Business Process Management saves the day in the face of the crisis

Whether its business travel, IT systems or everyday office supplies — in times of crisis companies take a much closer look at where they can save costs. IT directors in particular are under more pressure these days. They have always been forced to prove the value of their systems, and now the screw is being turned tighter than ever. Yet even in the current environment analysts agree there is one topic that simply won’t budge from the top of the corporate agenda: Business Process Management.

The International Monetary Fund (IMF) is increasingly gloomy. According to its latest forecast, the global economy will shrink this year for the first time since the end of the Second World War. Global GDP is expected to contract by 0.5 to 1 percent in 2009. Its latest report, published in mid-March, shows just how fast the economic outlook can change: in January, the IMF was still forecasting modest growth.

IT costs succumb to red pen

'Save, save, save' echoes around office corridors everywhere, regardless of the industry. Managers have announced cost-cutting and stricter budgetary discipline, and IT budgets are no exception, according to Gartner, US-based information technology research and advisory company. Instead of an originally forecast growth in IT expenses of 2.2 percent, analysts now believe global IT expenses will drop by 3.7 percent in 2009. Notwithstanding these cuts, managers still face the challenge of strengthening their company's overall performance and efficiency for the long term. In other words: they have to do more with less.

"When companies are in survival mode, they tend to slash head count and funding for programs to cut costs to still deliver on their earnings promises," says Michele Cantara, Research Vice President at Gartner. "This slashing approach can derail critical business processes and actually cost the company more money. Because BPM makes processes visible, it also helps companies do cost cutting with surgical precision."

What's more, according to Gartner's research companies that implement BPM can cut their IT costs by up to 20 percent in the first year of implementation: even during this first year, savings from a BPM project equal implementation costs. At a London event organized by Gartner in February, attendees were asked about the impact the deteriorating economy was having on their business. Gartner estimates that 70 percent of participants were from companies in "survival" mode, and that their organizations view BPM as a lifeline keeping them above water in the economic crises.

Cutting away costs with the precision of a surgeon's knife

"Process optimization is an issue that concerns every employee," says Dr. Wolfram Jost, Member of the Executive Board, IDS Scheer. An increased awareness among all employees is essential to enabling a company balance the need for cost reduction, speed and flexibility. "A company must have a clear picture of its processes and performance at all times," continues Jost, who is responsible within IDS Scheer for the worldwide ARIS product family, an integrated and complete "toolbox" for strategy, design, implementation and the controlling of business processes. Whereas in recent years BPM has focused on the reengineering of processes, today it's also about analyzing and controlling process performance in day-to-day business. IT experts group these tasks under the general term "Process Intelligence".

Process Intelligence is "in" right now: in times of crisis, managers focus less on devising clever strategies and big-sky visions, and more on managing urgent day-to-day challenges. Process Intelligence connects Process Management with the analytical techniques of Business Intelligence. In essence, Process Intelligence boils down to automatically measuring processes and process KPIs (Key Performance Indicators) from the company's running applications, and then generating corresponding process models. The information acquired on such factors as the amount of time needed from start to finish of a process, the cost of processes, the resources needed and process quality can all provide invaluable, timely information about what's happening in the operating business. Such key process data can serve as early indicators for the traditional financial key figures. So if a deterioration in a certain process has been noticed, management can respond immediately, and before that deterioration is reflected in the financial figures. The result: companies maintain a constant overview of the status of their business performance. They can see at a glance where on the operational, tactical or strategic levels it's necessary to optimize. By contrast, traditional KPIs-such as revenues, earnings or margins based on variable and fixed costs-always mirror past performance and tell only of the result of completed business processes. They don't say anything about the cause of their development.

Process KPIs can help forecast sales and earnings

"Only when you know your process KPIs and your processes are you in a position to identify the real cost drivers and cut costs without jeopardizing critical processes," argues Jost when explaining the usefulness of Process Intelligence.

From experience, managers know that the best improvements often come from employees who know their daily processes better than anyone. For this reason, process models should be made available to employees. Particularly in times of crisis, it's crucial to harness the full potential to identify and execute process optimization. It can also contribute to a more engaged workforce, another crucial factor in company performance.

Gartner  recommends that companies use BPM to help them optimize the performance of their end-to-end business processes. So a workflow spanning several departments should be analyzed and plumbed from start to end. "Economic woes are driving increased usage of BPM as a cost-cutting mechanism for survival," says Michele Cantara, and she doesn't expect companies to cut their BPM-initiatives any time soon. On the contrary: processes are again at the top of this year's "CIO Agenda", which is published annually by Gartner, and their researchers estimate that one-third of companies will even increase their investments in BPM. 

The "CIO Agenda 2009"

In the annual "CIO Survey" published by Gartner Executive Programs (EXP), analysts asked 1,500 IT directors around the world about their strategies, priorities and budget expectations for 2009. As in the previous three years, optimizing business processes topped the list, followed by reducing costs. Business Process Management creates the conditions to tackle both these priorities at once.

Top 10 business priorities

1.    Optimize business processes (1*)

2.    Cut costs (5)

3.    Improve efficiency of employees (6)

4.    Client acquisition and customer loyalty (2)

5.    More knowledge-sharing and analysis of information (8)

6.    New products and services/innovation (3)

7.    More efficient focus on customer and markets (9)

8.    Change Management initiatives (new)

9.    Build on existing customer relationships (7)

10. Expand into new markets and regions (4)

*Ranking in previous year

Gartner: January/2009