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BPM is Coming –­ and It's Not Just Hype

Published
  • September 01 2003, 1:00am EDT
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In the next 12 to 24 months, it is likely that you or someone you work with will decide that your company needs a business performance management (BPM) system. You can't read a magazine without bumping into BPM. Vendors are touting it, and companies are focused on BPM. In organizations that have launched initial BPM systems, additional departments are embracing its potential. Economic and regulatory drivers are forcing BPM on businesses. It is likely that you already have the beginnings of a BPM system in place ­– budgeting, planning, consolidation, business intelligence (BI) and analytic applications all fall under the BPM umbrella. This column's purpose will be to cut through the hype and misconceptions that surround BPM and ­– because you'll have no choice but to engage with BPM ­– help you deal with it successfully.

In a positive sense, BPM has the potential to be the next enterprise resource planning (ERP) system. BPM will be a major corporate initiative that addresses genuine business needs. However, don't let BPM become the next ERP in the wrong way: an IT tidal wave that takes longer and costs more than planned and doesn't solve all the problems it targeted, thus failing to meet key stakeholder expectations. For perspective, compare it to customer relationship management (CRM) systems. BPM shows greater promise for helping companies improve their performance and bottom-line than the much overhyped CRM. It's important for all of us that BPM solutions avoid the fate of the many unsuccessful CRM projects and deliver on a more realistic set of expectations.

What is BPM? BPM is a collection of software, business processes and measures of business success (metrics, key performance indicators) that, when combined, enable an organization to understand, act on and influence its business performance. Don't confuse BPM with business process modeling/management (although they are somewhat related) or with beats-per-minute if you're musically or medically inclined.

You'll occasionally see the terms CPM or EPM used to label the same solutions (corporate and enterprise performance management, respectively), but they are misleading because BPM is applicable to small companies as well as large ones. Despite a minor turf war among analysts and vendors who'd like to lay claim to having defined the "space" and toss around other labels, BPM is the most widely accepted and most accurate term.

The most obvious driver for BPM is the Sarbanes-Oxley imperative and the pressure for more accurate data faster. Corporate executives are being held personally accountable for any and all statements about their company's performance, and they want to know with confidence where they stand at the end of a fiscal period ­– without waiting. More subjectively, managers perceive that accounting ratios give too narrow a view, not what they need day in and day out to ramp up business performance. Acceptance of balanced scorecards, and the wide variety of key performance indicators (KPIs) they can employ, has grown considerably. Finally, the presence of expensive ERP, CRM and supply chain management (SCM) systems has created the need to tie them together, leverage them and derive more value for a wider range of employees.

Information technologists have grown numb to the message: "Here comes something new, and you better adopt it right now." The good news about BPM is that it's gathering steam at a reasonable pace, although it can never be too soon for some of the software vendors. You have time to gear up. Get educated now, and you won't be blindsided.

Although true BPM will contribute to a revolution in how businesses can maximize their performance, BPM itself is evolutionary. It builds on previously accepted technologies with a focus on KPIs, scorecards and dashboards. Most BPM suites make use of online analytic processing (OLAP) multidimensional databases; analytic applications such as planning and consolidation; BI report and query tools; and extract, transform and load (ETL) capabilities ­– all utilizing a BPM-specific data mart that pulls together relevant information from disparate data sources across the enterprise including other data marts. The software, combined with business processes and useful gauges (such as KPIs), delivers on the need for accurate and timely information.


Figure 1: Evolution of BPM

BPM is not just for headquarters and the executive elite. It has the potential to support nearly every businessperson with an up-to-date picture of how each department and job role is functioning. More importantly, BPM enables cross-departmental collaboration with sales data from ERP systems integrating with marketing's CRM information tied to the finance department's regional profitability analyses. This means that most BPM projects have many potential stakeholders, which can certainly complicate life for the project manager! Broad adoption is one of the most important keys to a successful BPM deployment. We will explore this more in a future column.

Although the term BPM is used to define a complete suite linking multiple systems, companies typically begin with one area. Planning is the cornerstone of most BPM implementations and a logical starting point. Know what performance you are targeting –­ then you can determine whether your goals are achieved. On the practical side, many planning systems today are still largely Excel-based and are ripe for upgrade to a more centrally controlled, secure system. This approach means that your first step in BPM can be limited in scope, labor, cost and timeline. Later, the BPM initiative can expand across departments, job roles, modules and in- house systems.

We expect and already see evidence that BPM will mature in three directions: verticalization, predictive/ prescriptive capabilities and wireless extensions. Today's solutions are mostly generic and "fit all industries"; but a handful of vendors offer systems targeted to a specific sector, usually financial services. Industry specialization will lower both implementation times and your total cost of ownership. Eventually, BPM systems will be able to predict how your business model will react to changes in external economic and demographic indicators, such as how your business will fare with "what if" analyses based upon certain currency fluctuations. The ability to prescribe actions will also appear, providing directions for management on the steps required to improve performance. On the hardware side, wireless components will make current KPIs instantly available to traveling executives and field personnel.

If movement toward the "extended enterprise" continues, BPM-derived information will be shared in a secure role-based portal with appropriate customers, suppliers, investors and board members. Today, adoption of this capability is more a cultural issue than a technology one.

In the coming months, this column will take you through a detailed look at the components of BPM and study the best practices, process methodologies, key vendors and other players, and major BPM trends. To keep it real, we'll also discuss the pitfalls and challenges of BPM implementations. I welcome your reactions, comments and suggestions at: cschiff@bpmpartners.com.

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