Enterprise Resource Planning

ERP Journal on Ulitzer

Subscribe to ERP Journal on Ulitzer: eMailAlertsEmail Alerts newslettersWeekly Newsletters
Get ERP Journal on Ulitzer: homepageHomepage mobileMobile rssRSS facebookFacebook twitterTwitter linkedinLinkedIn


ERP Journal Authors: Progress Blog, Automic Blog, Janakiram MSV, Louis Nauges, Jason Bloomberg

Related Topics: Java EE Journal, ERP Journal on Ulitzer

J2EE Journal: Article

BPM to the Rescue

BPM to the Rescue

In one day, a CIO receives two dreaded e-mails from the CEO, who is acting under board pressure to change the company's fortunes. The first "asks" for a revised IT budget reflecting a 15% cut for the rest of the year. The second calls for new ways of using IT resources to capitalize on missed customer revenue opportunities.

Forgive the CIO for feeling trapped. Suddenly the company's future seems to hinge on two fundamentally conflicting business objectives: cutting costs and increasing responsiveness to cross-selling, customer retention, and other revenue opportunities. The trap for CIOs is that they must do more with the technology already in place with less money to acquire the capability to improve processes. They have yet to recoup the costs of their IT investments, so they can't purchase new technologies to support new initiatives. CIOs must bleed more work out of their existing hardware and software investments to support the increased agility that their line-of-business counterparts require. But how?

CIOs often make the mistake of viewing this as an IT problem first. In fact, it's primarily a process problem. They need to identify their business objectives and determine how best to reconfigure their core processes to support those objectives. Instead of dwelling on the IT plumbing, they need to look at how their companies react to important business events, such as a high-value customer withdrawing half of his investment account. What business processes do they have in place to keep and win more revenue from that customer?

Once they've determined their business objectives, CIOs should look to business process management (BPM) technology to make sure their IT investments work together to achieve those objectives. BPM relies on Web services to enable new processes that respond quickly to key business events as well as tap little-used business process functionality trapped within existing applications.

Facing the Integration Challenge
Traditionally, CIOs have had two ways to support the kind of requirements described above. First, they could write a lot of custom program code. However, because code is hard to change, they first must poll users to determine exactly what they want to do as well as document and design the code. This type of approach is very costly, and therefore requires an up-front detailed return on investment (ROI) study with a 12-month payback schedule to justify the investment. Most of the cost is due to two factors:

  • IT staff must spend time assessing business process requirements and ensuring the code addresses those requirements because it's so expensive to change the code after the fact.
  • IT staff must be ready at all times to troubleshoot, modify, and upgrade.

    Web services can dramatically reduce the cost associated with these items because of the flexibility implied in the architecture. Since business rules can be more easily changed after deployment, fewer demands are placed on the up-front design phase and less "user-acceptance" risk exists.

    The second approach is the data integration approach. By creating a common database, users and applications can share information and coordinate activity. This, too, is very expensive. It requires complex requirement and architecture efforts, as well as ongoing maintenance that involves refreshing data. Data integration is expensive for several reasons:

  • Much of the cost is for the infrastructure to move and store data for potential (unknown actual use) future use by applications. That means most of the data is there for insurance purposes, and probably 20% of the data is accessed 80% of the time.
  • Modifying business processes usually requires architectural rework, which drives up maintenance costs.
  • The level of granularity of the data (i.e., do we need transaction-level data or just summarized data of monthly transactions?), and the latency of data (how often do I need to refresh it?) drive key cost decisions - decisions typically made data element by data element.
  • The cost of having IT staff hide the complexity of the physical data's appearance from the end user who can't understand table layouts also plays a role.

    A Web services architecture facilitates the creation of a layer of abstraction, enabling reusable components to be created that hide the complexity of the data from the user and allowing easier modification and enhancement over time.

    It is not surprising, then, that when faced with requirements to be more agile (i.e., view change as necessary and good instead of costly and undesirable), the impracticality of these approaches becomes painfully apparent.

    Many end users, analysts, and vendors have reached the same conclusion: a new approach is necessary for the types of requirements emerging today in support of business imperatives. Web services that enable siloed IT systems to freely communicate with one another are the foundation of that approach.

    A New Approach Takes Shape
    For a company to revise its business processes, it must first take stock of its existing systems and methodologies before determining how to use them to achieve certain objectives. A premier financial services company successfully planned how to fine-tune its business processes in the following manner.

    First, it identified strategic business objectives such as increased per-customer revenue and increased competitive differentiation. Then it determined the key business drivers of these objectives, such as meeting increasingly high service expectations, unifying the online and offline channels, and coordinating contact management. Finally, it parsed out the key business processes behind the business drivers, such as making a product offer and responding to a query for product information. Having defined its objectives and the means to achieve them, the firm was set to tackle the technical challenge of how to make it happen.

    This process-centric approach to fine-tuning business processes has several benefits. It allows companies to:

  • Tap existing infrastructure resources
  • Benchmark current state and measure success
  • Readily access and manage the "knobs and levers" that control these processes

    Tactically, improving the efficiency of business processes involves three areas of focus:

  • The "seams" where processes are handed off from system to system or department to department, such as when a loan application filled out on the Web site is passed to the underwriting department
  • The areas where companies can modify customer behavior to support business objectives, such as encouraging "self-service" on the Web site, but implementing "chat" to support customers who experience problems
  • The manner in which companies differentiate the customer experience, such as treating multirelationship customers differently from single-relationship customers

    Addressing these three tactical areas almost always means tighter systems integration, either from system-to-system or system-to-database. It also means connecting "silos" of business logic that operate independently of each other and of any "customer context," or knowledge about the customer that will improve interaction. Until recently, it took custom coding to connect the silos. Custom-coded solutions are expensive, brittle, and often impractical when management demands that the company respond quickly to business drivers. As a result, these types of integrations often fail, or companies don't even attempt them.

    Bridging the Gap with BPM
    Enter BPM, which industry analysts believe will jump from $570 million in 2002 to more than $1.5 billion in 2005.

    BPM coordinates the actions of isolated IT systems - like CRM, SFA, and ERP. Using the built-in intelligence of existing applications and systems, BPM can help companies nimbly react to key business events and capture millions of dollars in potentially missed revenue opportunities while improving customer service. Using a Web services architecture founded on XML, SOAP, J2EE, and similar technologies, BPM can synchronize signals from existing applications, enabling them to work together without changing how they operate individually.

    BPM technology overcomes the weaknesses of the current generation of systems integration approaches. It provides a variable cost model that allows for a small initial implementation footprint tied to a three-to- six-month payback period, tightly coupling investment and return. Today, technology must prove utility before vendors can demand license and support fees. Instead of the typical 12+-month implementation and two-year payback model, Web services- based BPM technology scales deployment effort to the initial requirements. As a company extends its BPM implementation over time, it builds upon the work already performed.

    BPM allows for rapid modification so end users can engage in "test-and-learn" process development and management. Most of the processes that support key business drivers are complex and must continuously evolve in response to internal and external changes. BPM technology that utilizes a Web services architecture enables users to implement, test, modify, and re-implement processes in rapid sequence based on what they've learned.

    BPM gives end users more involvement so they can change processes on the fly and improve agility and productivity without having to call IT. The current generation of technologies is brittle largely because IT shoulders the bulk of maintenance costs and responsibilities. BPM technology balances the workload between the end user and IT in such a way that users can maintain processes without resorting to IT support.

    Companies benefit from BPM's ability to reuse common data objects such as "Customer" and "Trade" and use open standards to make them available to any application. The complex infrastructure many organizations operate has evolved from the many proprietary database structures and application logic syntaxes from years of systems development. Most valuable components of business processes, including data definitions, business rules, and transformation logic, are replicated in a variety of formats across the enterprise. BPM technology relies on an object model that exposes and abstracts these elements so they may be reused across different systems via components of the Web services architecture, such as emerging XML standards.

    BPM provides a context for the business process to allow users to access information at the application level, before it has been saved to a database, dramatically reducing data integration. Most traditional application integration is based upon the movement of "state data," that is, data that has been saved about a particular event. State data is stored in databases, and then "synchronized" with other databases linked to other applications. But companies don't save much information needed to support business rules because it is too expensive or too complex.

    Companies can use BPM to cultivate existing business logic and integration capabilities to connect existing applications and databases without modifying them. This lightweight connection is the hallmark of Web services. Most of these systems already have connections built into them, either with middleware or published application programming interfaces (APIs). BPM technology uses these connections to link databases and applications while providing a layer of abstraction that hides the variability that exists between systems.

    Integration technology has been around for nearly 10 years. However, while it has addressed some specific needs, it still isn't practical for most companies because of the cost and performance issues. Consider that most integration projects still involve custom code, according to Forrester Research. Businesses that want to streamline how they respond to key events, build revenue, and strengthen customer relationships should instead take a fresh look at integration from the process perspective. What processes do they need to implement to achieve their business goals, and what technology will help them do that affordably? With its roots in Web services that make disparate IT systems communicate, BPM technology can provide the framework CIOs need to capitalize on missed revenue opportunities while still keeping costs under control.

  • More Stories By David Cameron

    David Cameron is vice president of product integration at AptSoft Corporation, an enterprise software solutions company pioneering the application of Web services to CRM integration at the event level.

    Comments (0)

    Share your thoughts on this story.

    Add your comment
    You must be signed in to add a comment. Sign-in | Register

    In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.