The State of BPM: Poised for Takeoff

Nothing like a recession to spur business growth.

In the business process management (BPM) space, the current downturn has presented a major marketing opportunity for software and IT service firms. Sparked by customers seeking to cut costs and by innovations in e-commerce, the BPM market could easily double over the next several years.

That explains why BPM providers continue to develop improvements to their products or otherwise position themselves to gain a competitive advantage.

For example, one BPM player, Global 360, upgraded its offerings with the July release of its Process-360 10.0 program. That followed IBM’s May rollout of enhancements for its BPM offerings, centered on its WebSphere product line. Also, Software AG a major BPM player headquartered in Germany, moved to bolster its capabilities when it announced on July 14 that it would acquire IT consultant IDS Scheer for US$674 million.

“The recession is placing a tremendous amount of pressure on enterprises to operate more efficiently,” Ken Vollmer, principal analyst at Forrester Research, told CRM Buyer. “BPM tools are very well suited to support increased automation of business activities that will lead to higher levels of productivity.”

What BPM Encompasses

In layperson’s terms, BPM covers a wide range of activities categorized as business automation or computer-based efficiency strategies. More precisely, BPM is a method used for the organizational integration of business operations through improved information techniques. Gartner defines BPM as “a management discipline that treats processes as assets that directly contribute to enterprise performance by driving operational excellence.”

BPM “provides for the aggregation of business processes, and BPM comprises software that organizes core elements of operations performed by people and systems,” Susan Eustis, president of WinterGreen Research, told CRM Buyer.

Information, business rules and analytics are key components of BPM, she noted.

BPM “refers to the designing, executing and optimizing of cross functional business activities that incorporate people, application systems and business partners,” said Forrester’s Vollmer.

Essentially, BPM uses improved information flow techniques not only to make individual functions such as marketing, finance and manufacturing more efficient, but also to coordinate these functions better throughout the entire corporate organization. The improved integration results in improved efficiencies.

A Robust BPM Market

However defined, BPM has large business potential.

The current level of spending on BPM software is between $2.5 billion and $3.0 billion per year, estimated Vollmer. Other recent studies indicate a similarly robust market.

BPM software vendor infrastructure revenue amounted to $1.8 billion in 2008 and could reach $6.2 billion by 2015, WinterGreen’s Eustis said. WinterGreen issued its BPM market assessment on July 1.

The worldwide market in terms of total software revenues for BPM software was $1.97 billion in 2008, and will grow to $3.17 billion by 2013, at a 10 percent compounded annual growth rate, reported Michele Cantara, research vice president at Gartner, in a study of the BPM market the firm released on August 3.

One factor that will stimulate market growth is a kind of “multiplier” effect. Significant growth in BPM doesn’t have to depend on developing new customers, as current users of BPM find it productive to expand their applications.

More than half of those polled in a recent Gartner survey planned to increase their spending on BPM efforts by more than 5 percent, and over a third of the respondents said they would increase BPM spending by more than 10 percent.

“Overall, the survey responses suggest an optimistic outlook for the BPM market and also highlight trends we’ve observed in customer inquiries and reference checks; that is, that companies don’t see BPM as a luxury,” said Cantara.

“Instead, BPM is quickly becoming an alternative and better way of developing solutions and improving processes for many companies,” she added.

Another major market target for BPM providers consists of companies that have not yet incorporated the technique, including many that are struggling to cut costs due to the business downturn.

In terms of expanding the customer base, “the increasing number of successful case studies highlighting the real-world results of BPM will add to the credibility of BPM and lead to higher levels of related products,” said Forrester’s Vollmer.

Automation Key to Survival

Beyond the short-term benefits of cutting costs, there is a more fundamental reason for adopting BPM, and that is the survival of the enterprise itself. Businesses will need to adopt some form of process improvement or die.

“Automated processes provide significant competitive advantages. Businesses that do not keep up with changing markets risk losing the company altogether,” said WinterGreen’s Eustis.

At its May BPM product rollout, IBM reported these sobering findings:

• Businesses waste 5.3 hours per employee;
• Two-thirds of employees believe there are colleagues who can help them do their jobs better, but they don’t know how to find them;
• 42 percent of people are forced to make decisions with the wrong information at least once per week; and
• 91 percent of CEOs surveyed said they needed to restructure the way their organizations work.

With companies looking to vastly improve productivity, it’s no wonder that BPM providers are aggressively pursuing the market. However, it’s clear that no single provider has yet developed a “silver bullet” or “one-stop-shop” for BPM success. The BPM vendor community is still somewhat fragmented, with room for new entries here and there, as well as for existing players to broaden their offerings through in-house enhancements or consolidation with other players.

BPM Players

IBM and Oracle are the dominant players, followed by Adobe, Software AG, Microsoft and Pegasystems, while Tibco, Savvion, Vitria, Lombardi, Singularity, and Sybase also have “measurable shares,” according to WinterGreen’s Eustis.

Forrester breaks down the sector in terms of functionality, with some firms appearing in more than one category: “integration-centric providers,” including Software AG, IBM, Oracle, Tibco, SAP and Vitria; “human-centric” firms such as Lombardi, Savvion, Global 360, Ultimus, Pegasystems, Metastorm and Appian; and “document-centric” vendors such as IBM, EMC, Global 360 and Adobe.

“The BPM market was initially dominated by pure-play heritage vendors such as Pegasystems, Lombardi, Global360, Savvion, Metastorm and others,” said Gartner’s Cantara. “All of these vendors are critical players in the market, but the dynamics of the business have changed as the ‘middleware titans’ such as IBM and Oracle have entered the market. While the middleware majors are pursuing a cross-industry BPM strategy, they are also pursuing many other evolutionary paths as well with their products.”

Another factor that should spur growth in the BPM market is the evolution of the Internet; the cloud computing phenomenon is opening broad new horizons.

“I’m seeing the use of BPM as a foundation for private cloud services as companies seek to cut costs through data center consolidation. A big piece of that is business process standardization and rationalization, and BPM is a key technology to achieve this,” noted Cantara.

“Cloud computing affects BPM by making it more available for less money,” said WinterGreen’s Eustis. “Cloud computing makes it possible to build applications without programming, and it exposes syntax to the business analyst that works directly to develop applications using service-oriented architecture.”

Whether using current or advanced technologies, BPM simply helps corporations make better decisions and better use of their resources.

“Working smarter means becoming more productive and cost-efficient,” noted IBM WebSphere General Manager Tom Rosamilia, “by taking advantage of the tools and information that can yield the greatest benefits in a competitive environment.”