Archive for the ‘BPM Vendors’ Category
After the global financial crisis started dominating the news in the Fall of 2008 I have read several press releases, blogs and statements from BPM vendors that the BPM industry is counter-cyclical. They claim that when times are tough and companies are forced to streamline or cutback their operations, the demand for BPM increases–or at least does not fall as dramatically as the rest of the market– because companies see BPM as a way to help reduce cost and become more efficient.
On the surface this optimistic argument appears to make sense. Tough economic times demand that companies cut cost while continuing to deliver adequate amounts of goods or services. BPM provide the means for companies to optimize their processes that can help achieve this goal. Beyond optimization, BPM also provides the means to automate processes that can greatly reduce cost while at the same time making the processes more efficient. It can enable companies to do more with less, which is exactly the medicine the companies need during tough economic times.
However nothing is ever as simple as it appears on the surface. The economic crisis that the world faces is going to impact the BPM industry negatively and the BPM vendors are not immune to the severe pain that the rest of the market is going through. There are several reasons for my pessimistic view that the BPM industry, especially in its current state of development, is not counter-cyclical.
First, BPM is not simply a technology that can be purchased and deployed, and suddenly companies can start reaping its benefits. Instead, BPM is a discipline – a way of conducting business and a cultural mindset. Technology is only a part of BPM, albeit an important part. Success with BPM is not the quick short-term fix that companies are seeking at times of economic crisis. BPM requires cultural change which takes time. Facing crisis, management generally does not have the luxury of time needed for BPM initiatives to bear fruit. Indeed, in a period of economic crisis, when employees are concerned about job security and their personal well-being, BPM is more likely to be perceived as a threat rather than an opportunity. This perception is not conducive to the kind of cultural change that BPM needs in order to thrive. Therefore, faced with the need for immediate action and reduced demand for goods and services, management is unlikely to invest in BPM which has a long term promise. BPM projects that are already well in progress are likely to be continued if their results are visible and significant. Mediocre projects are more likely to be canned, and new projects are less likely to be funded.
Second, BPM projects still rely heavily on professional services for the discovery, design, development, testing and deployment of processes. Because of this reliance on professional services, the deployment time for meaningful BPM projects ranges from two months to over a year depending on the complexity of processes and the amount of integration that is needed. This lag between making a decision to invest in a BPM project and when results can be ascertained, is another reason why management, facing the dire need to reduce cost today in the face of dramatically reduced demand, is less inclined to invest in new BPM projects whose payoff is months away.
Third, most organization have complex processes. They all look simple on the surface, but as one starts peeling the layers one finds the ever-present exceptions. The number of exceptions is generally proportional to the size of the organization. These exceptions are what make seemingly simple processes complex. And in many cases the processes are interlinked with each other. Simply automating one or two processes is unlikely to produce a major impact on the bottom line of a company. For tangible bottom line impact a company has to automate many processes which takes a lot of time. And management simply does not have the time or the patience when facing dire financial crises like the one we face today.
BPM cannot be rushed for the three reasons that I have listed. The financial crisis that the world is experiencing today will force management to make decisions that have a quick and short term impact. This does not bode well for increased investment in BPM and the prospects for the industry. Equally troublesome is the current state of the pure-play BPM vendors who are the driving force for innovation in the industry. Most of the pure-play BPM vendors are relatively small companies who do not have the deep pockets to survive a major downturn. In almost all cases, these companies have raised a substantial amount of venture capital investment with plans to either go public or be acquired by larger software companies seeking a slice of the BPM market. Prior to the current financial crisis Metastorm had already filed with the SEC, and Lombardi and Savvion have made noises in the past of going public. Most of these companies have already tried the M&A route and have been unable to find suitable acquirers willing to pay what they expect. Now with the state of the capital markets, the prospects of a public offering are nill. The pure-play BPM vendors will face tough times in 2009 with reduced demand for the reasons stated above, no prospects of going public and reduced prospects of acquisitions. Like many other companies, the BPM vendors will also have to take drastic actions to reduce cost and survive. Innovation will be impacted and there will be further pressure for consolidation on unfavorable terms. The larger software vendors eyeing the BPM space who have the financial wherewithal to ride the crisis will become even more dominant. While some may argue that consolidation is probably good for the industry, I have doubts about what it will do to innovation and agility for the industry.
Note: This blog is adapted from my recent column in BP Trends (www.bptrends.com )
In this post I want to address some address the points raised by Mr. Ismael Ghalimi in his latest post “Developing a True BPM Ecosystem” in response to my post “Don’t Forget the BPM Ecosystem”. Mr. Ghalimi apparently has serious differences with me and I understand where he is coming from. However, I think it is important to address his misconceptions and apparent belief that standards must be applied universally for the success of the BPM industry.
Mr. Ghalimi major contention is that I was looking too macroscopically when I used the example of the transportation industry. He argues that a more sensible approach would be to look at sectors within the transportation, such as autos and airplanes. He claims that if we do that we will find much more standardization and similarities across the sector, and he gives several examples of that in his post.
While I do not agree with his argument, for the simple reason that the term BPM is very broadly used for everything that has the semblance of a process, let us say for the sake of the argument that he is right and look at individual sectors such as autos or airplanes. While Mr. Ghalimi sees similarities and standardization, I see great diversity and lack of standards in these sectors which are much more mature and larger than BPM. For example:
i. There is no “standard” that I know for the design of the cockpit of an airplane or the dashboard/controls of a car. The cockpit of a Boeing 777 is totally different than that of a Cessna. The pilot’s “user interfaces” are all are different!
ii. There is no standard that I know for the engine of an airplane or a car. Yes they sometimes look similar, but they are different from each other. You cannot take the engine of one car and drop it into another car. There is no “portability” of the engine. For airplanes of different sizes (a Cessna versus a Boeing 777) even the technologies used are radically different, even though they have many similarities (wings, rudder, landing gear, tail, etc.). The “engines” are all different!
iii. Mr. Ghalimi mentioned the FAA in his post. I am sure the FAA uses very different standards to determine the air worthiness of a Boeing 777 versus a Cessna. So the quality and inspection standards are also different!
iv. You cannot take a pilot of small plane and put him in the cockpit of a Boeing 777 without a lot of training. The training is different!
Surely Mr. Ghalimi is not arguing that the aerospace industry would be much better off if it had one set of standards across the industry for all types of airplanes! Doing so is not only unthinkable, but even if someone succeeded in imposing standards by diktat the industry would be stifled as compared to what it is today. The same is true for the BPM industry. One set of standards for cannot be applied across all types of BPM systems that are very different from each other in terms of their goals, transaction volume, criticality, cost and numerous other characteristics.
I do not want to leave the impression that I am opposed to standards. Far from that, I believe that standards are necessary for all industries to be successful. However, standards must be used judiciously where they make sense. Otherwise they lose their value and the market rejects them by never adopting them to begin with. The two guidelines that come to mind for the judicious use of standards in general, and BPM specifically, are:
1. Standards make sense when they apply to specific products that do very similar things. The more specific the product the higher the chances of adoption and success of standards. For example, in the airline industry one can have one set of standards for jetliners, and another set for commuter planes, and yet another set for small planes. Likewise, in BPM, one set of standards across the BPM industry will not suffice and will not be successful. However, one could have standards for different categories of BPM such as human-centric, system-centric, etc.
2. Standards make sense when they are applied to “components” and “user interfaces” but not “systems”. Batteries, screws, tires, parking space size, fuel, street signs are all components and user interfaces. The design of the car itself and the engine is a “system”. BPMN is a “user interface” and that is why it is more successful than any other standard in BPM.
I would like to note that the BPM industry does use a large number of standards for components and use interfaces. These include relational databases, Web Services, the Internet browser, e-mail, portals, AJAX/Web 2.0 and numerous others.
Finally I note that markets (consumers and vendors) adopt standards when their value becomes self-evident to a sizable segment of the market. This implies that the standards have to be relatively simple otherwise the value will not be self-evident. That is why it is more likely to have standards for simpler components rather than complex systems, and BPM falls into the category of complex systems. The BPM industry will be better off if it were to focus its energy on standards for “interfaces” and “components”, many of which can be adopted from standards widely used in the broader software industry.
I have noticed three constants in my 14-years in the BPM/workflow industry. First, every BPM market forecast prepared by reputable firms has estimated a market size of anywhere from $1 to $3 billion, and a growth rate ranging from 10% to 20% per annum. Even if I take a conservative forecast and assume that the market was $1 billion in 1998 and growing at 15% per annum, it should be at least $4 billion today. But the most recent forecast continue to put it in the $2 billion range. So where does all the growth fizzle away? Second, every BPM vendor and analyst can provide a number of actual case studies of BPM deployments that demonstrate remarkable ROI and productivity benefits. And it is relatively easy for senior management to understand why BPM can deliver such results. Yet the penetration of BPM in organizations is still small and I would venture to say that less than 10% of processes are automated despite all the ROI and productivity proof points. Third, every year BPM vendors claim impressive growth and publish a roster of new customers. Yet most pure-play BPM vendors are relatively small companies and none have been able to go public despite the claims of growth and the fact that many of them have raised tens of millions of dollars in venture capital.
It seems to me that the BPM industry is stuck in a no-man’s land. The pure play vendors neither have the flexibility of really small companies, nor the resources or clout of large companies. While BPM has tremendous potential, the challenges which these vendors face are very significant which makes growth akin to progress in trench warfare. First, BPM sounds glamorous, but it is not easy. This is because human beings work in extremely complex ways. Developing software that caters to all these ways is not easy. The “human interface” of BPM is complex and challenging. Second, the IT environments in which BPM has to thrive are very complex, varied and in constant flux. BPM cannot be successful without seamless integration with the rest of the IT infrastructure. The “application interface” of BPM is complex and challenging. Third, as the size and impact of BPM projects becomes larger, buying decisions gets escalated to executive leaders. Executive leaders prefer to deal with large platform vendors such as IBM, SAP, Microsoft and Oracle, and this preference limits the opportunities of pure play vendors. The “market interface” of BPM is also complex and challenging.
I believe that pure play BPM vendors are stuck in the no-man’s land because of the challenges of the “human interface”, the “application interface and the “market interface”. However, I am still optimistic about the market and its opportunities. I am optimistic because extreme focus and technology changes generally benefit the smaller and more agile companies. We are again going through a period of technological change that can be leveraged by the pure play vendors. Web 2.0 provides an excellent opportunity for pure play vendors to attack the “human interface” challenge. The increasing maturity of SOA provides an excellent opportunity to address the “application interface” challenge. And finally, time, relentless focus and persistence provide the means to address the “market challenge”.
What do you think?