Process report

Although business process management software (BPMS) has been trumpeted by many integration software vendors and IT services companies as the ‘business case’ for service-oriented architecture (SOA), there is little clarity about how organisations are actually using BPM tools.

While the top-down, purist view of BPMS sees the one and only use for the technology as an enabler of total, flexible control of all business processes, there is a more prosaic application in which BPM technology is used as an integration tool – a way of ‘micro-orchestrating’ services to create compound services. The distinction is important – the former is a business concern, the latter a technological one.

Some critics believe that while business process technology may be selling well – Gartner puts BPM among the fastest growing software markets, predicting the total market value will exceed $1 billion in 2007 and reach $2.6 billion by 2011 – that does not mean it is being used to the extent that vendors would have prospective customers believe.

“You won’t find an enormous number of companies that have deployed production-level, enterprise-wide BPM environments,” says Steve Craggs, president of business integration technology advisor Saint Consulting. “Quite a lot of companies have bought them, but they haven’t done anything with them. That’s because [in some cases] they’ve been conned.”

The “con”, says Craggs, is the idea that businesses can simply tie together automated processes across multiple applications using BPM software. That level of sophistication is only possible, he says, when the company in question has established a mature SOA. Given the small number of companies that have achieved that much, the list of those doing BPM – at least as characterised by many vendors – is even shorter.

Alan Trefler, CEO of BPM software specialist PegaSystems which was recently positioned at the front of the pack in Gartner’s ‘Magic Quadrant’ for business process management suites, believes that the accusation of misleading the market would be more appropriately levelled against the systems integrators and integration tool vendors that have gate-crashed the BPM market of late.

“The integration vendors are trying to tell customers that BPM is just a matter of service orchestration,” he says. “The true value of BPM is for business people, but those companies sell to IT.”

Speaking to buyers of such software reveals that there is indeed a spectrum of approaches to BPM that vary in the degree to which they depend on SOA integration technology. And while most are entirely capable of assessing their requirements and choosing the appropriate toolset, the challenge of deploying those products is another matter.

The power of BPM

One company for which a combination of SOA and BPM created revolutionary improvements in efficiency is Dutch energy utility Nuon. Once an incumbent utility monopoly, Nuon has weathered the liberalisation of the Dutch energy market, with its competition roster growing from zero to 57 over the past five years.

It is now bracing itself for yet more change. The Dutch government has mandated that by the end of 2009 the country’s energy value chain is to be split in two, separating generation from supply, and that will require Nuon to divide itself. What is more, the company recently announced plans to merge with its largest competitor Essent.

Ian Kilmartin, third-party services executive, Newcastle Building Society.

“All of this called for improved agility,” explains Nuon’s CIO, Jeroen Scheer. That imperative led the company to investigate the possibilities of SOA – an approach previously treated with some scepticism by Nuon management but which has now been embraced with the enthusiasm of the converted, says Scheer.

For Scheer, BPM is the meeting point of business strategy and systems integration, and it has created very tangible improvements in process efficiency. A case in point is Nuon’s ‘meter mutation process’, wherein a customer’s gas meter is upgraded to allow Nuon to read it remotely.

This is an intricate process involving many constituent parties: the customer, the customer service staff, the grid management administration staff, the contractors and sub-contractors who would carry out the installation, as well as regulators who require the full documentation of the process to test for compliance.

Before implementing its enterprise-wide SOA and a BPM suite from enterprise infrastructure software company BEA Systems, this process took Nuon 21 days from execution to billing. Evaluating the availability of its various sub-contracting partners who would actually carry out the work was a difficult task, and finding out which sub-contractor had actually performed the work after it had been completed involved a paper-chase.

Moreover, as Nuon could not always give its customers a specific time when an engineer would visit to perform the upgrade, the company found that around 30% of the time engineers were unable to gain access to the premises.

Once the job was actually undertaken, there were seven pages of forms to be filled in. That data was then entered into seven separate systems by hand. The accuracy of data entry depended on the legibility of the engineers’ hand-writing which, reports Scheer, often left something to be desired.

Such a loose process resulted in dissatisfied customers, an irate regulator and an uneconomic process. That changed when the company adopted BEA’s AquaLogic suite, which allowed the company to automate much of the administration of the meter upgrade process, establish a calendar and messaging system for subcontractors, and a portal for engineers to access via mobile devices, removing altogether the need for any paperwork.

The upshot has been a 70% more efficient process, according to Scheer.  Now 97% of appointments are met on time and the administration for each appointment takes just 10 minutes instead of the previous 75.

Critically for Nuon, the BEA BPM suite has enabled the rapid redesign of business processes. Business process designers – a new job function at the company – can drag and drop elements of the process into ‘swim-lanes’, re-ordering the process. The ‘meter mutation’ process can now be radically re-defined in as little as two days, most of which time is taken up seeking regulatory approval. As events that threaten to significantly affect Nuon’s business model loom on the horizon, that kind of flexibility is invaluable.

It may sound simple, but that flexibility has been hard won, says Scheer. “BPM is a matter of blood, sweat and tears”, he says. One piece of advice he offers others is that they should think carefully about which processes they want to automate, and how each should be tackled. In the case of one process that Nuon automated, bad IT design created a backlog of work that involved 300 people manually re-entering data over a year and a half.

Supplying the process

In many ways, Nuon’s story is an endorsement of the integration vendor’s view of BPM. Application functionality was wrapped as services, automated and orchestrated using SOA technology, giving business process designers the flexibility they need to prepare for a changing business landscape.

But that is not the full story. Consider the case of Newcastle Building Society, which in the late 1990’s saw a critical part of its revenue stream, that of savings and mortgages, come under fierce competition from high street banks.

The company felt that it needed to focus on its core competency, namely behind-the-scenes savings management. In 1998, it established Newcastle Strategic Solutions Ltd (NSSL) in an attempt to capitalise on this proficiency by providing savings management as a service to third-party financial services providers.

But in order to attract these third parties, the company knew it has to be among the very best in its field, and to achieve that it employed BPM software from Global 360.

Crucially, the NSSL BPM project was not an integration play. The company’s applications were built in-house on IBM’s AS/400 platform (now known as IBM System i), and only now is the company evaluating an upgrade to Microsoft’s .NET platform. In terms of the underlying infrastructure, then, the building society was happy with what it already had in place. What it was less happy with were the processes that infrastructure supported.

“The main driver [for the BPM implementation] was the imbalance of workload across the organisation,” explains Ian Kilmartin, third-party services executive at Newcastle Building Society. “We have a lot of experienced staff, but when we experienced a peak in workload we experienced an issue with delivering that work to the right people.”

Addressing this problem required breaking down all of its services into constituent processes, and finding out where there was cross-service overlap and where there was opportunity for automation.

“At the time we were very silo-ed, and very product-centric, rather than customer-centric,” recalls Kilmartin. “There were some sacred cows that needed to be taken down.”

The BPM view allowed the building society to pick out common processes, which include anti-money laundering checks, account opening and credit checking. These were the first processes to be automated and orchestrated with Global 360’s BPM tools.

And as more work was automated and established as common templates for different business departments, Newcastle Building Society stretched their services out to more customers in more formats.

With the BPM suite acting as a central repository for business logic, services such as account management could be applied to websites NSSL supported, such as Bradford & Bingley’s Internet savings account, as well as to call-centres.

All the while, efficiency savings saw NSSL reduce the cost of processes, such as ‘open new account’, in half. Even more impressively, NSSL now accounts for the majority of Newcastle Building Society’s revenues.

Perhaps the organisation benefited from an unusual contiguity of infrastructure, but the Newcastle Building Society project nevertheless proves that BPM stands up as a discipline apart from SOA. Indeed, the organisation’s success in farming out its business processes to third parties is a demonstration of what the founding fathers of BPM saw as a key benefit – transforming businesses from consumers of services to service providers.

When BPM goes wrong

Above are two stories of when BPM goes right. Information Age has also spoken, however, to an IT manager from a global media organisation who saw well-intentioned plans to establish a BPM suite come to nothing.

The project began in the human resources department, which wanted to automate some of its process, and gain more control over other external processes as the business was undergoing a degree of transformation. BPM seemed the appropriate tool, and so the company bought software from one of the best-of-breed vendors.

The vendor worked with the HR organisation to ascertain which processes were ripe for automation, following SixSigma guidelines to establish the order in which its processes should be automated.

However, once that list had been clearly defined, the HR manager, who had been involved in the SixSigma evaluation, took another look at the schedule and decided it was back to front: the least important (and simplest) were slated to be automated first and the most business-critical processes last. The HR manager insisted on turning it upside down, work was begun on automating the most complicated processes of all.

Needless to say, the project did not fair well from that point onwards. Not only was the company trying to tackle the toughest problems first, but it did not have the culture of openness to progressive change necessary to deal with the BPM project, reports the IT manager.

“It was not the fault of the vendor. We just didn’t have the ability to deliver a product of that type. It required an iterative type of project, but we were more used to waterfall projects. We couldn’t take decisions quickly enough, so the budget ran out quicker than expected,” he recalls. The project, three quarters completed, is now on ice.

Deploying BPM as part of an SOA strategy may make sense in that many of the integration technology vendors now sell BPM software, and in that the flexibility of application functionality that SOA allows lends itself to fast business process redesign. But businesses must nevertheless recognise that BPM, SOA-based or otherwise, is a significant undertaking in and of itself.

A recent study by BPM analysts BPTrends found that those companies that established a dedicated BPM team achieved much greater success than those with no specific allocation of resources to the BPM implementation. Those which established a BPM centre of excellence achieved even greater success. (See graph)

As these examples demonstrate, the purported benefits of BPM are real and achievable, but only when it is approached as the radical, business-changing undertaking that it really is.

Further reading in Information Age

IA TodayTesco embarks on worlds biggest BPM project – April 2007

Protean business – July 2006

BEA builds its BPM – March 2006

Due process: BPM at law firm Eversheds – March 2005

The assimilation of BPM – April 2005

More articles can be found in the SOA and Web Services Briefing Room

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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