(…continued from my previous post)

Enterprise Resource Planning (ERP) evolved from the world of business accounting to ensure that all the beans were properly counted and eventually spread throughout most areas of business.  As computing platforms took full hold of businesses various specialty “vertical” software packages were developed for specific types of businesses (retail, manufacturing, health care, educational, legal, etc.) but in the end they all did the same thing: collect and process business-critical data.

But these ERP systems were then, and are still today, difficult to program and maintain.  After implementing ERP for a decade in a past life I can attest to the fact that there is no such thing as a “simple” and “easily configurable” system, no matter how small or large (OK, maybe Quickbooks is pretty simple but it’s hardly an ERP; look at Microsoft Dynamics or go upscale to Oracle Financials or SAP to see complexity in its full glory).  

Why is that?  There certainly is no lack of great tools and technologies now that the digital revolution has matured and now that we’re seeing a bunch of software packages and platforms hitting the double-digit version numbers.  The reason is simple: ERP is a data-driven, pre-set collection of screens, business logic, and supporting databases built with specific “hard coded” processes in mind: order entry, inventory control, purchasing, general ledger, etc. These functions, depending on the system, can often be tweaked through non-technical configurations but these tweaks only go so far.  If you have lots of money you can customize the system to your specific needs but then as a rule it is a nightmare to maintain and (…shudder…) upgrade.  

Business Process Management (BPM) is a very different animal.  It was born actually out of recessionary times in the 1980’s as a way to help cut costs by streamlining business processes.  If you can cut or speed up steps in how you produce an invoice, or produce a widget, you invariably save time and money.   Whereas ERP focused on performing specific functions while assuming the underlying processes were understood by all, BPM took a critical view at everything going on and asked “why”?  Why are we doing it this way?  Why do 5 similar departments have 5 different procedures? How can this be rationalized?

BPM efforts normally start on a white board where business people map out (“model”) their business processes – who does what, when, and how.  It’s gut wrenching because you have to get agreement at all levels about a unified method of operation – not obvious and often political.   As BPM matured it took the processes and fit them in a technological framework that is more intuitive to business users. That is, a focus on moving things along in a process rather than just putting functions up on a menu.  BPM was the affirmation that a company can be described as a group of persons and resources involved in business processes.  Period.  There is nothing else to a company in fact.  The great companies have great people with great processes, the bad ones have mediocre people with mediocre processes.  

BPM is an effort to model and automate this invaluable intellectual property that is called the Business Process. The underlying functions created by ERP are really secondary.  So rather than just taking this knowledge and further customizing ERP systems that are heavy and complex, BPM takes it to a new level that is poorly understood by ERP and establishes a different modus operandi: make people work around their processes by guiding them through it step by step, action by action, decision by decision. Let them also be accountable to their processes by making the process, the people, and the data transparent.

This is difficult in ERP’s because there is a basic assumption that a function is done a certain way and usually in isolation of many other functions – it’s a Chinese Menu of things that can be done, but good luck in figuring out which one you should do first, second, or third – or at all.   For example Orders are done a certain way, but certainly other things must occur also – are those tracked by ERP’s?  Often no, because ERP systems are not built technologically for managing dynamic workflows (some claim to do it but usually the workflows, being built on ERP technology, are more complex to develop than the ERP itself…).  When do I do that next step, let’s say a credit check?  Maybe it’s needed, maybe not.   BPM states instead that you enter the order, then a credit officer is notified if the customer is 90 days overdue,  then an inventory transaction is performed, etc.  A person doesn’t need to guess or learn over a long period of time what the company expects of her or him.  

BPM makes it crystal clear to you and all who need to know what the process is.  New employees don’t need ten years experience to learn all the intricacies of their job because it is modeled for them in the system.  Processes are enforced and governed – you limit mistakes and fraud when the software guides you step by step.  Anyone who is entitled can see what happened and when, so that you have transparency.  Service levels can be managed easily because each step is monitored, whereas with ERP (usually) each function is disjointed and requires a human being to think about what to do next.

And that is why I like to say that BPM is ERP 2.0, meaning that by using flexible modeling, workflow, and forms technologies that  focus on automating a process we can spend our time modeling, deploying, and refining the processes and their critical success factors and metrics rather than spending money hardcoding ERP functions.

Now don’t get me wrong, I am not suggesting we can eliminate ERP systems – yet.  They are well entrenched and serve a real purpose.  But because ERP’s are function-centric rather than process-centric, we often find BPM systems filling the gaps and orchestrating human and even system actions to compensate and enhance what ERP systems are doing. With the right software integrations in place this can be a great marriage of the classic and the new – ERP performs core, complex functions and BPM orchestrates it and ensures service levels while also modeling and enforcing your intellectual property.

And that is the fun part of my day… 🙂

References: For some interesting reading about BPM check out Wikipedia’s article