Roundtable Discussion: Business process management
[Editor's note: This is an expanded version of an article that appeared in the Nov./Dec. 2003 KMWorld magazine.]
Zale Corporation was founded as a single jewelry store in Wichita Falls, Texas, in 1924, and has grown to a $2 billion business that includes about 2,400 retail outlets in the United States, Canada and Puerto Rico with six major brands. Its retail outlets range from the flagship Zales Jewelers stores, to the high-end jewelry chain Bailey, Banks & Biddle, and the Piercing Pagodas kiosks.
KMWorld recently hosted a roundtable discussion of business process management (BPM) that included an industry analyst, a BPM vendor and a user of the technology. KMWorld senior writer Judith Lamont spoke with Dave Magness, senior director, MIS Support Services, Zale Corporation; Jim Sinur, VP, research director, Gartner; and Rashid Khan, co-founder, CEO, Ultimus. Read on to hear what they have to say about this burgeoning field.
Lamont: What is BPM, and why has it captured so much attention lately?
Sinur: BPM is the management of explicit business processes, like the ones needed to underwrite an insurance policy or deliver an order. BPM software products cover a whole range of capabilities, from simple administrative and task support to collaborative software and integration brokers that control system-to-system interaction. Pure-play BPM software has a runtime execution engine based on events. It can also model and simulate processes, and make "in-flight" adjustments when processes need to change. BPM products are effective at reducing costs and time to market, which is why they are attracting a lot of interest.
Lamont:How did Zales become interested in BPM?
Magness: In fact, when we began, BPM was the farthest thing from our mind. We used a lot of forms in the general office, and we simply wanted to switch from paper-based forms to electronic forms. We wanted to create an online form for the time-off requests that got filled out by the employee and went straight into the system, instead of sending over a form to be keypunched when someone was requesting a day off. At that point, we were looking for a workflow system. We got into BPM as we were designing this process and realized we didn't necessarily want to follow the same process as before.
Lamont: So you began rethinking your processes?
Magness: Yes. After the time-off form was automated, which took just three weeks, we realized that we didn't necessarily need to follow the same steps we had for the past 80 years for our other processes. That's when we began to take a more process-oriented view of our business. We were able to do away with some steps and some forms completely, and streamline our business. For example, our performance evaluation forms could go directly to HR after they were signed by the employee and manager, and we could eliminate the keypunch step there too.
Lamont: What is the most significant barrier for BPM?
Khan: The biggest barrier is really the gap between the business users and the IT staff. Business people own the processes and speak the language of their functional areas. And the IT people own the infrastructure, the Web server, the databases. The key to success is to provide solutions or tools that allow business people to own the process, IT people to own the infrastructure and both to co-exist peacefully. A secondary barrier is that BPM is still somewhat misunderstood. But as people learn more about it, the value becomes more evident, so we see this as a learning curve more than a real barrier.
Lamont: How did Zales get the business units and IT to communicate?
Magness: Rashid's comments are right on. We had to think outside the box a little. The software tools will do what you ask them to, but we get in ruts with our processes, and keep doing things because "that's the way we've always done it." The users have their view and the technical staff have their view. We needed to think about the problem we were trying to solve, and work through a solution together.
Lamont: So at Zales, the real challenges were cultural, not technical?
Magness: Most definitely. I will give you a real-life project that I am doing today. I communicate with my 2,200 stores via fax, and I am trying to put a process into place to eliminate all the fax machines. My biggest challenge is the culture shock that the store is going to have when you take their fax machine away: Their concern is, how am I going to communicate with the general office? We'll be giving them a better option, with Internet connectivity and faster functionality, but there is still the shock.
Sinur: And I think there are some other concerns too. Until people see the benefits, they view BPM as something that can take their work away. After they begin BPM--and we have done some pretty extensive surveys--employee satisfaction with the process is actually higher. Once BPM is in place, everybody knows what has to be done, a lot of administrative tasks are automated, and there's improved communication across departments. So this type of system value ends up winning people over.
Lamont: How did you arrive at the decision to use Ultimus?
Magness: When I first got involved in the process we were looking at a variety of options, including workflow products that tied in with some existing applications. Then we got a copy of the Ultimus BPM Suite and began experimenting with it. We were short-sighted initially, because we were just trying to solve a paper problem, but we grew it from there, and intend to grow it even more so. We have also developed a number of smaller workflow tools internally.
Lamont: Is it typical for companies to use multiple BPM products?
Khan: Yes, that is absolutely correct. I always use the example that a large company has different means of transportation--they use cars, trains, planes, forklifts, trucks, buses, depending on the situation. Each of them is optimized for a specific function. Likewise, there are different types of workflow products and each of them would be useful for a subset of the company's functions. About five years ago, most workflow solutions were departmental. We do see some tendency now to make more of a platform decision, typically at the CEO level, and then push it down through the company to be used for a wide variety of solutions. But both models--multiple BPM products and single platform--can work.
Lamont: What are they primary drivers for BPM—financial savings, better customer service?
Sinur: Well, there are a lot of drivers, but the last two years it's all been about cost and time to market. Lately, there also has been a trend to use BPM as a weapon to attain a competitive advantage. Companies are using the time savings from BPM to divert their most talented people to ways of expanding the business once the economy moves out of the doldrums. The "type A" progressive, leading-edge companies are doing that.
Lamont: What kind of growth do you expect in the BPM market?
Sinur: This market is growing incredibly fast. Software tools alone, with maybe a little bit of consulting, should grow from $1 billion now to about $3 billion within the next three to five years. Right now there are over 100 players in the market just with the integration-centric and pure-play BPM products, not including the BPM capabilities that are embedded in other packages or the image-related tools. We do expect consolidation of this market, down to about 30 or 35 players.
[Editor's note: Expanded BPM roundtable discussion begins here.]
Lamont: What vertical markets are showing the most activity in BPM?
Sinur: BPM is thriving in many areas, including insurance, credit, banking, financial markets, pharmaceuticals, manufacturing and telecommunications. Any company that is affected by compliance or productivity improvement programs like Six Sigma, is a good candidate. The appeal is so broad, I would say that only a few industries might not take to it, generally low-margin industries where potential savings are limited.
Lamont: Did you set up any metrics to assess what this system was achieving for Zales?
Magness: No, we really didn't set up any specific metrics. I had a goal initially to automate the HR request for the time-off form. That was my mission going in. After we routed the first forms through the entire automated approval process, I had an HR user who was just ecstatic about how smoothly it worked. Once we got a few more forms automated, the department figured out very quickly that the employee who had been gathering all of this information could be trained and moved into another position. So we gained some efficiencies that were a by-product of the tool that we are using.
Khan: We find that customers already have a point of pain or a need when they contact us. They are looking for a solution for this point of pain, and the value of BPM is fairly obvious to them. We do have a metric reporting solution but it is not heavily used—in general our customers are not doing extensive post-deployment online studies. I have not had a situation where a customer wanted an ROI analysis prior to buying the software, either. Customers with the pain find that the value is so clear that additional analysis is not that critical.
Sinur: Those questions come up earlier in the evaluation process. At Gartner we get calls all the time from business users as well as IT folks asking about ROI. It's a big deal, particularly in the last 24 months when the economy has been slower. By the time they approach a vendor, they generally have recognized the value.
Lamont: Is there a problem with BPM solutions becoming "shelfware" the way we see products in some sectors, where the software never really fulfills its intended function?
Sinur: Some applications such as CRM and ERP that have back-office functions set up prebuilt business paths that say, "OK, shape your business around my package." That works well in some cases, and in other cases it doesn't. Both CRM and ERP work better if you start them up in pieces, gradually, rather than trying to do the whole thing at once. So there are two issues--trying to revolve your business around the software package, and the scope that you try to bite off at one time. Problems with either of these issues might make the products into shelfware. With BPM, you get to define what your business is, and work everything around that process. The chances of it becoming shelfware are much less, I think, because it's so engaging, and tailored to your specific processes.
Lamont: What will the impact of Web services be on BPM?
Sinur: Web services provides the ability to put together components not just statically but dynamically. Services bring you agility, and reuse of legacy data.
Khan: In my experience, companies are just beginning to dabble in Web services. They are still in the process of evaluation. One way in which Web services will help is that sometimes customers are concerned about how a product will integrate. If there is acceptance that services are the standard method of integration, maybe not for everything but for a large number of requirements, it is helpful. It lets us expand our horizons because the concern about integration goes away to some extent.
Lamont: How can companies select the right BPM product?
Sinur: They need to pick a product that matches their business product domain. Some BPM is application-specific, and runs inside Siebel or PeopleSoft or a content management system. The integration BPM products are focused on system-to-system process management, integration brokers and composite application builders that may include both legacy and new applications. Collaborative BPM products use team support tools, project and resource tools. For a specialized use such as compliance, like HIPAA, there are a few vendors who have a sweet spot.
Lamont: What do you think are the ingredients for success of a BPM system?
Magness: The two key components are having an executive sponsor who is really open-minded and will support change, the culture change you need in your company, and you need to pick a small project and have a major success. You want to have a very successful pilot and get people talking. In order to get the buy-in, there is nothing more valuable in my company than good publicity.
Lamont: Have there been any unexpected benefits of the Ultimus system?
Magness: There's a big side benefit that I didn't think about, which is that it is making our IT staff much more business savvy. It's one thing to have a good programmer or an operator, but it's quite another to have a programmer who really understands distribution of merchandise to our stores. In what we are doing today with our processes, they are learning—they are forced to learn—more about the business, which is a good thing for all of us.