Optimize Processes and Reduce Costs with Operational Intelligence

Transcription

1 Optimize Processes and Reduce Costs with Operational Intelligence Addressing Limitations in Business Activity Monitoring White Paper sponsored by Aligning Business and IT To Improve Performance Ventana Research 6150 Stoneridge Mall Road, Suite 350 Pleasanton, CA (925) Copyright Ventana Research 2009 Do Not Redistribute Without Permission

2 Table of Contents Innovating With Operational Intelligence... 3 Where BAM Falls Short... 4 Where Operational Intelligence Delivers Value... 6 What To Do Next... 9 About Ventana Research Ventana Research 2009 Page 2

3 Innovating With Operational Intelligence Managing a company today is a pressure cooker. Businesses are told they must optimize business processes and lower costs, yet still continue to mitigate risk and stay in compliance with established policies and regulations. That s no small challenge. It becomes an even bigger one if the workforce is expected to be efficient in the execution of business processes and effective in the management of them and of overall business and IT efforts, all without having available the information they need to act decisively. The last decade has seen significant advancement in the capabilities of enterprise applications and information systems, providing organizations with an opportunity to transform their operations. Instead of just monitoring business and technology events, today s systems make it possible to correlate events with one another and apply modeling and analytics to determine relevant workflow and policies-andprocedures contexts. Ventana Research calls this significant leap forward in business technology Operational Intelligence (OI). Operational Intelligence is an advance in business and technology that relies on an information architecture and set of user tools built on an array of event-centered information and analytics processes operating across the network. This new approach can enable people to take effective actions and make better decisions, making both business and IT more intelligent in managing business operations. As a result, companies can optimize their business processes and reduce costs. Operational Intelligence rests on a technology foundation that includes modeling, analytics, monitoring and measuring, action and control. It also utilizes complex event processing (CEP), which can juxtapose information from reported events across multiple sources in the enterprise or over the Internet to discover and identify meaningful Benchmark research into OI and CEP found that 74 percent of organizations place a very high priority on the optimization of their business processes. business occurrences. Utilizing these technologies, Operational Intelligence can enable organizations to use business and technology events to grow their existing policies and rules into a more mature and responsive system that will deliver value. This advance in business technology arrives at a moment when organizations are placing a very high priority on the optimization of their business processes. Our recent benchmark research into Operational Intelligence and CEP found that close to three-quarters of organizations (74 percent) view achieving this as a top priority. But rhetorical prioritization is one thing; acting on that commitment is another. Our research also found that many organizations have not updated the applications on which they rely to versions that operate in a timely way as business processes execute. This robs them of the opportunity to integrate business and technology events across processes to gain information they can use not just to monitor business processes but to manage them. New versions of these applications can also help address the demands for effective governance, compliance and risk management. The intensified focus on these areas that we see today has brought with it new requirements for organizations to be agile and smart in their operations, to address compliance requirements and to conform to specific policies and rules. The day is past when this could be done by hand; policy and regulatory compliance must be accomplished through automated processes. The Ventana Research 2009 Page 3

4 same is true for managing risk, which is why our benchmark research revealed that 53 percent of organizations say managing risk using Operational Intelligence is a top priority. With business operating today globally and at a 7x24 pace, it is all too easy to miss opportunities and to fail to know when to take action to reduce costs. Realizing the full potential of a business requires being able to act when relevant information mandates it and being sure that that information will present itself. Thus, the pressure to remain competitive and grow the business in challenging times translates into a mandate to explore investing in technology that can support Operational Intelligence. Using time as a competitive advantage through the flow of relevant information is the foundation of what is called situational awareness. Simply put, situationally aware individuals have available relevant and timely event information that they can use to guide decision-making and action. Situational awareness can contribute to better decision-making, but too many organizations are hamstrung by their devotion to the conventional wisdom that they need only to monitor business activities and hampered by their failure to examine their options for technology and business improvement. Merely seeing what s going on is not enough to enable an organization to act decisively, optimize processes and reduce costs. Where BAM Falls Short Many business managers believe that monitoring business activities is sufficient for them to be able to optimize business processes. Although this approach, known as business activity monitoring (BAM), was introduced in the 1990s, there are still those who argue that it is critical for business to adopt. However, BAM is too limited; it provides only one of the many enabling capabilities needed in today s business, and it The rigid design and limited architecture of BAM-focused approaches falls short, failing to deliver the capabilities that today s business requires. does not enable process optimization efforts to reduce costs. The technology that supports BAM connects to business applications and systems so that it can provide notification, typically to a dashboard, if a specific event occurs. Thus, BAM focuses on the simple processing of one or two events. But many organizations have discovered that succeeding in business requires more than just monitoring an activity; notification technology developed when most businesses operated on a five-day week and an eight-hour workday simply won t suffice today. In an environment where business processes operate across a multitude of activities and involve dozens of events, the rigid design, limited architecture, lack of business context and inherent latency of BAM-focused approaches fall short, failing to deliver the collaboration and automation capabilities that today s flexible, quickly adaptable business requires. Business activity monitoring simply does not deliver the action-enabling capabilities that Operational Intelligence does. BAM does not make it possible to model activities utilizing CEP. It does not provide the correlation and generation of analytics that comply with specific rules and policies. And BAM will not enable an organization to optimize processes and reduce costs; in some cases, it may actually get in the way of these important business improvement efforts. For a modern business, these are Ventana Research 2009 Page 4

5 serious lacks that hinder business from advancing to higher levels of process maturity and thus negatively impact their profitability. The path around these obstacles involves utilizing the intelligent event processing capability of CEP. The importance of gaining a more complete view of information utilizing CEP and of being able to process large numbers of event sources is confirmed in our research. Organizations told us the inability to source a broad set of events was a top-ranked dissatisfaction, cited by 48 percent of organizations. They also reported that being able to handle a large number of sources is important; our research found that half of organizations need to handle more than 11 event sources, and 29 percent of them need to handle more than 20. The lack of this capability is a limitation of BAM. Consider the impact of the choice of how events are handled in a hospital, where monitoring is used as input for life-and-death decision-making. There, events are the trigger points for decisions about intervention or what other action is needed. Treating a patient merely begins with monitoring; the value of the treatment system lies in the situational awareness modern hospitals have created through their use of an Operational Intelligence approach to guide caregivers to the right action. The systems remove the need for the practitioner with hands-on knowledge of the patient s condition to always be available by empowering other practitioners with the contextualized information they need to take action in the time frames medical care requires. The pressure to remain competitive and grow the business in challenging times translates into a mandate to explore investing in technology that can support Operational Intelligence. To survive and succeed in today s crowded and noisy markets, businesses must embrace a similar model, improving operations by introducing intelligence to replace hard-wired reaction cycles. As is the case with doctors in hospitals, the gleaned knowledge and years of experience accrued by businesses must be integrated with information technology to produce systems that automatically can focus the attention of the organization s skilled professionals where and when needed. The added dimension beyond BAM is critical. Measuring business activities and processes is by itself not difficult, but it s also not enough. Moving to the next management level of knowing what is important, and what is not, is essential to operating smoothly and competing effectively today. This requires the application of analytics that can correlate events from many sources and provide a wide range of measurements among them time, threshold and geographic calculations that can serve as critical metrics and key performance indicators, which are the tools for business process optimization and effectiveness in controlling costs. Dashboards have become one of the most popular deployments in IT organizations supporting business. But just as in flying an airplane from its cockpit, merely monitoring the gauges is not sufficient; what s required is the ability to act on what they mean. In piloting a business, the systems needed are the ones that analyze information about events to ensure the business is in compliance with enterprise plans and policies and governing regulations. A dashboard that delivers BAM-like measurements is a start, but it s clearly insufficient to enable the workforce to be prepared and able to take action. Ventana Research 2009 Page 5

6 The need for an intelligent response capability becomes even more acute in the face of the demand to satisfy service level agreements (SLAs) and compliance mandates. These are business requirements that must be addressed constantly, not on the weekly or even daily cycle that batch-processed dashboard data and measurement permits; running an organization using those cycle times will be too slow for many, resulting in significant costs from being late and thus in violation of SLA or regulatory restrictions. Of course, monitoring also is important in providing the first indications that something may have gone awry. But to be useful, the monitoring must be sufficiently sophisticated to provide context to your operational workforce. The context should include information related to the event such as historical information, the demographic attributes of a customer or the proximity of an event to a specific location. Providing this, though, requires embedding in management systems the business s operational policies so that notifications can be contextual and meaningful rather than just a flashing red light on a dashboard. In fact, being able to build in exceptions to policies could prove to be one of the most important elements of Operational Intelligence. By providing the ability to support exceptions from policies built on a model, organizations can empower the right action when the business demands it, which is the path to optimizing processes and cutting costs. Just providing information is insufficient to enable an operational workforce to always make the best choice to meet the organization s goals and objectives. Technology should not hamper business; instead, it should enable it to move at the pace needed by its people and processes, however fast that might be. Operational Intelligence provides the robust foundation business needs. Where Operational Intelligence Delivers Value Operational Intelligence rests on a solid historical foundation. Businesses in many industries have for decades used operational events to trigger actions and decisions, most recently in deployments of service-oriented architectures (SOAs) and business process management systems. Unfortunately, many organizations have invested significantly in enterprise systems that are limited in not being able to harvest full value from their information. But, although some do not realize it, they can evolve their Technology should not hamper business; instead, it should enable it to move at the pace needed by its people and processes. businesses to be more dynamic and responsive without having to endure a significant or disruptive business transformation. All that s required is deployment of a platform that enables modeling and the encapsulation of rules and policies that reflect how a business actually operates. Many organizations are realizing benefits from Operational Intelligence in the form of optimized processes and reduced costs. In the area of customer relationships and satisfaction, for example, they have tied the interactions that make up a business s demand chain closely to the creation and delivery of products and services. Using OI, an organization can correlate events a spike in orders for a particular item, for example that are demand signals generated by customers, either consumers or channels of distribution, to needs and issues across the supply chain, such as a vendor situation that impacts raw materials supply. This enables the optimization of each of the many links in the supply chain, from Ventana Research 2009 Page 6

7 manufacturing or acquisition to shipment to loading and unloading. Since all these impact the timeliness of delivery and thus a company s ability to meet manufacturing and customer expectations, linkages of this sort are key to keeping customers happy. It doesn t matter that some parts of enterprise operations are driven by real-time events and others by intermittent events reported periodically through the day; management needs to be able to correlate them and provide actionable control to each individual who is in a position to act. Using CEP within an Operational Intelligence framework makes it possible to link together events occurring within differing silos of enterprise applications and systems. This, in turn, can help streamline operational processes and activities. An event-centric approach can help deliver knowledge of product and services status and availability the knowledge a business needs to optimize its operations and the customer experience. Doing this, of course, correlates directly to the retention and loyalty of those that the organization services. The business environment in which energy companies operate, to cite one example, is nothing if not challenging: Under intense public and regulatory scrutiny, they must manage their diverse mix of energy sources deftly while complying with regulations, policies and established pricing structures. As times, business models, and consumer relationships have changed, their legacy systems, including those that monitor both the energy grids and their billing processes, have left many energy organizations hampered in their ability to manage their operations in real time. Unfortunately, too often energy companies lacking visionary leadership have responded to these challenges by simply instrumenting new policies or methods to raise prices, rather than looking at ways to reduce costs and so be able to optimize prices. That s neither the path to environmental and social responsibility nor the path to maximizing profitability. Forward-looking energy providers are instead moving to put in place faster and more effective systems to balance demand while maintaining compliance with service level agreements and maximizing customer satisfaction systems that utilize OI and rely on CEP. Operational Intelligence provides the method to integrate sources across disparate systems and networks into a unified activity- and processdriven architecture that leverages business and technology events. This architectural model connects events and applications to improve Using CEP within an Operational Intelligence framework delivers the knowledge a business needs to optimize its operations and the customer experience. situational awareness and thus enable real-time operations. An energy grid managed with Operational Intelligence can use customer complaint and service events to determine the right course of action. The result: better, more cost-effective processes, more consistent, reliable energy supplies, and more satisfied customers. Or consider the communications industry, which continues to develop new and often complex service plans that involve service time, software, hardware and maintenance. Each service plan has specific SLA rules and policies, and these are far more than words on paper or target numbers; delivering in accordance with these targets is what keeps customers happy and churn minimized. Operational Intelligence provides a business and technology foundation to integrate events across communication networks into specific processes that are critical to a communications services organization. Ventana Research 2009 Page 7

8 Unlike BAM, which would merely monitor specific events and provide notification without the complete context, Operational Intelligence directly correlates customer events with that customer s current usage and the applicable policy. By deploying a technology backbone that has no latency and that processes events in a detailed context, organizations can enable themselves to be notified of situations, or even automate notification of a customer directly when an exception occurs. Operational Intelligence thus closes the gap that separates business and technology events to provide situational awareness in the monitoring of the SLA, which can contribute to an improved customer experience. This is an important advance, as otherwise it is difficult to maintain or even reduce the costs of these processes while improving their operations. Another key use of Operational Intelligence is in governmental entities, which have an enormous responsibility to service and protect the public in many different ways. Crimes, fraud and security-related events occur constantly. Unfortunately, every governmental agency does not always use the most efficient technology, and certainly government could do a more effective job of coordinating across them. The criticality of this has been underscored in the years since 9/11 as the need for collaboration to ensure homeland security has introduced new policies and procedures that impact how citizens interact with government and how government operates. Of course, many of the efforts undertaken in the last five years have been database driven, which means they have inherent latency and context limitations that hinder better response and more Determining if you are being hindered by BAM or inefficient event monitoring processes is the first step on the road to greater efficiency and effectiveness. effective actions. As a result, the exploration of how to provide situational awareness for every governmental worker is increasingly a top priority for federal, state and provincial governments. To operate more quickly and more safely, government must increase its technological and informational maturity. Operational Intelligence makes it possible to integrate any number of operational and technology events across agencies and geographies, and using CEP, these event correlations can be processed to derive analytic insights. These are far from abstractions. Events ranging from the identification of individuals passing through checkpoints to phone calls to agencies can be correlated and evaluated for relevance and then processed to security analysts for review and action action that can make the difference between security threats and day-to-day safety. Such an integrated approach can reduce the time required and the costs of establishing new operational activities. Operational Intelligence also can improve collaboration across organizations and agencies, as it provides a shared place to annotate issues and offer observations, replacing all the individual discussions that invariably introduce delays and increased costs. All of this, mediated by Operational Intelligence, translates into more effective and responsive governance. Operational Intelligence thus can provide situational awareness and reduce information latency, increase the contextualization of information, make it possible to take decisive action where and when it is needed, and enforce collaboration to decide on the best action. In other words, Operational Intelligence allows an organization to optimize processes and reduce costs, smoothing the path toward greater effectiveness, competitiveness and profitability. Ventana Research 2009 Page 8

9 What To Do Next Determining if you are being hindered by business activity monitoring (BAM) or inefficient event monitoring processes is the first step on the road to greater efficiency and effectiveness. Operational Intelligence provides the framework for operating your processes more efficiently while identifying immediate opportunities and issues that need to be addressed. Of course, undertaking a new initiative isn t easy even in the best of times, and having a good business case and demonstrably valuable technology may not be sufficient for success. To smooth the path, it s important to understand the lessons learned by others, whether about good or bad practices. It s striking that while many organizations talk about best practices, few actually seek out and document their own previous experiences with their organization s skills and competencies, much less those of others, to determine what might be needed. One useful step therefore is an educational workshop or the engagement of a trained practitioner to provide guidance on how to source and model events into Operational Intelligence. In our research, most organizations (55 percent) reported that lack of resources was the number-one impediment to the success of new projects in Operational Intelligence. Smooth the path for your organization by searching out what impediments might present themselves in your organization. By doing so you ll be able to move your project forward and address some of your most valuable business assets: time and people. We recommend this five-step framework for analyzing how the limitations of BAM impact you and bringing Operational Intelligence to your organization: 1. Determine what are your organization s most critical business activities the ones that deliver key benefits and that impact your business frequently throughout a day. 2. Examine the degree of manual intervention and collaboration these activities require. Prioritize where faster response times and shorter times-to-action are most important. 3. Assess your organizational maturity through the lenses of your people, processes, information and technology. 4. Develop a program and team that has skills in integrating events and modeling activities and policies that can be automated. 5. Establish clear leadership and sponsorship to ensure that the benefits of the business and technology investment will be realized in the shortest period of time. Bringing Operational Intelligence to your organization can optimize processes and reduce costs, both important advances. But it can do much more. The investment in this business improvement and technology can introduce new levels of accountability and responsiveness. Your organization may believe it has optimized its operational efforts, but the reality is that there is much more to be done to enable higher levels of responsiveness to opportunities and to situations that need to be resolved. Ventana Research 2009 Page 9

10 About Ventana Research Ventana Research is the leading benchmark research and advisory services firm. We provide expert guidance to help organizations manage and optimize performance to become not only more efficient but more effective. Our unparalleled insights and best practices guidance are based on our rigorous, research-based benchmarking of people, processes, information and technology across business and IT functions worldwide. The combination we offer of benchmark research, thorough market coverage and in-depth knowledge of hundreds of technology providers means we can deliver business and technology education and expertise to our clients where and when you need them. Ventana Research provides the most comprehensive analyst coverage in the industry; more than 2.5 million business and IT professionals around the world benefit from Ventana Research s insights. To learn how our benchmark research and assessment and advisory services can improve your organization s performance, visit Ventana Research 2009 Page 10