VideoWhen Viasys was formed three years ago from a dozen international entities that had been part of Thermo Electron, reporting was totally inadequate on two main fronts: it did not support Security and Exchange Commission (and later Sarbanes-Oxley) reporting requirements, and it would not have supported integrated management reporting, which was considered to be important to the growing company. Each entity had its own financial and operations system producing only highly summarized information for the old holding company. To unify operations and get better control over financial data, Viasys turned to BPM software from Cartesis.
The flexibility of BPM has emerged as a major selling point. When the terrorist attacks of 9/11 reduced leisure travel and related entertainment spending, Universal Studios Hollywood was forced to cobble together data from spreadsheets and operations systems to assess future business, but it couldn't do scenario modeling. Dan Aptor, director of financial systems, says the company's theme-park business declined markedly even as the company was acquired. "The company had these great transactional-processing and sales systems," he says, "but the finance organization never had its own tools. We were spinning our wheels all the time."
Scorecard Players
Aptor says that 9/11 not only "forced us into cost containment — 'What can we automate; how do we become more efficient and effective?' — but also prompted a move to a balanced-scorecard approach, in which operators can see how they're performing versus finance saying, 'Here are your numbers, why aren't you hitting them?' " These needs sent Universal Studios to a suite of software, including BPM software from Geac.
For PMI Mortgage Insurance, the push for BPM came with the recent surge in home-mortgage refinancing caused by record-low interest rates. The $900 million Walnut Creek, California-based insurer didn't know its risk exposure. "There was a tremendous churning of our portfolio — lots of policies coming on and off our books," explains Stan Pachura, vice president of corporate systems infrastructure and operations. "That's new risk that we need to understand." Topping it off, PMI was experiencing a shift in how it communicates with its large lender customers: in 2000 less than 20 percent of business was electronic; today about 90 percent of it is.
"We had many different sources of information...from our major processing systems, but also [individual] spreadsheets and local databases," says Pachura. "We wanted a single source of the truth, but also one that was easily accessible by those within the organization who required the information."
Turning to BPM software from Cognos, PMI began to implement the metrics-driven balanced scorecard and strategy map methodology developed by professors Robert S. Kaplan and David P. Norton. PMI now tracks such metrics as customer and product profitability, process efficiencies, key employee data (turnovers, hires), and revenues for insurance products, plus causal relationships drawn from the strategy maps.
"The ability to use the scorecard and strategy map to really put our strategy into operational terms that everyone can understand and articulate was one very big benefit," says Pachura. For PMI, the combination of BPM and the balanced-scorecard approach represents a substantial change that goes far beyond IT or finance alone.
"Everyone who goes down this path needs to realize that this is not an IT project," says Pachura, pointing to PMI's reliance on the organizational-development department. "It's a cultural change, with sophisticated technology playing a supporting role."
The various uses of BPM evidenced by these companies qualify as leading edge. But for most, "the future of BPMÂÂÂÂÂÂÂ…is toward integrating operational analytics and financial analytics and bringing all this back to the enterprise plan," says Meta Group's Van Decker. The next steps will be to tie human-resources planning and sales forecasting (from CRM systems) into this financial analytics/planning. That is, the nonfinance use of BPM represents the next wave, and most firms have yet to sign on for the first wave.
Most companies are "still drowning in data," says Jonathan Hornby, director of performance management at SAS in Cary, North Carolina. It's only when they begin to try to bring some order to it by linking operations to financials that they have an "oh, my God" moment and begin to investigate BPM as a possible cure for inefficiency, misalignment, and waste.
But progress comes slowly. A recent Meta Group report found that BPM "continues to be implemented as a tactical point solution, because many firms do not yet want to invest in a large-scale, expensive suite project (reminiscent of 1990s ERP implementation) in an era of reduced IT budgets."
Most BPM software companies are quick to say that customers can indeed start small and build. The degree to which they move past a point solution to a fuller embrace of the expanding capabilities of BPM will determine whether those forecasts are accurate or need to be revised.
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