Why ERP needs BPM…a view from the BPM Summit

I had the fortune of sitting in on one of the early sessions at the 2011 Gartner Business Process Summit here in Baltimore today. It was Bill Swanton, a VP at Gartner talking about “Peaceful and Productive Co-Existence of Enterprise Applications and BPM”.

Bill started off with what some might call the obvious…that ERP’s have inflexible, programmed workflows. Anyone who has ever implemented and then worked with SAP or Oracle knows this only too well. There’s even a theory out there that the companies who accelerate the most after implementing ‘Big ERP’ are already doing business in the pattern of an ERP or are willing to change themselves to be in the pattern of the ERP. So much for differentiation in how we do business. If you need to be like SAP or Oracle to be successful using their ERP’s, you probably look and sound just like your competitors. Where is your competitive advantage?

ERP’s and the Gartner Business Process Improvement Lifecycle

Bill continued to say that traditional IT-centric modeling tools, and he picked on ARIS, were sufficient for the define, model and simulate phases of the the Gartner Lifecycle (which represent only the early stages), but weren’t sufficient to help an organization through the full maturity model, which involves optimizing and pushing processes out to the masses.

Bill proposed going beyond modeling and modeling tools and layering business process management above the ERP. Provide a UI that puts transactions in the midst of your processes, not the ERP’s. Transactions belong where/when they fit with your business, not where the ERP has them. This is a brilliant approach and is the only way to achieve true flexibility while keeping the power of the millions of lines of code of an SAP or Oracle.

BPM layered on ERP

The reasons for doing this are many. Put simply, BPM needs to be far more flexible than any of the current large ERP’s allow. He spelled out the internal benefits as follows:

• Capture more process than lives in the ERP environment
• Provide better standards for BPM than the ERP allows for
• Use a format business users understand - this is a very significant benefit
• Simulate the effects of change before making changes (especially in the costly change process of an ERP)
• Drive continuous improvement in its natural environment
• Communicate and train employees more easily
• Reduce cost of configuring and changing your ERP as your business changes

Every benefit he gave is an excellent reason alone and taken together are a very compelling business case. This isn’t the first time I’d heard this message but it was the most succinct and specific presentation that I’ve seen to date. And from Gartner, no less. It was very validating of the approach we’ve advocated and taken for over ten years in some of the world’s most complex ERP customers (blue and red).

A point that wasn’t made, but should have been: Success with ERP software has to be about improved end-to-end business performance not just correctly functioning ERP software. This means many manual activities (SAP say up to 80% of a typical business) need to be understood and managed in conjunction with automated transactions for the true potential performance improvement to be realized.

In business, it has to be about differentiation. This overlay concept is the key to making you better than your similarly ERP-enabled competitors. Layering your own process platform allows the following differentiating benefits:

• Responding to opportunities faster by fine tuning your non-automated tasks
• Escalating sooner by putting rules into your escalation model
• Analyzing risk without slowing deals down. If you can improve process and approve a deal faster, you can close more business with less risk. He gave a great example in that ERP’s don’t manage discounting well, and organizations all have carefully orchestrated discounting. An overlay can handle this.

This was a great breakout session and I came away thinking about how this approach can be used to help customers achieve best-in-class BPM.

Layering BPM on top of ERP is the only way to differentiate your business and manage the true end-to-end picture of what you do.

Google+

Christopher Taylor