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Will Enterprises Experience As Much As a 20 Percent Cost Savings Within First Year of Using BPM to Improve Business Processes?

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This discussion is based on Gartner's recent press release, Gartner Says Enterprises Can Experience As Much As a 20 Percent Cost Savings Within First Year of Using BPM to Improve Business Processes. Can this really happen?

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  • The premise for the question is based on the assumption that after reviewing a number of BPM efforts that the maximum savings for all those efforts was at most 20%.

    In my own personal experiences with BPM, what I have discovered is that most organizations have a really difficult time accurately understanding the total spend regarding a particular process because there is a lot of manual intervention both in-process and post-process. Moreover, the data collection is minimal to none prior to the BPM effort.

    With these limitations, you could claim that your savings were greater than or less than 20% and it would still be a best guess estimate. I imagine that the cost savings are showing up at the budgetary level and based on past and current spending. However, there's a lot of other factors that are introduced into those numbers clouding the actual numbers.

    For organizations who want to gain real insight into the ROI of their BPM effort, they need to start with first gaining accurate insight into the cost of the process before improvement.

  • Yes, and far more than 20% even. However, I whole heartedly agree with JP, you have to insight in the current business process before you can establish the ROI.

    I also backup the point on the amount of manual processes involved today across the whole spectrum of the enterprise user task. In fact, I go further and say we have turned enterprise computer users into manual workers again - just at the keyboard. Therefore, the analytics on existing processes is fundamental. Putting tools on the users desktop that can measure EVERYTHING they do IS now possible - you cannot miss this step. Then you will have your metrics and more importantly, the key metrics on where to focus first - for the biggest bang for your (BPM) bucks.

  • The answer is “it depends? :-) . I am not sure why pick 20% and not 30% or 15% and the answers would be yes, yes and “it depends?. Look at it this way, there are large companies and small companies, companies that are mature in process management and some are just starting. So there could be companies that save 5% in a year that would amount to $50MM in saving and a company that saves 20% and reduces cost by $5MM . On the other hand for a process mature company 5% additional gain would be as significant as 20% for a company that is just starting a process improvement initiative.
    But this is perfectly realistic expectation that BPM initiatives can bring you cost efficiencies of that order - 20% or even more and to measure this companies need to evaluate as-is and to-be scenario. There are numerous examples of companies saving 20% and much more and I have personally witnessed companies recovering all their investment in BPMS in just few months and even days. So, yes it is very much possible and it is happening today. You need to set your objectives, pick up the process that contribute towards that objective, know the important metrics that you need to measure and go for it.

  • As I wrote recently on the ebizQ Improving Business Processes "Around the Web" column (not archived by ebizQ), I've seen all kinds of variations on this headline and it has a kind of Bernie Madoff ROI ring to it to me.

    The key word in the Gartner press release is "can." BPM "can deliver cost savings of 20% within the first year of implementation." But only if you use it correctly and only if you have a process set that is grossly over-engineered now. And -- possibly -- only if you count soft savings (which are OK to count but just be careful of overpromising to your CEO or CIO).

    The beter way to think of it is "Don't start a BPM project (not sure what that means but that is another possible Forum question) unless you expect a one-year ROI, including soft costs. Then, unlike Bernie Madoff, your return is guaranteed. -- Dennis Byron

  • Overall I agree with many of the other replies and it does depend on the scope of the process and it varies by process. You might see a 200% cost savings on one process but only a 5% cost savings on another.

    More importantly there may be no tangible cost savings on another process – but a priceless amount of value (e.g. increase in market share, better customer service ratings, or meeting a compliance deadline). Regardless of how you measure it, I don’t think anyone can argue that there is not significant value in implementing BPM software.

  • There are cases in business processes where BPM efforts may have turned out huge, huge savings. Simple example - Five years ago it used to take one or two weeks before you got an answer for your credit card application. These days in 80% of the cases, you get an approved or declined answer in seconds!
    That's improvement in thousands of percent, I am guessing!

    Japanese automakers have taken assembly line, tool die changes (mostly stamping operations that stamp out body panels from Steel sheets using huge dies and presses) from weeks to a few minutes over a period of years.

    Similar productivity improvements are possible with BPM also if brain is applied first and then tools! Many of these improvements have to do with thinking why should something be done one way and not another!

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