BUSINESS CASE FOR BPM

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1 HOW TO BUILD YOUR BUSINESS CASE FOR BPM TABLE OF CONTENTS 1 BPM evolves to deliver long-term value 2 Satisfying business needs 3 Weighing cost and benefit 6 BPM implementation process 7 Key success factors 8 Recommended resources The business environment is becoming ever more dynamic. As technology changes so do customer expectations, market standards and government regulations. Business Process Management (BPM) is also evolving to keep companies ahead of the curve and deliver both meaningful and measurable business value. BPM evolves to deliver long-term value From its inception, the main focus of BPM has been on efficiency. Services should be delivered quickly and reliably, and managers should have the tools they need to map, monitor and improve processes whenever necessary. Efficient and streamlined processes enable companies to handle a larger volume of customers and provide them with a consistently positive experience. Enterprise software also decreases the marginal costs per customer because each customer can be served in significantly less time and with fewer resources. This combination of lower marginal costs coupled with the ability to serve more customers makes BPM a very lucrative investment. In addition to offering efficiency, IT investments must also be able to adapt to changing market forces in order to deliver long-term value. That is why the focus of BPM is now shifting towards even greater flexibility and scalability. This has two major advantages. First, managers are able to adapt business processes on the fly in order to take advantage of new business opportunities or comply with new regulations. Second, IT infrastructure and processes can easily be scaled up as companies grow their customer base and expand to new locations. In recent years BPM has also been influenced by a number of market trends. Mobile devices are becoming ever more commonplace and they are changing the expectations of both customers and employees. Mobile BPM makes processes ubiquitous, meaning customers and employees can access services at any time and any place. WHITE PAPER

2 Another major trend is the shift towards customer centricity in favor of pure efficiency. As a result, customer satisfaction has come to the forefront of BPM applications. This is a critical step to take because, in today s technological environment, customers have come to expect instantaneous service and, in many cases, they can switch to a competitor with the click of a button. Therefore, user-friendly UIs and fast and consistent automated services are essential to retaining customers. Satisfying business needs Scalability and expansion There are many situations where agile applications can be useful, such as supporting the company in a period of rapid growth, during mergers and acquisitions, or to expand on small-scale applications to capitalize on unforeseen business opportunities. This new approach, called agile process, provides low-code development in addition to the existing, sophisticated IT development capabilities. That means that small-scale applications can be developed quickly and easily by non-it natives and, if at some point necessary, the existing application can be scaled up for larger-scale use cases. This saves the time and money that would otherwise be spent on developing an entirely new application from scratch. Ultimately, it also means that this approach prevents organizations from finding themselves in a dead-end with their tactical application landscape. Customer experience and satisfaction As technology improves, customers expect more consistent and expedient service, and they want it available not just in bricks-and-mortar shops but also on their smartphones. The right combination of BPM tools enables companies to deliver all of that. UI development capabilities make it possible to design Web and mobile apps that are compelling, intuitive and engaging, so that users can interact with them easily. This is important because in many cases the Web and mobile have become the primary touchpoints that many companies have with their customers. Customers also expect faster and faster service. Automated rules-based decisions guarantee that the customer receives an immediate response whenever they place an order or send out a request. Predefined business rules also ensure that the response is consistent, relevant and meaningful based on the business context. Compliance and SLAs Real-time analytics are an indispensable tool for any manager who needs to keep processes in line with government regulations and SLAs. Not only is it possible to monitor operations in real time, the application can also be programmed to notify relevant parties whenever a certain threshold has been passed or to even make the appropriate business response automatically. These thresholds can be dynamic with automatic detection of abnormal behavior and proactive measures kicking in before a critical limit is reached. Improved employee collaboration BPM can immensely improve collaboration between employees. In many business scenarios, input is required from different departments who use disparate tools, such as Microsoft Word, Microsoft Excel and Salesforce. A unified and fully integrated platform is the superior alternative to the slow and antiquated method of ing a document back and forth and manually transferring data from one platform to another. BPM makes it possible for everyone involved in a process to see and edit a living document from their particular platform. Authorized stakeholders can see the most up-to-date versions of documents in the pipeline, who worked on them last, what needs to be done, and what should be tended to first. Furthermore, BPM provides a social collaboration framework as part of the application that enables stakeholders to capture comments and conversations on any given work item. Additionally, BPM helps to foster collaboration by making expertise in an organization transparent. If a user is assigned a new work item, the system can recommend employees who are best suited for consultation for this particular type of assignment. This helps remove the first barrier of collaboration, which is knowing whom to actually collaborate with. 2

3 Align business goals with IT As described earlier, flexible applications are easy to develop. A small-scale application can be developed in a WYSIWYG environment by what is referred to as a citizen developer. Citizen developers act as intermediaries between the business and IT and are typically someone from the business side who has basic knowledge of IT. An employee who works closer to the end users can quickly develop a situational application to support short-term projects, such as a week-long marketing campaign. Mobile accessibility If a unique and custom mobile experience is required, BPM applications can be engineered to work on any mobile platform, regardless of operating system. Alternatively, BPM already provides out-of-the-box mobile experiences in order to avoid additional development efforts. Both approaches offer the advantage that customers as well as employees will be able to access services from their own mobile device. Customers are able to view progress and place orders at any time, employees can access relevant information on the job, and managers can monitor operations in real time. Weighing cost and benefit This section covers the costs and benefits associated with developing and deploying a BPM application. Keep in mind, the type and amount of costs incurred can vary significantly depending upon the size and scope of the project. Large-scale applications typically have higher upfront costs and lower recurring costs while small-scale applications have low upfront costs and relatively higher recurring costs. Upfront costs Perpetual license Depending upon the contract, licensing fees can be either a large upfront sum for perpetual use or a smaller but recurring subscription-based fee. Perpetual licenses are more cost efficient in the long run while subscriptionbased licenses are best suited for smaller short-term projects. Consulting Consulting is necessary to ensure that the very best application is developed to cater to a company s particular needs. Development As with consulting, development costs depend upon whether the company has opted for a solution that provides a lot of capabilities out of the box or a solution that requires intensive custom development. Once the framework has been decided, the solution set must be developed accordingly. An extremely important factor here is focus on usability and design. More time invested in making the new application easy to use ultimately means less time spent on training or user support. IT infrastructure New applications typically require additional computing power that is not immediately available to the company. If the company decides to expand its in-house IT infrastructure, this would count as an upfront cost. The alternative is Software-as-a-Service (SaaS), which carries a significantly lower but recurring cost. Testing Testing ensures that everything is programmed correctly so that when the application is rolled out, everything is working as it should and the system can handle the additional capacity. Digitization of records If the company has existing paper-based archives to digitize, this process requires time and resources that must also be taken into consideration. Recurring costs Subscription-based license As stated, an annual subscription-based fee can be chosen for small-scale applications in lieu of a perpetual license in order to avoid high upfront costs. Maintenance In order to keep the software up to date and make improvements, the software will require routine patching and maintenance. Training Training is most expensive around the time of initial roll out when existing employees are trained to adopt a new application. These costs will eventually taper off and only be incurred when either new employees are hired or in the rare case that major changes are made to the software. As mentioned, the more time spent on design and usability, the less time required to train new users. 3

4 Additional personnel After the solution has been rolled out, additional personnel may be required to manage the Digital Business Center of Excellence (CoE), which supports new initiatives throughout the company. SaaS If the company decides the cost of infrastructure is too high, it may opt for a cloud-based solution. In this case, the one-time infrastructure costs would be replaced by a low annual licensing fee, which is calculated on a per user basis. Quantitative benefits These are quantitative factors which have a direct and readily measurable economic benefit. The two go hand-in-hand so that the economic benefit increases almost exponentially. Depending upon the application, these benefits can either be purely cost saving or they can be a combination of both operational efficiency and increased sales volume. Lower marginal costs When processes can be completed faster and with fewer resources, the marginal cost per cycle goes down and subsequently the marginal return goes up. Greater capacity Shorter cycle times mean the company can serve a larger number of customers and get a greater share of the market. Qualitative benefits There are also qualitative benefits that have an indirect yet very meaningful economic impact because they ultimately contribute to greater productivity and more sales. Customer satisfaction User-friendly digital touchpoints and highly responsive and intelligent applications are the key to attracting and retaining customers. Higher customer satisfaction will boost sales in the long term. Increased competitiveness In addition to improved customer satisfaction and retention, BPM enables companies to respond faster to market forces and stay ahead of the competition. Business intelligence and easy-to-modify business rules allow managers to analyze process performance in real time and correct any potential issues that may arise, before they can have a significant impact on the business. Employee morale Having all the resources they need at their fingertips makes employees more productive and eliminates the stressful stumbling blocks inherent in paper-based processes, such as inefficient archiving and collaboration. Business agility Business agility means a company can more quickly adapt to various business cases such as new regulations, mergers and acquisitions, launching a new ad campaign, and expanding overseas. Greater agility lowers operating costs and makes the company more competitive. 4

5 Break-even analysis and ROI The numbers in this graph represent an investment in a medium-sized strategic application. Progress is reflected in the scale and angle of the curves. This graph shows cumulative benefit vs. cumulative cost of investmenting in a strategic BPM application over the course of four years. The first year is characterized by high upfront costs, such as expanding IT infrastructure, purchasing a perpetual license, and development. After roll out, the annual costs are significantly lower and continue to decrease while the returns start to come in. In the second year, the system is still new and the company has yet to realize its full potential so the initial returns are lower than in the following years. The break-even point comes shortly after the second year as the annual net benefit continues its upward trend. After four years the investment has a net present value of more than $3 million and an ROI of 90 percent. With a tactical application, the curves would look slightly different. Since development is only a matter of days or weeks, the overall timeframe could be measured in months. The economic scale is also significantly smaller so the costs and benefits could be measured in thousands rather than millions. There is also a tradeoff between upfront costs and recurring costs. Tactical apps are typically deployed on a cloud-based platform rather than in-house IT, and usage rights come from a subscription-based fee rather than a perpetual license. This means that upfront costs are significantly lower while recurring costs are relatively higher. The end result is a lower ROI but with less risk and a much more immediate payoff. 5

6 BPM implementation process BPM is useful in any sector, be it finance, logistics, retail, government, energy or healthcare, for example. While these sectors all have their own unique requirements, the phases of every BPM implementation are the same. For large-scale applications, each of these phases may be spread out over the course of a few months while for tactical applications they may be as short as a few days or weeks. Phase 1 Assessment During this phase, the company should gather information and decide what its goals are, what resources it has available, and what technology can be used to better manage its resources in order to achieve those goals. Once the necessary information has been gathered, planning can begin. Phase 2 Planning In this phase, the solution is mapped out, the necessary personnel are assembled, tasks are assigned to responsible task owners, and a timeline is drawn up. As stated above, if more time is spent on planning and development, less time will be needed for user acceptance after roll out. Phase 3 Development The size of the application greatly influences the length and characteristics of the development phase. Tactical applications can be developed by IT-savvy business users using WYSIWYG tools. Strategic applications require more time and a significant amount of communication between business users and developers. During this phase, a marketing strategy should also be devised in order to get the most out of the new investment. The final part of the development phase is testing. Phase 4 Roll out Rollout is the critical phase where all the time and effort invested in planning and development is put to the test. Assuming that all the necessary steps have been taken, it is also the phase where returns start to show. Phase 5 Maintenance & continuous improvement After the application has been rolled out and adopted, the work is not over. Process owners should keep an eye out for new ways in which processes can be improved in the future. For strategic applications, these functions would be supported by the Digital Business Center of Excellence. In addition, existing tactical applications may be considered for later expansion into strategic applications. As the company expands its process model repository, it should simultaneously take note of processes that could also benefit from automation and integration. 6

7 Key success factors Depending upon the size of the application, there are a number of factors that are integral to the success of BPM implementation projects. Large-scale apps have additional key success factors, which are listed at the end of this section. Tactical and strategic apps: Project and orocess owners A qualified team should be assembled and each person should have a meaningful and clearly defined role in the project. Assigning owners to each step of the project is the best way to guarantee that each of those steps is taken. In the interest of the project s long-term success, owners must also be assigned to each of the newly engineered processes. These individuals must understand the process KPIs and be responsible for monitoring and support. Internal communication Project stakeholders should be in contact so that each member knows how far along the project is and when it s time for their contribution. In addition to the project team, everyone in the company who will be making use of the new software should be informed of the project as well. Keeping employees up to date on the project s progress and training them in time for the system s launch will ensure a smooth transition. Design and usability The application should always be designed with the end users in mind. If possible, end users should be consulted during the design process to ensure that the application is aligned with user expectations. This will speed up user acceptance and lower training costs. Alignment with business strategy This point coincides with board approval. If upper management is involved, it is easier to align the BPM project with the company s business strategy. This will give the project a clear purpose and help prioritize the pain points that are being addressed. That way the company can get the most out of all the capabilities that BPM has to offer. Marketing Whether there is already a line out the door or not, the enterprise should broadcast its new capability. Current and potential customers need to be informed that the company now offers faster service and a better customer experience overall. Greater capacity only pays off when there are new customers to fill it. Specific to strategic apps Board approval and involvement First and foremost, the company s executive board should understand the value, goals and scope of the project and commit to overseeing its success. Executive sponsorship means that the project will be given the time, attention, and resources it needs to be done right. Digital Business Center of Excellence To support BPM initiatives in both the long and short term, a Digital Business CoE is essential. A CoE consists of BPM experts who are committed to developing standards and methods and to promoting BPM initiatives throughout the company. For larger companies, these tasks would be carried out by a team of professionals with specific roles while in smaller companies the CoE may consist of one dedicated individual. 7

8 Recommended resources White paper: Digital Transformation and Continuous Change White paper: Digital Business Platform 2.0 ABOUT SOFTWARE AG Software AG offers the world s first Digital Business Platform. Recognized as a leader by the industry s top analyst firms, Software AG helps you combine existing systems on premises and in the cloud into a single platform to optimize your business and delight your customers. With Software AG, you can rapidly build and deploy digital business applications to exploit real-time market opportunities. Get maximum value from big data, make better decisions with streaming analytics, achieve more with the Internet of Things, and respond faster to shifting regulations and threats with intelligent governance, risk and compliance. The world s top brands trust Software AG to help them rapidly innovate, differentiate and win in the digital world. Learn more at Software AG. All rights reserved. Software AG and all Software AG products are either trademarks or registered trademarks of Software AG. Other product and company names mentioned herein may be the trademarks of their respective owners. SAG_BC_BPM_8PG_WP_Feb16