Business process management (BPM) is a management approach focused on aligning all aspects of an organization with the wants and needs of clients. It is a holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. Business process management attempts to improve processes continuously. It could therefore be described as a "process optimization process." It is argued that BPM enables organizations to be more efficient, more effective and more capable of change than a functionally focused, traditional hierarchical management approach.
A business process is "a collection of related, structured activities that produce a service or product that meet the needs of a client." These processes are critical to any organization as they generate revenue and often represent a significant proportion of costs. As a managerial approach, (BPM) considers processes to be strategic assets of an organization that must be understood, managed, and improved to deliver value added products and services to clients. This foundation is very similar to other Total Quality Management or Continuous Improvement Process methodologies or approaches. BPM goes a step further by stating that this approach can be supported, or enabled, through technology to ensure the viability of the managerial approach in times of stress and change. In fact, BPM is an approach to integrate a "change capability" to an organization - both human and technological. As such, many BPM articles and pundits often discuss BPM from one of two viewpoints: people and/or technology.
Roughly speaking, the idea of (business) process is as traditional as concepts of tasks, department, production, outputs. The current management and improvement approach, with formal definitions and technical modeling, has been around since the early 1990s (see business process modeling). Note that in the IT community, the term 'business process' is often used as synonymous of management of middleware processes; or integrating application software tasks. This viewpoint may be overly restrictive. This should be kept in mind when reading software engineering papers that refer to 'business processes' or 'business process modeling.'
Although the initial focus of BPM was on the automation of mechanistic business processes, it has since been extended to integrate human-driven processes in which human interaction takes place in series or parallel with the mechanistic processes. For example (in workflow systems), when individual steps in the business process require human intuition or judgment to be performed, these steps are assigned to appropriate members within the organization.
More advanced forms such as human interaction management are in the complex interaction between human workers in performing a workgroup task. In this case, many people and systems interact in structured, ad-hoc, and sometimes completely dynamic ways to complete one to many transactions.
BPM can be used to understand organizations through expanded views that would not otherwise be available to organize and present. These views include the relationships of processes to each other which, when included in the process model, provide for advanced reporting and analysis that would not otherwise be available. BPM is regarded by some as the backbone of enterprise content management.
BPM is a critical part of ITSM - IT Service Management. Without driving good business process management your IT Service Management initiatives would fail. All disciplined IT Service Management implementations include well developed BPM processes.
Because BPM allows organizations to abstract business process from technology infrastructure, it goes far beyond automating business processes (software) or solving business problems (suite). BPM enables business to respond to changing consumer, market, and regulatory demands faster than competitors - creating competitive advantage.
Most recently, technology has allowed the coupling of BPM to other methodologies, such as Six Sigma. BPM tools now allow the user to:
Design - The process or the process improvement
Measure - Simulate the change to the process.
Analyze - Compare the various simulations to determine an optimal improvement
Improve - Select and implement the improvement
Control - Deploy this implementation and by use of User defined dashboards monitor the improvement in real time and feed the performance information back into the simulation model in preparation for the next improvement iteration.
This brings with it the benefit of being able to simulate changes to your business process based on real life data (not assumed knowledge) and also the coupling of BPM to industry methodologies allow the users to continually streamline and optimise the process to ensure it is tuned to its market need.
Business process management activities can be grouped into five categories: design, modeling, execution, monitoring, and optimization.
Process Design encompasses both the identification of existing processes and the design of "to-be" processes. Areas of focus include representation of the process flow, the actors within it, alerts & notifications, escalations, Standard Operating Procedures, Service Level Agreements, and task hand-over mechanisms.
Good design reduces the number of problems over the lifetime of the process. Whether or not existing processes are considered, the aim of this step is to ensure that a correct and efficient theoretical design is prepared.
The proposed improvement could be in human-to-human, human-to-system, and system-to-system workflows, and might target regulatory, market, or competitive challenges faced by the businesses.
Modeling takes the theoretical design and introduces combinations of variables (e.g., changes in rent or materials costs, which determine how the process might operate under different circumstances).
It also involves running "what-if analysis" on the processes: "What if I have 75% of resources to do the same task?" "What if I want to do the same job for 80% of the current cost?".
One of the ways to automate processes is to develop or purchase an application that executes the required steps of the process; however, in practice, these applications rarely execute all the steps of the process accurately or completely. Another approach is to use a combination of software and human intervention; however this approach is more complex, making the documentation process difficult.
As a response to these problems, software has been developed that enables the full business process (as developed in the process design activity) to be defined in a computer language which can be directly executed by the computer. The system will either use services in connected applications to perform business operations (e.g. calculating a repayment plan for a loan) or, when a step is too complex to automate, will ask for human input. Compared to either of the previous approaches, directly executing a process definition can be more straightforward and therefore easier to improve. However, automating a process definition requires flexible and comprehensive infrastructure, which typically rules out implementing these systems in a legacy IT environment.
Business rules have been used by systems to provide definitions for governing behaviour, and a business rule engine can be used to drive process execution and resolution.
Monitoring encompasses the tracking of individual processes, so that information on their state can be easily seen, and statistics on the performance of one or more processes can be provided. An example of the tracking is being able to determine the state of a customer order (e.g. ordered arrived, awaiting delivery, invoice paid) so that problems in its operation can be identified and corrected.
In addition, this information can be used to work with customers and suppliers to improve their connected processes. Examples of the statistics are the generation of measures on how quickly a customer order is processed or how many orders were processed in the last month. These measures tend to fit into three categories: cycle time, defect rate and productivity.
The degree of monitoring depends on what information the business wants to evaluate and analyze and how business wants it to be monitored, in real-time, near real-time or ad-hoc. Here, business activity monitoring (BAM) extends and expands the monitoring tools in generally provided by BPMS.
Process mining is a collection of methods and tools related to process monitoring. The aim of process mining is to analyze event logs extracted through process monitoring and to compare them with an a priori process model. Process mining allows process analysts to detect discrepancies between the actual process execution and the a priori model as well as to analyze bottlenecks.
Process optimization includes retrieving process performance information from modeling or monitoring phase; identifying the potential or actual bottlenecks and the potential opportunities for cost savings or other improvements; and then, applying those enhancements in the design of the process. Overall, this creates greater business value.
Whilst the steps can be viewed as a cycle, economic or time constraints are likely to limit the process to only a few iterations. This is often the case when an organization uses the approach for short to medium term objectives rather than trying to transform the organizational culture. True iterations are only possible through the collaborative efforts of process participants. In a majority of organizations, complexity will require enabling technology (see below) to support the process participants in these daily process management challenges.
To date, many organizations often start a BPM project or program with the objective to optimize an area that has been identified as an area for improvement.
In financial sector, BPM is critical to make sure the system delivers a quality service while maintaining regulatory compliance.
Currently, the international standards for the task have only limited to the application for IT sectors and ISO/IEC 15944 covers the operational aspects of the business. However, some corporations with the culture of best practices do use standard operating procedures to regulate their operational process. Other standards are currently being worked upon to assist in BPM implementation (BPMN, Enterprise Architecture, Business Motivation Model).
Some define the BPM System or Suite (BPMS) as "the whole of BPM." Others will relate the important concept of information moving between enterprise software packages and immediately think of Service Oriented Architecture (SOA). Still others limit the definition to "modeling... to create the ‘perfect’ process," (see Business modeling).
These are partial answers and the technological offerings continue to evolve. The BPMS term may not survive. Today it encompasses the concept of supporting the managerial approach through enabling technology. The BPMS should enable all stakeholders to have a firm understanding of an organization and its performance. The BPMS should facilitate business process change throughout the life cycle stated above. This will assist in the automation of activities, collaboration, integration with other systems, integrating partners through the value chain, etc. For instance, the size and complexity of daily tasks often requires the use of technology to model efficiently. These models facilitate automation and solutions to business problems. These models can also become executable to assist in monitoring and controlling business processes. As such, some people view BPM as "the bridge between Information Technology (IT) and Business.". In fact, an argument can be made that this "holistic approach" bridges organizational and technological silos.
There are four critical components of a BPM Suite:
BPM also addresses many of the critical IT issues underpinning these business drivers, including:
Validation of BPMS is another technical issue that vendors and users need to be aware of, if regulatory compliance is mandatory. The validation task could be performed either by an authenticated third party or by the users themselves. Either way, validation documentation will need to be generated. The validation document usually can either be published officially or retained by users.