BPM in the Real World
The Impact of Business Performance Management
By David A. Kelly, Analyst, ebizQ
It’s always nice to optimize the money coming in and minimize the money going out. The more my wife and I are able to do that, the more free money we have for savings, paying down debts, or finally getting that new set of tires for the car. Unfortunately, in my house, there’s only a limited number of options we have for controlling both sides of that equation—my wife and I can ask for raises or take on extra work or additional jobs if we want more money, and we can cut back on the non-fat lattes from the local Starbucks or increasingly expensive movie nights at the theater (where one large soft drink now seems to equal a day’s pay). The process itself is still a relatively straightforward task—there isn’t that much money coming in and there are only so many ways that we spend it (even if it does go quicker than we imagine), so when it does come time to review our income and expenses it’s relatively easy to keep track of where we might be able to cut back on expenses and increase our earnings, and project how much money we’ll have next week or next month.
The picture isn’t quite that clear however for most large companies—in fact the larger and more distributed the company is, the more difficult this type of analysis becomes. For organizations this challenge becomes one of optimizing their working capital and cash flow by monitoring and managing key payment and receivables processes and process cycles such as Order-to-Cash and Procure-to-Pay.
Based on conversations I’ve had with multiple enterprise executives, in 2006 and beyond we will continue to see the business trend of organizations looking for ways to drive down costs and improve internal efficiencies. Areas such as cash flow management and balance sheet improvements are increasingly important, as are the general needs to be able to connect, consolidate and manage previously fragmented financial processes and disconnected systems. Connecting these disconnected systems and gaining clearer and faster financial perspective can be difficult for a number of reasons—from systems that simply aren’t integrated to poor cross-departmental communications to reactive collection policies and difficulties in forecasting and managing procurement projections or invoice disputes. For years, organizations have used ERP systems to keep track of transactional business processes and data, storing all types of critical business and financial information, yet these don’t always provide the visibility and capabilities needed to optimized complex processes such as Order-to-Cash. Some organizations even have more than one ERP system, making the job of identifying and leveraging the flow of cash from inflows to outflows even more difficult.
That’s where the idea of specialized process-oriented and rule-driven IT solutions come in. It’s also a good example of the kind of specialized process-centric business applications that I believe that we are going to see in the future, especially from the areas of business process management and business performance management. As organizations implement successful process-oriented IT or business solutions, they are increasingly beginning to realize the benefits that effective process automation and management can bring to almost any area of the organization.
For example the area that we’ve been discussing, corporate finance, is one important area where process-centric solutions that can integrate metrics and information from a wide variety of sources while being driven by business-defined rules can make a big difference. Managing areas like accounts receivable and cash flow may not be as interesting as some other business challenges but they can be crucially important to the success of business—especially now when business leaders are looking for ways to cut costs and improve the effectiveness. For example, simply reducing the number of days that it takes vendors to pay bills by 5 or 10 days can free up hundreds of thousands of dollars annually for large organizations.
With that type of return on investment, it’s not surprising to see specialized solutions emerge to help organizations solve the potentially very lucrative process and business performance management challenges inherent in the working capital areas such as the Order-to-Cash and Procure-to-Pay cycles. In fact, over the past few years, we’ve seen multiple business process management vendors pursue these areas of corporate finance improvement by offering their infrastructure-oriented process management solutions as a vehicle for more closely managing these types of processes and increasing visibility into these key corporate areas.
We’re also seeing solutions that use business process management capabilities, business rules and business performance management techniques to create frameworks and specialized solutions aimed at tackling these types of complex process and information sharing problems. For example, Emagia’s Working Capital Performance Management Suite is designed to help organizations optimize their cash flow related processes and manage the performance of their financial systems. The product can gather financial data from multiple systems and consolidate information from various financial applications into the management dashboard to highlight performance problems and enable simulation forecasting and monitoring of working capital initiatives.
Unlike general business process management solutions, Emagia’s Suite is aimed directly at line of business managers and financial officers, making it a pure business sell. I believe it’s a good example of the types of specialized process- and performance management driven products that we will continue to see emerge over the next few years. Now, if only I could find the right set of business rules and processes monitoring capabilities to keep my wife from downloading more U2 songs from iTunes, I’d be able to free up significantly more cash flow around my house.
About the Author
David Kelly - With twenty years at the cutting edge of enterprise infrastructure,
David A. Kelly is ebizQ's Community Manager for Optimizing Business/IT Management. This category includes IT governance, SOA governance,and compliance, risk management, ITIL, business service management,registries and more.
More by David A. Kelly
As Community Manager, David will blog and podcast to keep the ebizQ
community fully informed on all the important news and breakthroughs
relevant to enterprise governance. David will also be responsible for
publishing press releases, taking briefings, and overseeing vendor
submitted feature articles to run on ebizQ. In addition, each week,
David will compile the week's most important news and views in a
newsletter emailed out to ebizQ's ever-growing Governance community.
David Kelly is ideally suited to be ebizQ's Governing the
Infrastructure Community Manager as he has been involved with
application development, project management, and product development
for over twenty years. As a technology and business analyst, David has
been researching, writing and speaking on governance-related topics
for over a decade.
David is an expert in Web services, application development, and
enterprise infrastructures. As the former Senior VP of Analyst
Services at Hurwitz Group, he has extensive experience in translating
the implications of new application development, deployment, and
management technologies into practical recommendations for enterprise
customers. He's written articles for Computerworld, Software Magazine,
the New York Times, and other publications, and spoken at conferences
such as Comdex, Software Development, and Internet World. With
expertise ranging from application development to enterprise
management to integration/B2B services to IP networking and VPNs,
Kelly can help companies profit from the diversity of a changing
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