The Five Characteristics of Highly Successful BPM Deployments in Shared Services and BPO

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1 The Five Characteristics of Highly Successful BPM Deployments in Shared Services and BPO BPM Published August 2011 Executive Summary Business process management (BPM) software is a transformative technology that allows non-technical people to create and modify their own process-based software applications. Increasingly, shared service centers and business process outsourcing (BPO) companies are adopting BPM suites for the lower costs, better service, and new sustainable competitive advantages they deliver. Based on the lessons learned through BPM deployments by many leading global organizations, there are five common characteristics of a successful BPM implementation in a shared services/bpo environment: Careful Selection of Initial Projects Based on Size, Scope, and Degree of Interrelation Assured Executive Support and Visibility Cost Containment and Delivery of Clearly Measureable Return on Investment (ROI) Close Linkage to Competitive Advantage Alignment with a BPM Vision Plan Corporate headquarters 1875 Explorer Street 4th Floor Reston, VA appian.com EMEA headquarters 73 Watling Street London, ec4m 9bj appiancorp.co.uk

2 Introduction Success in the shared services and business process outsourcing worlds requires continually increasing customer satisfaction while simultaneously lowering costs. In the earlier stages of the shared services and outsourcing movement, gains in these areas were comparatively easy to come by. Economies of scale came from combining small functional groups. Moving work to lower wage geographies cut costs. Specialization made it possible to focus on better service. But as we enter the next phase of shared services, managers are confused about where to go next. Further increasing satisfaction and lowering costs has to come from improved process execution, as all the easier moves have been taken. Automating manual work, streamlining what can t be automated, and providing transparency to identify more improvements are the hallmarks of this new phase. Software is the foundation for all of this. The more it can be customized to the shared services or BPO environment, the more value it can deliver. Until recently, there were only two choices for software: license a third party application and adapt it to the company s needs, or commission a custom-built application. Adapting third party applications is often easier said than done. Product limitations often get addressed with manual processes that negate efficiency gains. Custom development can get exactly what you need, but costs are high and development times long. You are also dependent on the developer for any enhancements. Both of these options are costly, so many processes that could benefit from automation don t get it. That s led to the rise of spreadsheets as process management tools, particularly for exceptions. Spreadsheets are wonderful for many things, but they are poor tools for real-time process management across large groups and organizational boundaries. Business process management (BPM) software has upended this situation, and is rapidly being adopted in shared services and BPO organizations. To help you understand why I will explain what BPM software is and share examples of how these groups are using it to transform their operations. What is BPM Software? BPM software automates, executes, and monitors business processes from beginning to end. BPM is adept at filling the white spaces between other applications, fostering better integration to increase straight-through processing and automating the human processes that result from process exceptions. BPM puts power in the hands of business users because it allows process applications to be constructed in a visual tool (think Microsoft Visio on steroids) using business activity terminology, not programming constructs. Models are automatically loaded into the BPM engine and instantly create running applications. This allows non-technical staff to create and modify their own process solutions. (Here s a link to more background information on BPM.) BPM s hallmark is ease of use. Business users can design and implement projects in weeks, not months. Be Part of the Process 2

3 Today s BPM suites include built-in capabilities for visual process modeling, a run-time engine with rules capabilities, business analytics, content management, social collaboration tools, and mobile process enablement through native apps on all major platforms. Anyone using a modern BPM platform has a powerful set of technologies in their hands. How BPM Enables New Levels of Performance in Shared Services/BPO Software applications are supposed to fit and support the way you do business. Software user needs vary and business is never static so applications need to be adaptable. Those who try to adapt them run into roadblocks. Have you ever asked a software vendor to make a change to their application, only to be told that s not on our roadmap? Have you ever asked your IT department to create or modify an internally developed application, only to hear that even small changes will take weeks or months? If you said yes to either question, then you re living in an environment where you re adapting your business to your applications. That makes no sense, but it s become the norm and not the exception. BPM puts business people back in control so their software applications can become a source of organizational strength. The ability to adapt applications quickly is key to servicing client requests and capturing new business opportunities. Here are examples of success from the shared services and BPO world. Automating Exception Processing in a Financial Shared Services Center The financial shared services center of a multi-billion dollar construction material company was drowning in order-to-cash process exceptions. Forty percent of the thousands of invoices they sent out every month came back with short-payments. Their ERP systems (they had more than one) could identify short-payments, but were no help in facilitating the human interaction required to analyze and pursue customer deductions. The work log of short-payments was kept on a spreadsheet. was the primary communication mechanism to drive resolution. This lead to minimal visibility and limited control. The center deployed BPM against the problem. Within weeks they had a live application that automatically routed short-payments to appropriate people, provided real time status for management, and sent automatic alerts on overdue exceptions. Additional requirements emerged right after go-live. That would be a killer for traditional custom developed applications or ISV products. But the business users just opened up their BPM process model, added an extra review step, and put it into production within minutes. The success with short-payments was significant and immediate. Faster resolution of exceptions has led to fewer write-offs, reduced DSO, and a more productive workforce. Eyes quickly became opened to the realization they could build processes for any type of need. For Be Part of the Process 3

4 example, if someone doesn t pay for construction materials reclaiming them can be impossible. A mechanic s lien must be placed on the project to force payment. The center had sufficient volume of this activity to justify purchasing an application to help, but no third party application existed to fit this particular need. Building a process application to fix this problem in BPM is relatively easy. Improving Responsiveness in a HR Shared Services Center The human resource shared services center of one of the world s largest financial exchange companies lacked a way to organize and monitor all of the activities involved in getting new employees and contractors on-boarded and fully productive. Their on-boarding application consisted of a MS SharePoint form that automatically sent s to relevant parties. It provided no visibility into status and no alerts on delays. This caused pain throughout the organization. A search for software found no pre-built applications that could meet some unique needs without significant customization. Custom development was the best answer, but the high cost kept this project on the low end of the priority list, until the organization discovered the benefits of BPM software. Work progressed quickly on the new application and it was live within weeks, bringing immediate benefits on day one. Now when recruiting logs a new employee or contractor s start date, a number of related processes tailored to that hire s role and location are automatically kicked off. All the information other departments need to arrange network access, building access, computer hardware, phones, credit cards, and business cards is automatically included in the request. All tasks are monitored and alerts provided when items are not completed in the required time. The new system gets on-boarding processes completed faster, provides status visibility for hiring managers, increases HR staff productivity, and reduces direct costs. Automated measurement and reporting is provided to the HR shared services team so they can identify areas for additional improvement and set ever higher service standards. Using BPM to Give a Mortgage Processing Outsourcer Competitive Advantage A mortgage loan administration outsourcing company felt a consistent pressure to demonstrate higher levels of service and lower costs to continue to outpace in-house options. Their scale and experience processing millions of loans gave them process insight greater than any of their clients. But they were challenged to capture the full value of their insights in operational improvements until they found BPM software. The leaders of this outsourcing company knew they could develop custom software to capture their vast experience, but they had reservations about traditional development. They needed an approach that kept solution development in the hands of their business process owners, Be Part of the Process 4

5 avoided the need to engage costly vender services or expand their IT department, and kept iteration cycles short. Adopting BPM as an enterprise platform was their path to maximizing service quality, increasing efficiency, and delivering more value for less expense. The new BPM-based application delivered a range of benefits. Major improvements were noted in workload balancing, employee productivity, resource allocation, and performance visibility. Process cycle times dropped from 5-10 days to 24 hours. Real-time analytics laid a foundation for continual process improvement. The cost savings are significant, but what really has the business leaders excited is that they can now provide customized services to each business partner, helping them build a sustainable competitive advantage. Facilitating Geographically Dispersed IT Shared Services through BPM The IT shared services group for one of the world s largest financial services companies provides central data management services for investment management, trading, and research. The group is spread across the US, Europe, and Asia. They had been managing requests through , but increasing volume and a lack of visibility made that untenable. Performance metrics were calculated manually, rendering it time-consuming and difficult to determine if the shared services team was meeting client expectations. By deploying BPM software to manage service requests, the shared services team substantially increased their productivity. Work is now automatically routed across geographies to ensure client SLAs are met. Requests are fulfilled faster, and management is able to accurately monitor request turnaround times. The operational expense of manually capturing reporting metrics has been eliminated. Satisfaction among helpdesk users has increased because the system makes it easier to submit requests, achieve faster resolution, and know where things stand in the process. The Five Characteristics of Successful BPM Deployments in Shared Services and BPO Organizations BPM is clearly proving to be an outstanding tool to help shared services leaders and BPO organizations improve client satisfaction, decrease costs, and gain competitive advantage. When introduced to an organization the right way, the technology can quickly become transformative. But sometimes in their excitement about what BPM can do, managers make crucial missteps in their introduction strategies. Here are the common traits of the most successful BPM initiatives. 1 Careful Selection of Initial Projects Based on Size, Scope, and Degree of Interrelation Just like Goldilocks, you want something that s not too big or too small. Too big and it will likely take too long to realize benefits. Too small and the impact may not be noticeable. Be Part of the Process 5

6 Choose a project where the application can be completed in ten weeks or less (you ll be surprised how much can be accomplished in that time with BPM) and where success will be significant and visible to key stakeholders. Look for projects where processes cut across boundaries. That allows your shared services clients (or their end customers) to experience the benefits of the application first hand. An example would be a new interface where the questions customers answer to initiate a service request are tailored on the fly through the BPM application, avoiding the requirement to enter extraneous information and prompting automatically for case-specific information instead of that becoming a later step. 2 Assured Executive Support and Visibility BPM is transformative technology. Most BPM applications bring lots of positive benefits through process change. But positive change from your point of view can first appear as a negative disruption to someone else. Should that cause a hiccup in the deployment of your first application, calling in executive support can get things quickly back on track. But you need to line up that support before change starts. Figure out which executive would receive complaints (if there are any) and be sure they are bought into the project vision and goals before you start. For shared service managers, there could be more than one executive critical to win over. Be sure you have both your group and your client organizations covered. Another way to secure executive support is to design your new application so executives can participate in processes and receive alerts on their smart phones and tablets. Allowing them to be full process participants while mobile generates excitement and is the kind of experience people want to share, helping your initiative catch fire. 3 Cost Containment and Delivering Clearly Measureable Return on Investment (ROI) Nothing slows down an initiative more than a big price tag. The higher the initial cost, the more review cycles you ll go through. Remove this risk by keeping initial costs low. Some BPM vendors offer their software in the cloud with monthly per-user pricing. That can put the starting price into rounding error territory, and makes it an operating expense rather than a capital expense which has review cycles of its own. It also cuts out potential delays associated with requesting server space. Just be sure that you can easily migrate whatever you ve created in the cloud to an in-house deployment should you decide later that your application must be behind your firewall. The other side of ROI is the return. Look for potential success that s not only significant, but easy to measure so your first project can generate momentum. Shared services Be Part of the Process 6

7 leaders may find the best success in financial operations as clear tracking metrics already exist. Process exceptions in receivables, payables, or month-end closing often lead to write-offs. BPM is an outstanding tool for managing exceptions. Fix these processes and you ll stop the write-offs. Measuring those is easy and you ll even have more cash in the bank as proof of your success. In other shared service areas, look for process problems that already have clearly defined metrics. That will make success easy to measure and provide a clear before picture for comparison. 4 Close Linkage to Competitive Advantage A strong ROI is great, but it is just a prerequisite for a BPM initiative that can transform your shared services or BPO organization. To really take off, you ll need to link your first and subsequent projects to creating competitive advantage. How do you do this? BPM makes this relatively easy. Show your team how fast you can make changes to processes to accommodate changes in your client s business. Or build entirely new processes so you can take on new business and drive it to a high rate of efficiency quickly. This can be done easily with the visual development environment of BPM. Be prepared to showcase modifications and don t be surprised if jaws drop when you do this live. Why the focus on competitive advantage? We all need to be keenly aware of our competition. The BPO space is highly competitive. Shared services centers have competition too. Internal clients need to be swayed as to why they should turn their processes over to you and not fully outsource it to a BPO. Competitive pressures are getting tighter, so you need to take maximum advantage of any technology that adds value. Competitive advantage also has an ROI component. What s the ROI on helping your organization win one additional account that could lead to years of profitable business? Extremely high! 5 Alignment with a BPM Vision Plan First project success is like striking a match. But matches can t heat much by themselves. They need a fire to light. Be sure you have your BPM fire laid out and ready to go that s your BPM project list. Senior executives tend to get most excited not at the success of the first project, but when they understand how easily that success can be duplicated fixing problems, providing insight, and creating competitive advantage throughout their organization. Software application sprawl is becoming a more frequent problem as single-purpose applications pop up to solve individual problems. That leaves many companies with a maintenance and training nightmare. When senior executives Be Part of the Process 7

8 understand that BPM can defeat application sprawl, you ll want to pull out your list and show them how far you can take the technology. That can seal the deal for a broad BPM expansion. The best BPM project lists for shared service managers will include proposed implementations that touch on all the classic shared service areas finance, IT, HR, and procurement. Conclusion BPM is already proving to be a transformative technology for shared services groups and BPO companies. It is a key to reducing costs, improving service, and increasing your organization s agility. Leaders who have introduced this technology correctly using the lessons noted above are seeing their entire organizations embrace BPM and use it to gain sustainable competitive advantage. It s not often that such a transformative technology becomes available. Those who run shared services groups and BPO companies are wise to understand the technology and use the lessons above to bring its transformative power to bear. About the Author Evan McDonnell is Appian s Vice President of Solutions. As senior executive at multiple software companies over the past twenty years, Evan has maintained a steady focus on helping organizations achieve competitive advantage and operational efficiencies through better use of technology. Evan continually strives to understand what prevents organizations from utilizing software to its full potential and using that insight to drive breakthrough software business models. Evan has had responsibility for functions including product management, marketing, business development, and mergers and acquisitions. He holds a BS degree in Mechanical Engineering from Carnegie Mellon University and an MBA from Harvard Business School. About Appian Appian is the global innovator in enterprise and cloud-based business process management (BPM) software. Appian s combination of simplicity and power provides everything business users need to drive transformational process improvement on the desktop or via mobile devices. Commercial and government organizations around the globe use Appian to increase agility and collaboration, and accelerate business performance. Appian empowers more than 3 million users from large Fortune 100 companies, to the mid-market and small businesses worldwide. Appian is headquartered in the Washington, D.C. region, with professional services and partners around the globe. For more information, visit Corporate headquarters 1875 Explorer Street 4th Floor Reston, VA appian.com EMEA headquarters 73 Watling Street London, ec4m 9bj appiancorp.co.uk