The Emerging Era of Business Process Management and Its Imperatives for an IT Leader

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1 The Emerging Era of Business Process Management and Its Imperatives for an IT Leader Table of Contents IT Trends Vinaykumar S. Mummigatti IT Trends 1 Challenges For A CIO 2 Business Process Management: What Do We Mean? 2 Why BPM Is Relevant To An Evolving Enterprise 3 BPM - A Business Case 4 Summary 5 Information technology is experiencing an increasingly rapid pace of change. IT has ceased being a mere enabler for a business and has taken on an active role driving the revenues and profits of the enterprise. It is very interesting to see business and IT goals converging as a result, calling for a more strategic role for the CIO. The emerging focus on enterprise processes rather than just data and transactions going beyond the barriers of departments, technologies, and geographies is a major focus area for most global corporations. This article takes a look at these trends, the challenges they present, and what this all means to CIOs. First, what factors are driving this rapid pace of change? 1. We have evolved from data-centric applications to information-based applications where mere digitization of data could not meet the changing demands from an organization. We are now experiencing a second phase with the transition to a knowledge- and process-centric enterprise where IT initiatives are mainly focused on Optimizing business processes Capturing knowledge as rules that are consistently leveraged to deliver automated, proactive action in applications Externalizing the rules and processes from the applications to ensure agility. 2. Emergence and acceptance of Business Process Management, straight through processing, Business Performance Management, composite applications, and service-oriented architectures that are breaking the traditional barriers imposed by silo technology stacks. 3. The tightening grip of compliance and regulations that mandate that every process is documented and tracked, and owners assigned. 4. Globalization and business process outsourcing (BPO) are the order of the day and are forcing organizations to break the walls imposed by distance and time. Automation is becoming a necessary pre-cursor to outsourcing. Each of these factors is not only driving the change individually, but their synergy is causing an increase in the rate of change. With better knowledge of the dynamics involved in this change, we can gain appreciation for how the CIO can adapt the enterprise to exploit these changes for gaining competitive advantages and operational efficiencies. 1

2 Challenges For A CIO Enterprises have been making substantial IT investments in leveraging the power of the internet for information exchange and conducting business transactions. Application areas like ERP, CRM, Portals, SCM, SRM, PLM, and ECM still govern a majority of IT investments. Continued investment in legacy systems exists with little ability to change or revamp. Most IT leaders are standing at a threshold today where the questions looming large are 1. How do we leverage the IT investments made over the years to meet the challenges of the new business order? 2. How do we derive radical ROI on every incremental investment made on IT? 3. How do we address growing demand and expectations from business leaders to use IT not just an enabler, but to provide faster, smarter, and more agile solutions, which help? Reduce cost and improve turn around time in all key processes Improve customer satisfaction levels Improve time to-market Reduce manpower employed in managing repetitive processes It is very surprising to see that these were the very objectives we had when we started investing in various technologies years ago. Then where is the gap inhibiting some of these objectives from being attained? The answer may lie in the following observations: Varied systems performing niche operations or solving only a part of the business problem with little focus on solving the business problem as a whole Need to access multiple systems for solving a single business problem Redundancy in data entry and information access Lack of control in the hands of business users and over-dependence on IT teams Heavily customized enterprise applications, leaving little scope to make quick changes to meet the changing market demands With this background, let us take a deeper look at what we mean by Business Processes and why is it so important to gain control of our processes to address these shortcomings. Business Process Management: What Do We Mean? Any business has a chain of value-adding activities, from the sourcing of raw materials to the sales and distribution of finished products, from employee management to finance and asset management, from supplier management to customer relationship management and other support services. A business process is a series of activities, involving humans and systems, that must be executed in a particular order and governed by specific business policies to achieve desired objectives. Business Process Management (BPM) is a broad term used to describe the automation of these activities to derive efficiencies in terms of cost, quality, and time. BPM provides an end-to-end view of the process, assigns owners, tracks the process at every stage till completion, continuously optimizes the resources deployed, generates reports on various SLAs and output parameters, and controls and improves the various parameters used to measure process efficiency. In a nutshell, it is the ability to orchestrate a process, automate the activities, optimize the resources, and define and control the final outcome. BPM is a philosophy or an approach to deal with business problems in a holistic way, bringing business and IT needs together, keeping a focus on agility and bridging the gaps across the enterprise. 2

3 Why BPM Is Relevant To An Evolving Enterprise? The need of the hour is to evolve a process-centric culture where all parts of an organization start looking at processes as assets and how to leverage them to perform better and to compete. Beginning with understanding exactly what processes are being followed, to automating them and achieving radical transformation, is a cultural change for any organization. The next level of transformation is achieved through shrinking the number of steps, eliminating resources involved, and monitoring and optimizing processes on an ongoing basis. The case for BPM is easily appreciated by examining some real-life case scenarios: Scenario 1: A billing solution for a global company offering turnkey solutions and services to clients all over the world. Billing for each client was often constrained by their specific contract and the rules governing invoicing terms. Such a process often involved collecting input data from multiple data sources, applying complex business rules to compute invoicing line items, process/workflow automation to approve the invoice by different stake holders, and interfacing with varied applications such as AP, AR, tax engines, etc. The process sometimes included interacting with online services like currency conversion or economic indices. What did the BPM implementation involve? The end result of implementing a BPM solution was significant improvement in the accuracy of invoices generated, improvement in the working capital cycle, adherence to regulatory standards, and better utilization of resources. Scenario 2: A telecom carrier with more than a 100,000 subscriber lines has a complex process for responding to a customers requests to change long distance providers. Such a process is labor-intensive, complex, and involves manual data entry through back-andforth exchange of forms between three types of systems: switch provisioning, order management systems, and an external gateway. The BPM solution brought radical transformation in terms of eliminating manual data entry by directly interfacing the systems involved. Significant efficiencies were gained with the ability to monitor the process, manage the resources, measure the adherence to SLAs and thus track the customer satisfaction. Scenario 3: One of the mission-critical activities for an insurance company is the underwriting process. The process begins with the receipt of an application for a policy, followed by validation of data, risk evaluation, underwriting, and policy issuance. This is a very complicated process and may take up to 45 days. But this process drives the quantity and quality of business booked, thus affecting revenues and profitability. Manual interchange of information between agents, risk analysts, and underwriters comprises most of the effort. Also, referring to third party services for various reports such as a credit history, geographical details for home insurance or a motor vehicle history for auto insurance, followed by redundant data entry takes up major time and resources. The existing legacy applications did not facilitate dynamic change and process automation. With the BPM solution, there were major opportunities in this underwriting process to reduce the time and cost to process the application, and improve the quality of customer service. Automation of the workflow, accompanied by business rules automation and integration with third party services, made the process highly efficient and less costly. In a more generic sense, there are many areas where we can expect to see a radical transformation of processes, including: 3

4 Order fulfillment: Managing the order lifecycle from quote through order entry, manufacturing, delivery, and billing. Integrated channel management: Ensuring consistency throughout customer touch points (direct sales, indirect sales, resellers, distributors, Web). Enhances pricing, delivery and product information. Configuration management: Defining specific product deliverables for a customer; ensuring manufacturability and optimizing profitability. Pricing optimization: Pricing products for each customer segment to optimize profitability. Considers characteristics like account geography, size, historical revenue, specific location, etc. Companies owning and leveraging their processes competitively leave behind those companies not focusing on their internal processes. By not owning processes and gaining control over them, competitive advantage is lost. The key questions to ask are Are we in control of our processes? How can we leverage our processes to drive our profits, customer satisfaction, and business growth? Is our process management capability and strategy in line with the trends, challenges, and competitive environment in which we operate? BPM A Business Case It is difficult to quantify the benefits of BPM unless we map BPM features to a business problem. The success of BPM lies in identifying an appropriate application that shows promise for demonstrating business benefits within a short span of time. However, there has to be a business case to start a BPM initiative. To identify such cases you might consider 1. Complex processes in new business origination or customer acquisition involving customer qualification, data validations, credit checks, and fraud detection, or involving multi-point data entry, multiple levels of approvals, or application of business rules and policies to evaluate risks. Such processes are often governed by stringent compliance and regulatory norms which mandate auditing and control. Such processes are typically marked by: Dependency on manual paper pushing for approvals, referencing policy manuals for risk evaluation and rating, or dependency on experts Availability of trained resources and level of expertise governing the speed and costs of task completion Multiple systems being referenced either for data look ups or data entry 2. ERP and legacy applications managing mission critical processes require constant change; such processes need to be agile. The strength of these enterprise applications is in offering industry specific best practices in transaction management, but they typically fail to provide agility and dynamic change capabilities which become major bottlenecks in responding to competitive dynamics. 3. Business systems where legacy applications are involved might call for either complete rebuilds or extensive patches and fixes. Such applications are candidates for BPM. Increasing costs of upgrades and maintenance, and lack of support for some ISVprovided applications are key drivers for such initiatives. A BPM solution might be the right answer, providing a process orchestration layer keeping an existing legacy application intact, while enabling agility, scalability, and modernization. 4

5 Summary Business processes are pervasive. BPM is a topic of interest for most of the CIOs in Fortune-500 and Fortune-1000 companies. BPM is also applicable to SME environments. They all face the challenge of aligning business and IT. It is not if a company is going to implement BPM, but it is when. Competitive pressures will drive all companies to look at their core processes as assets and gain control of the processes through BPM initiatives. A lengthy process of analysis and evaluation will only delay the returns of a BPM initiative. The key to success is in identifying inefficiencies in core processes, demonstrating quick wins with high ROI, gaining visibility and support from business users, and replicating the success. Don t wait Start now! Vinaykumar S. Mummigatti is the General Manager of BPM Practice at Satyam Computer Services, a global consulting and IT services organization located in Parsippany NJ. He can be reached at vinaymummigatti@gmail.com. For more information, check 5