Understanding of how Business Process Management (BPM) can deliver value to business is becoming increasingly well understood by businesses and IT even though the following points seem to indicate why there may be slow adoption across some organisations:
- Pockets of user resistance across organisations and departments
- Lack of understanding leading to poor adoption due to immaturity
- Lack of executive sponsorship
- No strategic plan to adopt BPM i.e. adoption tends to be tactical (departmental)
Business users, practitioners and technologists all differ in their opinion of what BPM is and what is hype, theory and practically achievable but there does seem to be consensus that it has the capability for sizeable, realizable benefits when implemented correctly.
Quick Recap for the BPM uninitiated
Automation of business process must be balanced with human exception management, which is managed by workflow. These business processes are enhanced by the ability to interconnect a range of different applications systems and data across the organisation. These may include general ledger, order entry, inventory, process control, and human resources to mention a few.
The IT perspective is that BPM aims to achieve greater value from existing software assets. IT investment allows business processes to be used to capture information electronically and automate services delivery. As part of this automation, BPM ensures that an automated process is used to dynamically manage business logic with integrated application services and therefore forms a corollary to Service Oriented Architecture (SOA).
What the ‘Usual Suspects’ think….
This post explores some of the BPM market trends and looks into where current BPM demand is as well as its perceived adoption potential. To get a sense of the size of the BPM market, I turned to some of the usual and not so usual suspects. My Google search returned the following results:
- Gartner – “….Gartner issued a press release this morning stating that BPMS will be among the fastest growing software markets over the next five years: from $1B this year to $2.6B in 2011.” (2007)
- Forrester – “Business process management (BPM) license, services, and maintenance revenue from software vendors will grow from approximately $1.6 billion in 2006 to $6.3 billion by 2011.” (2007)
- IDC – “IDC predicts that rapid growth will continue throughout the five-year forecast period to reach $5.5 billion in 2011, a 44% five-year compound annual growth rate (CAGR).” (2007)
- WinterGreen Research – “Business process management (BPM) and services oriented architecture engine markets at $1.3 billion for licenses, maintenance, and services in 2007 are expected to reach $4.6 billion by 2014.”
- Datamonitor – “While BPM adoption rates lag behind that of other enterprise technologies tracked by Datamonitor, we estimate that in 2007 the market for BPM systems software was worth US$1.4 bn in license revenues. The market is set to reach an annual growth rate of 14.5% over the forthcoming five years, offering bright prospects for BPM vendors and service providers.”
Some BPM ROI Analysis….
Now that we have ascertained that there is a market for BPM and from that we can assume that there is pent up demand, I want to briefly analyse a recent survey report done by AIIM.
354 end users where questioned as part of the study and found that a majority of respondents believe that their organizations as a whole are at “process ignorance” rather than “process excellence.” The “AIIM Market IQ Business Process Management: Leveraging Competencies and Streamlining Processes to Achieve Operational Excellence” report can be downloaded here.
It is obvious from the report that moving from theory to practice is a big challenge for most organisations and I would argue it is due to not being able to gain a clear assessment on the ROI. BPM Return on Investment (ROI) can be broadly categorised in the following ways:
- Automation – In a nutshell, automation is the conversion of process actions from a current operation that requires manual human intervention to a new operation that is performed in an automated manner.
- Quality – Processes typically require the collection of data in a specific form and validates that actions were taken, in the appropriate manner by the appropriate personnel. Quality processes sometimes can also include the collection of measured data (audit log and performance metrics) to support proof of quality for the product/output produced.
- Compliance – Common characteristics of compliance include adherence to a known set of operational policies and procedures, recording substantiating evidence that such compliance occurred, auditable trails for all compliance requirements and auditable records of change to the process or operations that could have a potential affect on adherence to compliance requirements. Because BPM is specifically designed to model and manage all business processes, it is ideal for achieving compliance for virtually any regulatory or partner requirement.
- Management & Performance Monitoring – BPM is an excellent tool for improving the management of a business. The primary functionality available to aid managers are alerts and escalations based on Business Rules, Business Activity Monitoring (BAM) and managerial process views. Management ROI is driven by real-time reaction to disruptions and proactive addressing of potential disruptions or adjustments to personnel activities to meet current business/customer requirements.
- Optimisation – To perform process analysis for identifying potential cost reductions and to ‘tune’ the enterprise towards optimal performance requires that the metrics these process activities are based on be defined during the process modelling stage. This step is essential to successful analysis and improvement of a given process or a collection of processes.
Stakeholder Business Drivers and ROI Priorities….
These ROI categories are interesting but do not really explain the areas of value that can be delivered with the adoption of BPM. Taking a deeper look at the AIIM report the following areas were identified by the study as being perceived as important to business stakeholders and key to delivering BPM ROI. Projects normally include more than one of these as part of an initiative.
As part of the AIIM report, the surveyed stakeholders indicated that BPM is seen to be significantly important in relation to their organisations strategy and success. This is reflected in the image below.
The last point I wish to highlight is that the report identified that BPM had a much higher ‘tangible’ ROI in comparison to other domains such as Security, Enterprise Search and Enterprise 2.0.
The AIIM report states that “Despite BPM’s relatively immature state of adoption, survey data suggests that the introduction of BPM into an organization can have a very strong and positive impact measurable in hard dollars. Among those who conducted a return on investment (ROI) study, 52% achieved a positive ROI in three years or less. Another 15% achieved ROI in five years or less.”
AIIM also concludes that “A full 70% of those who reported executing an ROI indicated direct cost savings as an achieved benefit. It is no surprise then that 65% of survey respondents indicated that BPM was imperative or significant to the success of their organization.”
Some Best Practice InSights….
I generally agree with these findings based on my own experience of BPM implementations. I would however want to clarify some aspects related to the ‘time to value’ of these type of projects as there are many variables that can influence the size and time dimensions of a projects ROI. These factors include:
- Short term ROI (3 months to 18 months) is normally based on how well understood BPM and the specific problem is that the organisation wishes to address. In my experience, organisation always start by focussing on a tactical problem to prove the initial value.
- Another factor that influences how quickly and to how big a projects is, is the project sponsor and stakeholder groups. IT and Business should be partners in this type of initiative. In my experience, implementing BPM is a team effort and should be in response to a specific business problem/need that requires a business solution e.g. increase customer satisfaction and retention thereby increasing revenue and lower cost of new sale effort. IT should just be the facilitator and qualifier of the technology solution/enabler with the Business being the owner.
- Project scope and complexity is directly proportional to its cost and time to value. As a rule of thumb it is always a good idea to start small and focus on a specific, well define business problem that has a clear ROI. This approach gives a good foundation for both IT and Business to understand BPM and the specific challenges such a project places on a project team and wider stakeholders. Choosing a process that is mission critical, complex and has a high probability of non delivery is not a good candidate unless it can be scoped in such a way to ensure it can be delivered in a series of sequential project iterations.
- User adoption is probably the most challenging aspect of any BPM project. It is therefore imperative to get executive sponsorship from the start and then involve both the Business and IT in a uniform way during the project and subsequently so that any hard won momentum and success is not lost.
To get a better understanding of the approach of incremental delivery of ROI, please read the post that can be found here.
BPM is very ‘real’ and with great potential for benefits realisation. Organisations that have taken the leap of faith have proven this and for the majority that have kept up the momentum and focused on finding additional opportunities in their organisations have gone on to gain incremental value from the adoption of a BPMS and BPM.
The IDC have recently revised their view of what the IT market will face during 2009. They have indicated that “…spending in Europe, the Middle East, and Africa reveals a bleaker outlook for the near term in the wake of the worldwide financial crisis. Growth of just under 3% is now expected for the EMEA IT market in 2009, which represents a 1.5-point drop compared to IDC’s previous, pre-crisis forecast.”
In an economic climate where there is continual scrutiny of operational and discretionary budgets, compliance and regulatory demands, any opportunity for demonstrating cost reductions, good governance and efficiency gains should be treated as a priority.
Additional Research & Reading: Aberdeen Group – BPM and Beyond, The Human Factor of BPM (Nov 2008)
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