................................................................................... 18 6.2 Business Professionals ................................................................................................ 18 6.3 IT Professionals............................................................................................................ 18 7.0 Inhibitors and Risks ................................................................................................................... 19 7.1 Organizational .............................................................................................................. 19 7.1.1 Actions to Take............................................................................................. 19 7.2 Technical ...................................................................................................................... 19 7.2.1 Actions to Take............................................................................................. 19 7.3 Competency ................................................................................................................. 20 7.4 Risks ............................................................................................................................. 20 7.4.1 Actions to Take............................................................................................. 20 7.5 Business Management ................................................................................................. 20 7.6 Suppliers of Technology and Services ......................................................................... 22 7.7 Investors ....................................................................................................................... 23 7.8 IT Management ............................................................................................................ 23
LIST OF FIGURES Figure 1. Business Pressures and Technology Converge ................................................................ 6 Figure 2. BPM and SOA Share Goals: Greater Business Agility .................................................... 10
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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Figure 3. Stages of Value Realization With BPM ............................................................................ 13 Figure 4. Process Revision Cycle.................................................................................................... 15
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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STRATEGIC PLANNING ASSUMPTION(S) By 2009, BPMS technology will be relatively mature (0.8 probability). Companies that adopt BPM before 2009 will continue to enjoy the advantages of superior efficiency and operational visibility until at least 2012 (0.7 probability). By 2012, most companies will be BPM-proficient and well on the path of continuous process improvement (0.7 probability). Because many BPM vendors are small companies with limited resources, no more than 25 of today's 140 vendors will make the transition to the emerging BPMS market by 2008 (0.8 probability). By 2009, 20 percent of business processes of Global 2000 companies will be supported on BPMSs (0.7 probability). By 2012, the proportion of business processes in Global 2000 companies supported by BPMSs will have reached 40 percent (0.7 probability).
ANALYSIS
1.0 Gartner's Position on Business Process Management Business process management (BPM) is a management discipline that requires organizations to shift to process-centric thinking, and to reduce their reliance on traditional territorial and functional structures. BPM has evolved from past management theories and practices, such as total quality management (TQM) and business process re-engineering (BPR). BPM requires and enables organizations to manage the complete revision cycles of their processes, from process design to monitoring and optimization, and to change them more frequently to adjust to changing circumstances. Such rapid change is impractical while processes are embedded in conventional applications. The development of BPM technologies is enabling business managers to abstract process flows and rules from the underlying applications and infrastructure, and to change them directly. BPM is neither a technology nor an updated version of BPR. It is an IT-enabled management discipline. It represents a fundamental change in how businesses manage and run their operational processes. Businesses today face increasing competition, especially on cost and quality; and stricter regulations require tighter business operations. On the other hand, uncertainty and volatility in business and politics continue to demand greater agility. To meet these challenges, organizations must find ways to better manage their business processes — that is, the ways in which they operate. Only excellent processes can enable organizations to meet competitive challenges and demonstrate compliance with regulations. Only excellent and responsive process management can provide the agility needed to respond to changing conditions. Moreover, making processes visible will provide new information about business operations, enabling business managers to make better and more-timely business decisions, and possibly innovation. In practice, these changes require a management discipline that treats processes as distinct assets. BPM is based on past management methods, such as operations and maintenance (O&M), TQM and BPR, and on many years of experience in using IT to support business processes. BPM requires changes in governance to emphasize processes and shared
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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performance goals, rather than functions and territories; and shared, rather than local, performance goals, new skills and supporting technologies. Resolutely deployed, BPM will make organizations more efficient and agile, and enable them to make better process outsourcing decisions. Implementing BPM is difficult, however. The main problems to any significant change are the human barriers — inertia and vested interests. The inflexibility of IT application systems and the immaturity of the necessary methods and tools are also problems. IT vendors are addressing the technical challenges. Although processes are increasingly important, they are usually implemented as an ad hoc collection of applications, middleware, workflow, manual procedures and user knowledge. The key step is to represent the whole of each process in a single model. Then, by providing a comprehensive set of model-based tools that support all stages of the process life cycle, known as a business process management suite (BPMS), tools enable business managers to change processes more easily than ever before. The increasing importance of BPM software that supports and uses these models is encouraging companies with deep knowledge of particular sectors and processes to create pre-written process components that make technology implementation faster and less risky. However, technology risks remain because the products are evolving quickly. Furthermore, it's inconceivable that all, or even most, of today's BPM technology suppliers will survive. BPM requires changes in technology and organization. The shift in management practices to BPM can have far-reaching consequences. There are various ways in which organizations can move to BPM. The "right" choice will depend on the company's unique business challenges, the leaders' understanding of BPM and the commitment to organizational transformation. Success with BPM also requires a culture of real-time management and skill in using software tools to support rapid decision making. To support the real-time management style, the organization must align its business analysts with process owners and may need a separate process center of excellence. It will also need to progressively refocus the work of the IT department. The adoption of BPM will strengthen competitive advantage in well-positioned companies. The companies will enjoy increased efficiency, less-intrusive compliance, increased alignment between operations and strategy, and greater agility. They will also get to play stronger roles in interorganizational processes and may contribute to reshaping the industries in which they participate.
2.0 Defining Business Process Management In 2000, Gartner established one of the IT industry's first detailed pictures of the emerging BPM phenomenon (see "Business Process Management: The Hot Non-Market"). The initial definition offered a technical view of BPM, and it remains an accurate description of the technology. However, it omits the nontechnical aspects. Although the term "BPM" is still used to describe software tools, Gartner now uses the term to mean the management discipline (see Figure 1).
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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Figure 1. Business Pressures and Technology Converge
Bu Ma sines na ge s Pro me c nt ess
Business pressures Process focus Faster Process Life Cycle BPM tools Tool integration Service-oriented architecture
M BP
a -En
n b li
e gT
ch
n
s gie o l o
Source: Gartner (February 2006)
2.1 BPM as a Management Discipline BPM is a management discipline that treats business processes as assets to be valued, designed and exploited in their own right. It is a structured approach employing methods, policies, metrics, management practices and software tools to manage and continuously optimize an organization's activities and processes. It aims to improve agility and operational performance. It treats processes as organizational building blocks with as much (if not more) significance as functional areas and geographic territories. The BPM discipline has implications for four aspects of business: •
Strategy: The strategy of the organization must be explicitly linked to and, in turn, executed through its business processes. Processes provide a shorter link between strategy and operations by overcoming the vested interests of territorial and functional managers. Although operational changes within a functional unit are relatively easy to make, conflicts of interests between functions often inhibit any shared understanding of the need for broader process change to reach strategic objectives.
•
Governance: There should be explicit responsibility for business processes and policies at the highest levels of the organization, and for subprocesses at the departmental level. Business objectives drive process performance objectives, which motivate staff and business partners. There must be clear accountability for the approval, implementation and audit of process and business rule changes.
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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•
Organization: The organizational structure must recognize the interdependencies and relationships that foster value creation across the enterprise. It de-emphasizes hierarchical reporting relationships and empowers employees to seek improvements across organizational boundaries.
•
Culture: The methods, procedures and skills that support all stages of the process life cycle must be conducive to rapid change. There is a culture of constant change to stay in step with fluctuating business conditions.
2.2 BPM-Enabling Technologies BPM requires tools that business managers can use to control and modify their processes. Specifically, it requires technologies that make process explicit — that is, clearly expressed and readily changed. We call these BPM-enabling technologies. They provide graphical models that enable managers to control various aspects of business operations and invoke the relevant resources. BPM-enabling technologies have existed for many years as point products supporting explicit control of particular aspects of a process, such as human workflow, document and image routing, and system-to-system interaction patterns. However, it's only been since 2000 that they converged into suites to support business managers' desire for greater ability to control work, including manual and automated tasks. The greatest benefits will be obtained from the synergies between these technologies, especially from their capability to enable business managers to make rapid process improvements. The appearance of integrated BPM-enabling technologies is part of the disaggregation of application software and is an example of the trend toward building software systems from small "chunks." BPM-enabling technologies are available as separate specialty tools, as integrated BPMSs, and are being added to some major application packages.
2.2.1 Process Modeling Process models are needed to help business and IT managers understand actual processes and enable them, by visualization and simulation, to propose improvements. (Modeling tools also help produce the documentation needed by standards such as ISO 9000.) Explicit process models are easily changed because nontechnical managers understand them easily and they are independent of the underlying resources. Models provide a basis for cross-organizational collaboration between managers responsible for the separate parts of a process, as well as with IT professionals on the implementation of the resulting design. The key elements of a process model are the events that trigger actions, the sequences of steps, and the business rules used in and between those steps to support decision making and execution flow. To support simulation, the models must also embrace characteristics such as skills, availability and costs of the people, and other resources that perform the process. Business process modeling tools — also known as business process analysis (BPA) tools — provide a shared environment for the capture, design and simulation of business processes by business analysts, managers, architects and other IT professionals. Models are generally shown in graphical form. BPA tools are modeling-only environments, not execution environments.
2.2.2 Executing the Process To support the entire process life cycle, from modeling through execution to monitoring, the process model must become the core of the actual business process. Making a model executable requires other BPM-enabling software (such as integration technology, a runtime environment and rule engines). Many of the enabling technologies continue to be available separately. When provided together, we call the system a BPMS.
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A BPMS contains core BPM-enabling tools. •
Orchestration engines coordinate the sequencing of the activities and steps (system and manual) according to the flows and rules in the process model.
•
Business intelligence and analysis tools support analysis of data produced during process execution. Capabilities range from reporting to online analytical processing analysis to graphical user dashboards. Business activity monitoring (BAM) systems do this in real time with proactive alerting.
•
Rule engines execute rules that abstract business policies and decision tables from the underlying applications, and make available more-flexible process changes.
•
Repositories contain process definitions, process components, process models, business rules and other process data to enable reuse across multiple processes.
•
Simulation and optimization tools enable business managers to compare new process designs with current operational performance. Scenarios are executed, altering resource constraints and business goals, to assess risk and display the financial and operational (that is, timeliness and quality) impact on the organization.
•
Integration tools link the model to other system assets (data and logic) that support work steps.
As the market for BPMS matures, additional technologies (such as document management and collaboration support) will be integrated into BPMSs.
2.2.3 The Business Process Management Suite A BPMS is a set of integrated technologies that enables process stakeholders and users to go quickly around the process revision cycle. It includes all the specialty technologies presented above, as well as interfaces to systems for document management, portals, application servers and multiple collaboration technologies. Through the integration of these technologies, the BPMS delivers a consistent process management experience. With help from the IT department, application logic and data can be made accessible to the BPMS, enabling business managers to monitor, analyze and iteratively refine the execution of the process, altering human and automated steps more easily.
2.2.4 Accessing Underlying Resources via Service-Oriented Architecture Most business processes require hardware and software resources to perform functions such as complex processing, the storage and retrieval of information, and connections to trading partners. Many of these functions are available in application systems and software tools, and are designed to be used directly by people and/or to include hard-coded process flows. BPM requires functions that can be called from a BPMS independently of their flow control (since that will now be provided via the BPMS). Technically, the best architectural style to achieve this is service-oriented architecture (SOA). Under SOA, discrete functions are packaged into modular, encapsulated, shareable elements ("services") that local or remote "consumer" parts of the system can invoke in a loosely coupled manner. In addition, a best practice recommends Web-based services (using XML over HTTP). However, considerable work is required to make the necessary interfaces available. Many package suppliers fear that in doing so, they will lose control of their clients' systems — and they are right. For users, BPM can deliver a high return on this investment.
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3.0 Key Predictions The adoption of BPM will begin as tactical initiatives for automating workflow, growing over time into an enterprisewide cross-functional transformation. The BPMS will increasingly be recognized as essential for the management of business processes and will be integrated into application packages, transforming the application market. The work of IT departments will shift progressively from defining processes to enabling business managers to evolve and adapt their processes.
3.1 Business Management Enterprise leaders are beginning to see themselves and their industries as collections of processes, rather than collections of functions, territorial units and companies. This trend will continue and, indeed, accelerate so that by 2009 it will be the normal view in major enterprises and public bodies. Through 2012, managers and consultants will develop process-centric methods and disciplines analogous to those used in traditional territorial and functional organizations. This process will be incomplete in terms of agreed-on best practices until 2010. The new methods and disciplines will include: •
Methods for identifying a small set of major processes that constitute a complete enterprise.
•
A governance discipline for organizations that must reconcile local, functional and enterprise process management requirements.
•
Activity-based costing aligned by process steps to improve product costing, pricing and profit planning.
•
An iterative process evolution discipline that enables all aspects of a process to evolve in parallel in rapid response to changing business demands. This discipline will integrate elements from the HR, IT and facilities areas, as well as from line and change management.
These will have become part of all leading business schools' curricula by 2010. The skills needed to use these methods and disciplines will be scarce until at least 2010. Beginning in 2008, managers with these skills will command higher salaries. To maximize the leverage, companies will organize people with process skills into centralized centers of excellence. Adoption of BPMS and SOA technologies will enable managers to make an increasing proportion of necessary changes with little to no involvement of technical personnel (see Figure 2.)
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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Figure 2. BPM and SOA Share Goals: Greater Business Agility
BPM
Organizing People for Greater Agility
SOA
Organizing Technology for Greater Agility
Processes
Source: Gartner (February 2006)
Leading businesses that adopt BPM will create a top-level process model, make processes part of their governance, adopt BPMS and begin to extract application services from their application systems. Businesses that adopt BPM in 2006 will be well-placed to exploit the advances in techniques and technologies. Those that do so systematically will gain advantages over their competitors. Two significant consequences will be: •
The stock markets will pay more attention to the quality of a business's processes when assessing its likely future earnings and, thus, its current value.
•
Litigation to protect the intellectual property rights of process owners will increase.
By 2009, BPMS technology will be relatively mature (0.8 probability). After 2010, sufficient experience with BPMS technology will become a competitive necessity to achieve innovative benefits that result in part from greater process visibility. Companies that adopt BPM before 2009 will continue to enjoy the advantages of superior efficiency and operational visibility until at least 2012 (0.7 probability). By 2012, most companies will be BPM-proficient and well on the path of continuous process improvement (0.7 probability). Companies focused only on productivity improvements will see their competitive edge diminish because competitors will have moved on to visibility and innovation with greater agility benefits. Similarly, enterprises must be enjoying the benefits of the visibility phase by 2015 to achieve the benefits of the innovation phase by 2017.
3.2 IT At the start of 2006, there were more than 140 suppliers of BPM-enabling technology, most of them supplying specialty tools rather than BPMSs. It's now clear that users require seamless integration between tools to get the full benefits of IT-enabled BPM. Because many BPM vendors are small companies with limited resources, no more than 25 of today's 140 vendors will make the transition to the emerging BPMS market by 2008 (0.8 probability). The rest will provide morespecialized tools, become suppliers of packaged processes for specific industries, geographies or horizontal processes, migrate to alternative adjacent tool markets, be acquired or cease trading. By 2009, 20 percent of business processes of Global 2000 companies will be supported on BPMSs (0.7 probability). These processes will predominately involve a considerable amount of human work that differentiates the company from its competitors and that is poorly supported by established IT systems.
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Through 2011, BPMSs will acquire more-advanced features, further changing business operations. •
More-sophisticated optimization features will result in processes that self-adapt to shifting goals, thus enabling more dynamic supply chains, for example.
•
More-natural representations of process flows and decision points will enable model usage to shift from business analysts to business managers.
•
Better interoperability will enable BPMSs to exchange process and subprocess models with other BPMSs and with specialty BPM-enabling products. This will make it easy for enterprises to enable people in a wide variety of roles to collaborate on models.
•
Modeling will become the preferred method for creating shared understanding of processes.
The need to fund these improvements will cause a further shakeout in the BPM technology markets during this period. The separation between process design and process implementation and execution (a separation not found in conventional applications) will permit the emergence of a market for packaged "process component sets" — a new kind of intellectual property. These solution sets will include templates for specific horizontal and vertical processes, business content, rule sets and other components. They will be "executable" — that is, when loaded into a BPMS, they control what the system does. Technology vendors, external service providers and new process component vendors will provide these process component sets, which will address the specific requirements of particular industries and horizontal processes. This market will not take hold until suppliers can serve a majority of potential customers by producing component sets in a small number of marketdominant BPMS formats. In the absence of broadly adopted standards, the process solutions market will remain fragmented until a sufficient number of BPM technology vendors have achieved interoperability between process models. However, it will then boom, and the combination of leading a BPMS and standards-based process component sets will deliver functionality beyond that of traditional packaged applications. The packaged application suppliers have already identified this threat and have begun adding BPM-enabling technology to their product portfolios. Over time, they will develop this technology in the same way that the BPMS suppliers are (sometimes by buying BPM suppliers). They will also transfer their legacy hard-coded process logic to their emerging BPMSs. ERP systems in particular will evolve into highly flexible business process platforms by 2008, tying business application functionality with the BPM-enabling technology. Thus, BPMS and packaged application vendors will converge on a new application architecture in which process models are autonomous; thus, a major architectural shift will have occurred. After 2009, advances in technology and market consolidation will make the use of BPMS (whether supplied separately or as part of a packaged solution set) quite common. It will be applied to a wider range of processes. By 2012, the proportion of business processes in Global 2000 companies supported by BPMSs will have reached 40 percent (0.7 probability). These predictions could be significantly overoptimistic if: •
The world economy grows rapidly — undermining interest in efficiency
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•
Regulation becomes weaker
•
IT users and vendors switch investments to a major new offering
•
A lack of standards and interoperability prevents the process component market from fulfilling its potential
•
The control of business technology shifts from companies to employees
3.3 The IT Department The spread of BPM-enabling technology, and especially its use by business managers and the process analysts working for them, will cause a progressive shift of process design and maintenance work from the IT department to business units. However, the process improvement life cycle is significantly different than the well-understood application systems development life cycle. Organizations that do not follow a process improvement methodology to guide their efforts will experience a high rate of failure in fostering this transition. Through 2012, the IT departments in organizations that adopt BPMSs will shift the focus of their work to: •
Wrapping selected legacy applications to make their functions available to processes (Process modeling will provide design guidance for the IT department's development of reusable services.)
•
Abstracting process flows and rules from legacy systems
•
Developing process and business service component repositories to support effective interworking between BPMSs
4.0 The BPM Scenario The best practices associated with BPM will force businesses to shift toward horizontal organizational thinking, relaxing reliance on the territorial hierarchical structures of the past. The complex nature of business processes that cross geographic boundaries and span organizational and interorganizational fiefdoms challenges current management practices and system design practices. However, driven by demands for regulatory compliance, innovation, process efficiency and human capital productivity, BPM is a practice that can be embraced for its substantial value at every stage of adoption.
4.1 Stages of Value Creation In most organizations, the adoption of BPM will progress through three main stages: productivity, visibility and innovation. (A minority may skip early stages or take a massive rather than an incremental approach.) Each stage delivers specific value and lays a foundation from which additional value can be created in the following stage. Figure 3 shows how agility increases as the organization passes through the stages.
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Figure 3. Stages of Value Realization With BPM
High Innovation
Visibility Business Agility
Productivity
Low 2005
2012
2017
Source: Gartner (February 2006)
The first stage takes a narrow focus and delivers productivity improvements and reductions in cycle time (a form of agility) for specific, and often local, processes. Process support is often primarily human workflow with only limited integration with legacy applications. Productivity gains range from 15 percent to 150 percent as a result of automating human tasks and document workflows, along with some system leverage in process areas never addressed with earlier technologies. Success in first-stage projects encourages additional projects of the same kind, and projects based on a wider view of process. In many cases, after five to 10 BPM initiatives, even skeptical senior managers find themselves taking the steps necessary to move to the next stage. These may include establishing new roles and departments, and innovative forms of governance. It also puts pressure on the IT department to increase the scope of BPMS-based systems by making legacy functions more easily accessible. In the second stage, greater flexibility comes from enhancements in visibility. This occurs within the organization and in conjunction with customers and trading partners. Increased visibility, sometimes delivered as a result of simply modeling the processes, generally leads to further investigation and exploration of how to achieve greater process management benefits. These benefits are not part of the original business case in most situations, sometimes simply because they were not seen. In addition, BPMSs acquire deeper links with other IT systems. Third, in organizations where creativity and innovation are emphasized as core values, the exploration of the broader business process will lead to greater awareness of new ways of doing business, from launching new products to crafting new service offerings. Such was the case at Sprint Nextel, where BPM initiatives aimed at improving the productivity of the reverse logistics process led to the launching of a new repair service business.
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4.2 The Value of the Discipline The process management discipline of the industrial age was focused on efficiency and was impersonal. Managers concentrated on things that could be measured, especially time and cost; notions such as TQM and continuous improvement became ordinary management tools. More recently, management has recognized the importance of the human contribution to work, especially as computers have taken over routine industrial age work. The ability to lead and collaborate has become important as value networks are increasingly interdependent. Technology has matured to the point where it is an integral part of work — even of work that is largely interpersonal. Good management now requires a balance of skills in process, staff management and use of IT. BPM now embraces an approach where people and system interactions are equally important and closely integrated. For the process owner, managing constant changes to the process means adopting some of the hard-learned disciplines of the IT department (for example, impact analysis). The key value of the BPM discipline is reducing the time needed to make changes to processes. This discipline is acquired by adopting two important concepts: •
First, every business process requires a continuous and unending revision cycle. Today, implementing the application is often seen as the end of the revision process.
•
Second, the engagement of process stakeholders is vital at every step. Traditionally, business stakeholders are generally involved at the start of the process, but often drop out subsequently.
4.3 The Process Revision Cycle Each step of the revision process (see Figure 4) creates value in its own right. Beyond the value of creating a business case for improvements to a process, the first step in the BPM discipline of managing a process is modeling the target process. Prior to starting any design or revision process, the organization should decide the scope of its initial activities, make the business case for BPM and adopt a proven methodology.
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Figure 4. Process Revision Cycle Discovery
Refine
Modeling
Optimization
Simulation
Analytics
Deployment
Monitor Execution Source: Gartner (February 2006)
•
Discovery identifies the intricacies of how a process executes. The value of the discovery methodology comes from how quickly and accurately an organization can establish consensus among process stakeholders as to how work is accomplished and how to measure success.
•
Modeling is valuable because it shows easy improvement opportunities, or at least the scale of the problem. Modeling helps business leaders collaborate regarding how the process improvements will help achieve corporate goals, irrespective of organizational boundaries.
•
Simulation reveals bottlenecks that are not obvious during static modeling. Making adjustments to workflows or decision points provides fine-tuning in the process model before moving to the next phase of real-time process execution.
•
Deployment then creates detailed process execution scripts and makes the required changes in systems. Training and facility changes that are needed for the new process to work must be coordinated. The system changes include integration with applications and databases, and may include the conversion of application systems into sets of reusable Web services components.
•
Execution is where the main value of BPM is realized, because it's where the actual improvement in the process is first seen.
•
Monitor collects information from the executing process in real time. Because the BPMS supports manual and automated activities, monitoring is more complete than what was available previously. Because it is collected in real time, it allows immediate corrections to take place.
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•
Analytics creates further value when key performance indicators based on process execution are linked directly to business objectives.
•
Optimization is a fact-based approach to process scenario optimization, which greatly reduces risk and delivers value by eliminating the guesswork and intuition that typically have taken place around process optimization.
•
Refine establishes the way the stakeholders want work to be accomplished.
4.4 The Value of the Technology Failures of sound management disciplines are often due to the lack of technology to support the underlying practices. One of the most-valuable aspects of BPM technology is the ability to directly support process management practices in a more-fluid manner across the entire life cycle. Making process flow control explicit and decoupling it from the underlying technology enable organizations to change processes more quickly. •
Processes are easily changed because other system elements are not affected by flow control changes and need not, therefore, be retested.
•
Some process changes are made by business professionals who need only limited knowledge of IT systems. In a growing number of cases, changes such as work item routing, business rule overrides and parametric changes to approval levels are made in real time to executing process.
•
Near-real-time reporting of process steps delivers never-before-seen analysis of current operating conditions, customized as appropriate to the organization. Tightly coupling business dashboards/cockpits/BAM to the underlying runtime allows for rapid and precise process changes.
In addition, the models, key performance indicator targets and other examples created by BPM are vital contributions to the development of service-oriented applications and components. IT professionals get better statements of business requirements and, thus, are better able to componentize legacy systems.
5.0 Drivers and Enabling Factors Two factors are driving the shift to BPM: •
A period of weakness in the global economy (especially uncomfortable after the hypergrowth of the 1990s) has combined with globalization and has increased global competition, especially around price. This is commoditizing many businesses — for example, airline seat reservations, mortgage loan processing, stock trades, insurance claims and telecommunications provisioning. Competition is forcing many businesses to look closer for business efficiencies and alternative strategies for effectiveness and innovation.
•
Compliance with regulatory requirements such as the Sarbanes-Oxley Act, Basel II, the Health Insurance Portability and Accountability Act, and industry initiatives such as consumer packaged goods and Universal Product Code (UPC) standardization are forcing businesses to seize and maintain control of their processes. Information transparency and corporate accountability represent additional benefits of the BPM discipline.
These drivers combine with two key enablers:
Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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•
The advance of BPM technology has benefited from the emergence of technology standards for SOA, XML and Web services. These standards are making it progressively easier for BPMS products to invoke complex application processing that is embedded in custom and package applications, and to deliver greater flexibility.
•
The adoption of the BPM discipline is facilitated by the spread of Six Sigma and other process improvement methods, and the availability of process modeling tools for business analysts, in addition to architects and IT professionals.
6.0 Implications The adoption of BPM over the next decade will have some profound outcomes — changing the way industries are defined, how business is managed and the responsibilities of the IT department. This section examines each of these three areas and further explores some of the more-compelling consequences of adopting BPM.
6.1 Industries 6.1.1 Market Leadership As industries become commoditized, the mastery of business process improvement provides a powerful route to market leadership. Consider Cemex. This highly successful Mexican-based cement company grows by acquiring less-successful businesses. Cemex uses its own BPM approach to ensure that it learns improved practices from every acquisition it makes and that every operating unit follows these practices. It uses acquisitions as a source of improvement rather than a source of complexity, as is usual in acquisitions. Capital One is another example. Recognizing that process is becoming the key competitive differentiator among financial services providers, Capital One recently acquired Hibernia for its best-in-class processes for dealing with small business transactions. Process improvement initiatives will have much broader ramifications for the business. Project targets focused on time and cost are common. As BPM gains momentum, short-term productivity improvement objectives will become secondary to broader strategic objectives, such as increasing quality, pleasing the customers and building business agility.
6.1.2 Business Process Outsourcing Business process outsourcing (BPO) will become more pervasive as organizations' processes become well-defined. BPO is often inhibited by the lack of a solid understanding of the processes, without which managers cannot determine the optimum degree of outsourcing. Furthermore, the fear of losing control and visibility looms over each BPO opportunity. With explicit business process models displaying the end-to-end process, backed with real-time performance analysis and overlaid with activity-based costing, well-informed decisions will drive BPO to new levels. These decisions include: •
Outsourcing a whole business process. (Much of today's outsourcing is a collection of steps that need the same resources but that form parts of several processes.)
•
Tighter coupling with explicit and fine-tuned service-level agreements.
•
Costs will be visible across the value-chain.
•
Stronger alignment between outsourcer and service provider through shared goals and incentives.
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BPM may enable organizations to cost-effectively outsource very small parts, as well as large parts, of a process. (Amazon's Mechanical Turk — mturk — site, for example, enables organizations to find suppliers of such microservices.)
6.1.3 Processes as Business Services When applied to a process, BPM generally improves the performance of the process. In some cases, the improved performance is good enough for the organization to use that process as the basis for a commercial service offered to other companies. For example: •
Citigroup has begun offering a digital certificate validation service to nonbank businesses.
•
Newcastle Building Society, a small specialist financial institution in the U.K., has used BPM to improve the performance of its key processes, so that it now performs custom versions of these processes on behalf of much larger organizations.
6.1.4 Boundary Problems Businesses increasingly see themselves as parts of supply chains, and even networks, that reach across many companies. It can be difficult in such cases to decide where a process begins or ends, which may lead to confusion, even conflict, about decisions and costs.
6.2 Business Professionals The adoption of BPM practices has clear benefits for the business professional. For example, BPM will largely eliminate the need for manual exceptions to standard operating procedures. Because changes can be switched in and out of execution quickly, the larger the library of exceptions that exist, the more flexibility a business has in adapting to changing conditions without losing control. Change can become a normal day-to-day matter — captured in the process model and called on at a moment's notice. Managing the frequency and degree of change (using impact analysis) is one of the skills that managers will have to learn. One of the more-interesting issues comes from process innovation. In a world of crossorganizational and outsourced processes, who will own the intellectual property rights to innovative processes or process components? Business process outsourcers see such rights as a competitive differentiator and a way to justify a premium price. Their clients, however, may take a different view.
6.3 IT Professionals As BPM and its tools are better understood, more of the responsibility for process modeling, simulation, analysis and optimization will move away from the IT professional. Some IT departments will move their best process analysts into the business, while others will create centers of process management excellence to support business efforts. However, as process flows and rules are abstracted and managed separately from the underlying technology, then application development and maintenance groups will become smaller. In the long term, a business manager's desire to use BPMSs with automatic process optimization features will demand increased real-time flexibility in the supporting services. Enabling processes to be completely and dynamically flexible, while maintaining integrity and security, is impossible today and will be a considerable challenge for at least the next 10 years.
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7.0 Inhibitors and Risks Inhibitors and risks are naturally associated with the adoption of the BPM discipline and enabling technologies. As with any new management practice, adoption takes time, and time has a way of changing a company's priorities.
7.1 Organizational The main barriers to the enterprisewide adoption of BPM are inertia and vested interests (functional and territorial). Every organization has established management and power structures that are legitimized by tradition (however short-lived) and defended by their beneficiaries. Sometimes, these barriers can be so large that only an extraordinary event — such as an actual or threatened takeover, near-bankruptcy, a major lawsuit or significant loss of market share — will create the top-level commitment needed to overcome them. At a minimum, strong leadership is required to overcome these barriers. Furthermore, in some organizations, bad experiences with BPR (for example, the use of the term as a cover for crude downsizing) or even simple process improvement initiatives have made any mention of "process" suspect. Middle management will create barriers to BPM initiatives and may dismiss BPM as just another management fad. Barriers to the local use of BPM technologies are much lower because there is less challenge to vested interests.
7.1.1 Actions to Take The first stage in addressing enterprisewide adoption of BPM is for a senior manager, ideally the CEO or one of his or her direct reports, to champion the cause. Inertia and vested interests at the top of the organization can be addressed by assigning responsibility for each major process (process ownership) to a senior manager. Difficulties at lower levels can then be escalated to the process owner. Employee resistance to change is unavoidable but can be diminished by effective changemanagement techniques. Encouraging middle management and process participants to initiate and own improvements will help overcome negative feedback.
7.2 Technical The main technical inhibitor for flexible processes is the lack of business services for the BPMS to invoke. The required services include the processing of specific business transactions. The necessary processing is generally present in established applications but is not accessible to a BPMS or in inflexibly large components. To avoid this problem, most early BPMS users have restricted their initial use to human workflow processes that don't need such services. A minority of users have created those services within the BPMS environment. Unfortunately, because of the limitations of current BPMSs, most large users have implemented multiple, incompatible tools, thus creating silos of automation. A system-independent repository is required to address this. However, the business service repository is the single weakest area of the BPM technology stack.
7.2.1 Actions to Take BPM technology suppliers should develop interworking between repositories. (The Business Process Modeling Notation and Business Process Execution Language standards won't fully solve this problem for at least three years.) Until such interworking is established, IT departments
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should limit the number of BPMSs they buy, and should use the models produced by BPM initiatives to determine which services should be created first.
7.3 Competency The skills needed to define business processes are in short supply. Most business people are not trained to think through the precise details of processes, while more IT people don't understand the business context. Success with a business process improvement initiative usually requires process specialists who can act as intermediaries. It's often convenient to organize these people into a BPM center of excellence.
7.4 Risks Adopting BPM is not risk-free. As history has shown, a major commitment to embrace BPM will, like adopting TQM or CRM, occupy significant amounts of management time. Management time is a scarce resource in most organizations. Time spent on improving process management may detract from product innovation or customer focus. As an example, despite the improvements in its vehicle design process, General Motors' North American automotive operations showed a loss of $1.2 billion in the second quarter of 2005. Process must not be an end in itself. As with any business discipline, a rapid advance risks giving too much power to people who do not fully understand the discipline. The need to assert central governance over major business processes may legitimize the desire of head-office managers to control everything, or of systems analysts to implement BPMS in every project. The former will produce gridlock; the latter will produce inappropriate technical solutions and delays. These risks can be mitigated by good management. When implementing BPM technology, the main risk is selecting a vendor that is unable to continue supporting and developing the product. This may produce inadequately supported processes that cannot be fixed or enhanced without a major investment. Even when vendor viability comes into question, good processes implemented with good designs (but not the executable code) should be fairly interoperable or portable to the replacement BPMS infrastructure. The current level of interest in BPM was triggered, in part, by the economic downturn of 2000. Generally, when the economy improves, companies shift to managing business expansion rather than process optimization. The current momentum that BPM enjoys could be short-lived as the economy recovers.
7.4.1 Actions to Take We have recommendations for business management, suppliers of products and services, investors and shareholders, and IT management. Generally, the current adoption of BPM (as a management discipline and its enabling technologies) has moved beyond the initial phase of overpromotion ("peak of inflated expectations" hype) into a phase of "make it work." With hundreds of successful BPM deployments in place, recommendations are based on best practices learned from leading organizations.
7.5 Business Management Act now. To ensure that they gain the competitive benefits of BPM, businesses should begin to apply BPM principles during 2006. Establish a robust governance framework that identifies process ownership. Every organization is made up of a hierarchy of processes. At the top tier of the hierarchy, an organization will have between five and 15 major business processes. A senior manager should Publication Date: 16 February 2006/ID Number: G00136533 © 2006 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
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own each of these major business processes. As you move down the process hierarchy, subprocesses align more with the functional areas — for example, the telesales process might belong to the vice president of customer service, and a capital approval process might belong to the vice president of finance. Further down, there may be geographical variants of processes. For example, the managing director of France may be responsible for the sales order entry process in France but not sales order entry for the global organization. The process owner's responsibilities are to: •
Develop the approach to process improvement and the ongoing business justification for doing so
•
Oversee the execution of the process
•
Set goals and performance metrics
•
Act as arbitrator in the event of serious disagreements
•
Decide whether any part of the process should be outsourced (These decisions should be made in the context of a sourcing strategy.)
•
Direct change management and communication to process participants
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Develop and maintain detailed business process models
•
Manage business policies, rules and unforeseen events that affect the process
Appoint a business process analyst to work on each major business process. This analyst normally reports to the process owner. The business process analyst will be responsible for discovering, validating, documenting and communicating business-process-related knowledge through modeling, simulating and analyzing current and future states, including: •
Demonstrate the benefits of using best-in-class processes
•
Provide disciplined and shareable process knowledge
•
Embrace methods, techniques, notations, standards and best practices
•
Show the organization the best way to identify and solve problems
IT staffs have generally done the more-technical parts of these tasks — for example, design of operational procedures, exact specification of business rules and applications training. For consistency and to maintain integrity, the transfer of this work should be progressive and may involve non-IT staffs. In the short-term, business and IT departments will usually share responsibility for the definition and maintenance of business rules and for process deployment. Create a BPM center of excellence. As an organization moves beyond its first few BPM initiatives, the challenge of coordinating several more-complex initiatives simultaneously requires an office that will help facilitate the organization's move toward becoming a process-driven business. It's often called a "BPM center of excellence" and normally reports on the business side to the vice president of operations. The group's charter is to facilitate process improvement and avoid process suboptimization. The center's mission includes: •
Streamlining internal and external business processes
•
Providing visibility over entire processes
•
Facilitating communication among process stakeholders
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The capabilities delivered by the center of excellence are primarily to support process owners, the project management office and the IT department. The services include: •
Coaching and facilitating
•
Sharing best practices
•
Training and education
•
Creating the business case
•
Maintaining a business process knowledge base
•
Taking an inventory of business activities
•
Ensuring there is a business process architecture — that is, architecture links supporting processes to operational ones and linked to strategic processes
Select an experienced person to head the BPM center of excellence. This person should have a unique set of process improvement skills and experience. Quite often, the individual comes from outside the organization and has five to 10 years of experience in the management consultant industry, performing process improvement projects. The focus is on the human, organizational and value stream aspects of business processes and their transformation. The responsibilities are: •
Gaining consensus of internal constituents regarding new concepts
•
Identifying business performance and incentive metrics
•
Drafting organizational alignment requirements
•
Leading the execution of building and sustaining a process-managed organization
Create a real-time management culture. In most cases, BPM leads to processes that are more automated and more responsive than non-BPM applications. This increase in pace demands a similar acceleration on the part of process managers. Gartner calls this new managerial style "real-time management." It has three elements: •
Preparation: To ensure that they are rarely taken by surprise, managers should use scenario planning to think through the possibilities. When an exceptionally fast response is essential, as in an emergency drill, managers should even rehearse the response.
•
Empowerment: To avoid bureaucratic delays, executives should empower managers and reduce the need for consensus.
•
A culture of speed: To encourage managers to act decisively, executives should create a culture that gives high value to responsiveness and seizing opportunities.
7.6 Suppliers of Technology and Services To survive the upcoming BPM market shakeout, BPM technology vendors should determine whether they have the strength and positioning to become BPMS market leaders. Those that don't should consider specializing in one or a few industries, processes or tools; or they should seek to be acquired by a better-positioned vendor that needs their specific strengths. They should actively seek partners that can provide credibility, industry or process-specific knowledge (which may be embedded in process components) and supporting services.
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•
BPMS vendors should design for interoperability with other BPMSs. Users require interoperability as the installed base of BPM systems becomes more heterogeneous. The ability to share process components and models will emerge as a key differentiator.
•
BPM technology providers need to develop diagnostic capability that links the process issues with the underlying technology infrastructure status.
•
Business process outsourcers should develop the capability to integrate their process management with their clients' methodology. This trend provides a unique opportunity for the service providers to gain greater visibility into the client's upstream and downstream process flows.
•
Consulting firms should create BPM methodologies to boost their consulting practices and create packaged process components aligned with the leading BPMS vendors. The market opportunity for process customization and implementation will grow significantly through 2012. Businesses worldwide are struggling to become process-driven organizations.
•
Independent software vendors should waste no time in decomposing their applications into process flows and supporting services with BPMS-based process flows. This will enable them to offer their customers the process flexibility provided by a BPMS.
•
Application package developers should be encouraged to adopt BPMSs (or standards compatible with their vendors' products) for future generations of their packages. This will enable the application vendors to offer more pre-written functionality to clients.
7.7 Investors Having a process-managed culture is a positive indicator for potential market leadership. Competition within all industries will be defined by companies that best orchestrate their business processes. Company valuations will further recognize the use of best-in-class processes. From 2007, when IBM, SAP, Oracle and Microsoft gain market share against the small BPMS vendors, consolidation will begin. Therefore, investors should only fund BPMS technology suppliers that demonstrate superior knowledge of and commitment to specific industry or process niches. Such a proposition may be superior to the major vendors' offerings, but there is room for very few such offerings. New startup companies focusing on the following areas represent interesting investment opportunities: •
Interoperability between different BPM implementations
•
Development and management of reusable process asset repositories
•
Service providers that have proven methodologies for the deployment and management of business processes
7.8 IT Management Due to the emerging nature of the BPM technology market, we advise IT management to think strategically about process design but act tactically until at least 2008, especially while in the first stage of BPM value creation. This is not the time to choose an enterprise-standard BPMS product. Select products on the basis of today's features and fit to current and foreseen projects only. IT professionals should focus on good process flows and business service component design, exposing business rules that guide exception handling.
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IT staffs should avoid acting as advocates for BPM technologies, but rather should choose the technologies that best support the way business wants to interact with its processes. In 2006, BPMS products will continue to be most appropriate for processes that are human- and paperintensive, and customer- or partner-facing (rather than data-integration-intensive or highly collaborative). Product selection will require careful analysis to determine the strengths and weaknesses of each product, and to match them to the use case. In 2006, the right approach may be to employ multiple BPMSs matched by use case until the market consolidates further and the BPMS products become more mature. The IT department should: •
Retain significant responsibilities
•
Work with business managers to align established systems, such as reporting and analysis systems, with the process approach
•
Retain responsibility for: •
IT infrastructure
•
Sourcing and operating the technology of major applications, databases and information repositories
•
Creating a process, rules and events repository
•
Operating BPMSs
Although business managers will make many process changes using a BPMS, they will still need to have changes made that go beyond their abilities. Therefore, the IT department should retain its role as the steward (on behalf of the process and data owners) of major applications, databases and information repositories. This role will include the practice of enterprise information management, a discipline essential for maintaining system integrity. IT departments and business managers will still need a collaborative approach. Because the IT department can often be a catalyst for BPM, it should also apply BPM to its own activities. IT processes are increasingly following standardized models. The IT department should adopt such models to get the direct benefits of BPM and to increase its BPM credibility with the business.
RECOMMENDED READING Davenport, Thomas H. Process Innovation: Work Through Information Technology. Harvard Business School Press: 1992. Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-first Century. Farrar Straus Giroux: 2005. Keen, Peter and McDonald, Mark. The eProcess Edge: Creating Customer Value & Business in the Internet Era. Osborn/McGraw-Hill: 2000. Keen, Peter. "A Recipe for Business Process Management: Slashing Cycle Time" www.peterkeen.com. February 2003. "How Nestle Reduced Errors in Its Management of Master Data" "Case Study: BPM Education and Training at Owens & Minor"
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"Findings From the 'Business Process Management' Research Meeting: BPM Lays a Foundation for Innovation" "Market Share: Pure-Play BPM Software, Worldwide, 2004" "Business Process Management Offers a World Where Exceptions No Longer Exist" "Examining Process Management's Future: Land Mine or Gold Mine?" "Align Roles and Responsibilities to Make BPM Work" "Adopt BPM to Realize Business Objectives" "Drivers for BPM: 11 Money-Relevant Reasons to Start"
Acronym Key and Glossary Terms BAM
business activity monitoring
BPA
business process analysis
BPM
business process management
BPMS
business process management suite
BPO
business process outsourcing
BPR
business process re-engineering
O&M
Operations and maintenance
SOA
service-oriented architecture
TQM
total quality management
UPC
Universal Product Code
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