Tools for tough times

Here’s good news for CIOs looking to do more with less. Business-process management (BPM) software can pay for itself within a year or two by linking expensive legacy applications to new, more streamlined workflows, customers say.

With BPM, “you can get to the point where you can see, on a second-by-second basis, what’s happening in your business and where in the business are the holdups and where process improvement [is needed],” said Dean Pipes, an integration architect at The Toro Co. in Bloomington, Minn. The yard equipment manufacturer uses a BPM system based on Vitria Technology Inc.’s BusinessWare to pool its purchases from vendors to negotiate volume discounts.

Shippers are turning to BPM “to lower costs and to leverage the investment they’ve made in their ERP systems,” said Ted Barnicoat, CIO at trucking company Trimac Corp. in Calgary. He expects a return on his US$500,000 BPM investment within two years through reduced paperwork and additional business from customers who find Trimac’s BPM-based ordering system easier to use than those of competitors.

BPM requires a flexible application architecture that can accommodate new applications as needs change. It also requires a tool with the right mix of modeling, code-generation, workflow and monitoring capabilities. Veterans recommend that companies start slowly, allowing enough time to understand existing workflows and train workers to use BPM systems.

BPM is “friendlier” than implementations of other major software packages such as ERP, said analyst Eric Austvold at Boston-based AMR Research Inc. If a business process needs to be changed after it’s deployed, he said, “you don’t have to go back to a huge IT organization to rewrite a whole bunch of code. It’s usually minor tweaks to the process model.”

BPM Basics. BPM software allows customers to graphically map business processes, such as issuing or collecting a bill; transform that visual map into an application or set of applications; and manage the electronic workflow to monitor that the work gets done and allow changes to the workflow. The software is offered by a variety of vendors, ranging from makers of traditional enterprise application integration software to business application suppliers and “pure-play” BPM vendors.

Reston, Va.-based NII Holdings (formerly Nextel International) two years ago began to integrate applications such as finance and billing to eliminate the costly and error-prone practice of entering data multiple times. The wireless communications company chose Plano, Tex.-based Fuego Inc.’s namesake BPM package based on the strength of its business-process modeling and its connectivity to legacy applications, said Jorge Perez, vice-president of IT and CIO at NII.

As for Trimac, it chose Vitria’s BusinessWare over Microsoft Corp.’s BizTalk Server because of Sunnyvale, Calif.-based Vitria’s expertise with the chemical industry’s version of XML, said Barnicoat. Ironically, customer use of the older electronic data interchange (EDI) format grew instead, and Trimac plans to use Vitria to handle all of its EDI transactions.

Like other customers, Pipes said simple application integration is becoming a commodity in the BPM world. The actual reason Toro chose Vitria was for its business-process automation, reporting and workflow capabilities.

A new way of thinking. Thinking first about the business and not about technology can be a challenge. When Perez started to improve a payments collection process in Brazil, users immediately began talking about problems with the current collections application. After training users in business-process modeling, Perez had them map the collections process on charts that soon covered all four walls of a room. Next, they identified gaps and used Fuego to model an improved workflow that has led to a “dramatic” improvement in the process, he said.

NII also used Fuego in Mexico to improve the process of establishing service for new customers, reducing the rate of “churn” (customers switching to other carriers) “very substantially,” Perez said. “Getting managers across the divisions to agree on what information is important at what point is a challenge, because each business has a different set of criteria by which they rate their success,” Pipes explained. For example, he said, “in winter, we want to know about snow throwers, and in summer, we want to know about lawn care products.”

Veterans also recommend starting with relatively straightforward, quick-payback projects until IT and business managers get used to BPM. Toro first used BusinessWare to integrate and automate workflow between its Ariba procurement system and its SAP R/3 ERP system, Pipes said. It now automates the process by which stores buy spare parts from Toro. Pipes plans to tackle the biggest and most important work – integration with the distributors who buy finished products from Toro – only after completely understanding how to improve that process.

Trimac’s BPM project, which began in 2001, linked its dispatch systems with its customers’ order entry systems to improve customer service. Barnicoat estimates that the BPM system will pay for itself within two years. It not only saves customers about US$20 per order in handling charges, but it also allows Trimac to spend less time resolving invoice questions, has reduced its accounts receivable and has resulted in more business from customers using the system. The BPM system even allows Trimac to run a virtual shipping desk to accept customer orders and arrange for shipment.

Integration and training. Integration may not be a showstopper for BPM projects, but it can be a headache. It took Perez’s staff about a year and a half of working with vendors to build links to legacy systems that allow Fuego to use the business logic (such as rules for credit checks) built into those applications. Perez also had to increase server capacity by 50 per cent to give users the appropriate response time.

Because different users might need different types of information, some form of data warehouse is often necessary for BPM, Pipes said. “You can’t expect all of your information to be available” from legacy systems in the form and at the time required by the improved workflow, he adds.

Although Trimac struggled a bit integrating Vitria with its EDI transaction flow, “what took us a heck of a lot longer was changing our dispatch system to accept electronic transactions,” Barnicoat said. Dispatchers used to receiving orders by phone and fax needed visual and audio alarms to alert them to new orders arriving electronically, Barnicoat said. Developers had to include different alarms to tell dispatchers about the last-minute shipping changes common in the trucking industry and to redesign screens so the dispatchers could find the changes easily.

Intensive coaching is vital – as are reassurances that the BPM project isn’t simply a way to cut jobs, said John Antaki, managing partner at Matrix5 Consulting LLC, a Houston-based consulting firm. If what end users see “is a lot of consultants running around, they get very insecure,” he said.

Before extending a BPM system to customers or suppliers, Barnicoat suggests signing a contract governing issues such as testing, how to handle system crashes and notification of software upgrades that could crash a partner’s system.

Once users see how BPM can improve the business, they often demand more detailed and more timely information, Pipes said. One way to avoid endless additional requests is to “define success from the get-go,” Antaki said. For example, a BPM project Antaki worked on at Shell Oil Co. had a goal of reducing the cost of the monthly financial close by at least 10 per cent.

But the need to keep tweaking is also good news, Pipes said. “If you try to hit 100 per cent, you limit the best part of the process, which is that it can feed back on itself and improve itself.”