Could this be the beginning of a beautiful friendship? Web services and business process management (BPM), two promising if arcane approaches to software design, may prove to be a potent combination. If analysts’ predictions come to pass, the perennial question that haunts most companies’ software strategies — whether to build or buy — may give way to a build-and-buy approach, with Web services and BPM able to tie it all together.

The problem companies face with current software, says Tyler McDaniel, managing director of analyst services at consultancy Hurwitz Group Inc., is that it “often prevents [them] from responding to new circumstances.” Once a given approach to a task has been encoded in software, it’s difficult to change. By integrating existing software with BPM and Web services, however, McDaniel says that “you can break an application into smaller components and rearrange them as your process changes or as you add new information, and the time required to do that is minimized.”

The result, say analysts, is that software now in use — whether packaged applications or homegrown systems — once integrated and recombined with help from Web services and BPM, could provide unprecedented flexibility while protecting current investments. And while the vision of broad “end-to-end” integration is still a ways off, companies are taking early steps. A survey by FactPoint Group found that nearly two-thirds of Global 1,000 companies are piloting or actually using Web services standards within their overall software efforts. Meanwhile, the market for BPM software “engines” is expected to grow from $267 million last year to $1.5 billion by 2007, according to WinterGreen Research.

Integrate, Then Facilitate

As independent approaches to software integration, both Web services and BPM have their uses and their fans. Web services is a set of standards (XML, SOAP, and others) that determine how data is passed from one (usually Web-based) application to another. BPM is a method for modeling and automating how multiple-step business processes — whether hiring a new employee or paying an invoice — are handled within a company or between companies.

Web services and BPM can provide substantial benefits independent of each other, but because they both address problems and possibilities inherent in Web-based software, using them in tandem may allow companies to extract far more value from Internet connectivity. The Web can unite all the workers and departments that may be involved in a given process. If several applications are needed to address that process, BPM tools can integrate them at the programming interface and messaging levels, and Web services standards can make sure the data passes between them smoothly.

Once integrated, much of the grunt work associated with a given task can be automated. Today, the synapse between one software program and another is often a human being, one engaged in some tedious manual process. At Minneapolis-based Xcel Energy Inc., for example, the “affiliate billing” function, in which various operating companies are billed for their respective shares of operating expenses, processes 450,000 transactions a month. While the enterprise resource planning system can handle much of the work, director of financial systems Ken Ellgen says that IT and accounting staff had to submit the batch jobs, review them, and pass them through, which amounted to some very expensive baby-sitting.

So the company is piloting BPM tools from Nobilis Software Inc., which in turn rely on Web services standards to integrate several applications into a seamless and largely automated billing process, one that frees up staffers to focus on exceptions versus routine processing. The software uses a drag-and-drop interface to create a flowchart of how work gets done: what applications, what data, what people, and so on. Once the process is captured, it can be automated; the applications it relies on are integrated and work is routed to the appropriate department. If Xcel decides to do things differently, a business user simply redraws the map to reflect the new rules, and the underlying technology makes the necessary changes (that is, it “manages” the business process, hence the not-intuitively-obvious term BPM).

If the pilot fares well, Ellgen sees plenty of potential for a combined BPM/Web services approach to software elsewhere in the company. “We have many processes that need to run in batch mode, and that’s where automation can really help,” he says. “We’re also moving to as many Web-based applications as we can, and we need technology that will connect them quickly and allow data to pass between them with no problems.” E-procurement, customer relationship management, and employee self-serve applications also loom as major Web-based initiatives for Xcel, he says.

Hiding the Complexity

As another example of the power of Web services and BPM, consider an expense report built using both: a user creates the same sort of map or flowchart that the finance department at Xcel created, only this time it captures travel expenses and routes them for approval and payment. It may incorporate a currency converter, a useful if ancillary function that certainly no IT department wants to build. In Nobilis’s case, such an application could tap a currency converter that resides at IBM; the figure in question would be passed to IBM, translated, and returned to the application, and processing would continue automatically.

That’s a small but useful example of how Web services standards allow small modules of functionality to be combined into larger applications. If the company decided, after the system was built, that it wanted to capture whether the trip in question satisfied some training requirement on the part of the employee, the process map could be redrawn to incorporate the passing of the relevant data to the relevant human resources system. Once the rules were changed, the BPM software would connect the necessary systems, and Web services would facilitate the passing of data into the additional program(s).

The potential for combining Web services and BPM is not lost on software makers. In fact, it may be the software makers, including but not limited to those that offer BPM products, that are most excited by Web services, since it allows them to offer customers products that pose little or no integration challenge. Yet, despite all the hype surrounding Web services, says James Maniscalco, CEO at Nobilis, “if our salesmen go into an account touting Web services, we’ve already lost the sale.” Instead, by incorporating Web services into his BPM software, Maniscalco can offer customers functionality they couldn’t get any other way, and they almost certainly don’t care how the software actually works.

Nobilis not only tries to hide the complexity of the underlying software from users by offering a drag-and-drop interface, but it recently launched a new product so that a Microsoft Excel spreadsheet becomes the primary front end. Given that it competes with much larger players in the BPM space, from IBM and Hewlett-Packard to CompuWare, FileNet, Fuego, Metastorm, SeeBeyond, Sybase, Tibco, and Vitria, innovation is clearly essential. (See how some of these companies compare with the CFO PeerMetrix interactive scorecards.)

“We’re on the verge of a new wave of application development,” says Whit Andrews, an analyst at Gartner. “Instead of shipping a long-term project off to Bangalore, you can tackle something internally in a few days.” Analysts, in fact, see 2002 as the year in which most companies pilot Web services, with 2003 seeing serious implementation. The embrace of a combined BPM/Web services solution is harder to predict, in part because companies need to decide whether to adopt a companywide approach to BPM or to use different approaches for different business processes. But in either case, these technologies are being hailed for their value in making companies more responsive to change by developing and integrating software systems more quickly. “Given that most IT projects last longer than the careers of the people who tackle them,” says Andrews, “this is good news.”

Scott Leibs is a senior editor at CFO.

BPM Breakdown

Business process management has been dubbed the next “killer app” by Delphi Group, but to date the market hasn’t agreed. Only 12 percent of the companies surveyed by Delphi are using BPM, although approximately two-thirds of those currently testing it do plan some sort of deployment within a year. BPM separates the business rules (or process logic) from the applications that run them, creating a clear boundary between what a company does (the process) and how it does it (the supporting applications). The Hurwitz Group Inc. identifies four main components to BPM:

1. Modeling. A map or other graphic representation of the process assets, multiple steps, sub- and parallel processes, fulfillment paths, and rules that shape event processing, exception handling, and error handling.
2. Integrating. Connecting process assets and automating transactions and data flow
   among applications and people.
3. Monitoring. Providing an “administrative console” that displays status and metrics.
4. Optimizing. Analysis of inefficiencies combined with the means to address them.

Aberdeen Group cautions that because a “business process” can be hard to define, companies must be wary of software firms that bill themselves as BPM providers; many have extended a specialized core competency into what they bill as a more broadly focused BPM offering, requiring prospective customers to shop very carefully. —S.L.