Prime Time for Real TimePrime Time for Real Time

Executives are buzzing about the notion of the real-time enterprise. It's not the latest "killer application," but a management strategy that calls for squeezing time and associated costs out of processes, transforming how companies operate and even the very businesses they're in.

General Electric, JetBlue, Virgin Group, Progressive Insurance and others are harnessing the universal, real-time connectivity of the Internet for business process innovation. While the concept of time-based competition isn't new, the ability to execute on this management ideal with computer-assisted process support is.

Some enterprises look to new technology architectures and composite applications as the route to the real-time enterprise, but this article explains why time-based competition demands a business process management approach. By giving business analysts software to build and manipulate end-to-end processes, companies are dramatically improving response times to routine customer transactions and emerging market demands by bypassing lengthy software development cycles.

Faster Time to Products and Services

Time-based competition doesn't apply only to the manufacture and distribution of physical goods. Progressive Insurance began its journey more than a decade ago, when it introduced a fleet of 2,600 "immediate response" vehicles fitted with laptop computers, claims submission software and wireless access to the company's databases. Instead of adjusters responding to claims in seven to 10 days — the standard of the 9-to-5 insurance companies — Progressive was soon completing the process in as few as nine hours.

But Progressive didn't stop there. In 1996, the company gave customers the ability to compare rates online, and a year later to buy policies. In 1998, a new site let customers make payments, track claim status and modify policy information. In 2001, Progressive was the first insurance company to receive wireless payments from customers using Web-enabled personal digital assistants and mobile phones.

By setting the pace of innovation, Progressive grew from a $1.3 billion company in 1991 to a $13.4 billion company in 2004. Just as price elasticity measures the limits of customer demand, Progressive learned that the limits of time elasticity helped it steal customers from slower competitors in what was otherwise a mature market. By saving customers time, Progressive also builds on and reinforces another competitive variable: trust, the foundation for building valuable relationships.

Put Process on a Fourth Tier

Becoming a real-time enterprise demands more than fast technology. It's also about how fast a company can transform or add end-to-end processes to execute new strategies — think of this as restructuring time. It's also about how business events can be shared in real time across multiple applications to deliver compelling value to customers — think of this as response time. A customer order is significant to many business processes. Thus, the faster related processes can be triggered, according to embedded business rules, the more real time an organization becomes. For example, an order might alert a CRM system to instantly bring forward cross-sell or up-sell opportunities.

The real-time enterprise isn't just about speedily handling routine transactions. Restructuring time and response time can only be substantially reduced if business processes can be quickly and easily changed. That's why BPM is the real-time trend's cornerstone.

Let's look at a conceptual architecture of process-oriented systems. As shown in the diagram on the next page, companies already have a tremendous investment in legacy enterprise systems (ERP, supply chain management and so forth). These systems handle routine transaction processing and keep the official corporate records. Most are built on three-tier, client/server architectures. Process-oriented systems are emerging in a "fourth tier": They embody not so much official records but actual real-time operations — the outward-facing business processes such as managing insurance claims and loan or account applications.

Business processes are also embedded inside legacy systems, of course, but such processes are mostly cast in stone in enterprise resource planning and other applications. Those on the fourth tier are end-to-end, cross-functional processes that deliver value directly to customers, and they may even extend past the company's boundaries. Take computer manufacturer Dell: When a customer configures and buys a new system online, subprocesses throughout the delivery system are triggered in real time — even ones involving Dell's contract manufacturers and other suppliers.

Lower-tier processes may represent fragments of the end-to-end business processes; to change them generally requires hard coding. Conversely, business processes are dynamic, and the tools used to create and maintain them must be able to support rapid change. The whole point of BPM systems is that they provide a layer that can manage and support dynamic, end-to-end processes across systems. This is the essence of what BPM contributes to real-time information.

To make the real-time dream a reality, it's also critical to have an information integration architecture that can extend customer-relevant information and transaction support from existing enterprise systems, such as ERP, in real time. Your legacy systems don't go away in the real-time enterprise; they're leveraged as vital participants in creating end-to-end processes. Consider Virgin Mobile. When British entrepreneur Richard Branson decided to move Virgin Group into the U.S. mobile phone business, he transformed how a mobile phone company could operate by having absolutely no phone infrastructure — not even one tower.

How did Virgin become one of the top 10 mobile phone providers in the United States in just 18 months? The company forged a "coopetition" relationship with Sprint PCS to host its phone services and deployed process integration software to connect its business processes to Sprint's operational infrastructure (an example of an external trading partner system shown at the bottom of the architectural diagram). Virgin Mobile integrated its Siebel CRM and J.D. Edwards ERP systems and connected them to operational support — system software from Telcordia to broker real-time transactions between Virgin and Sprint. This innovative approach leverages legacy systems with real-time information integration to support Virgin Mobile's end-to-end business processes.

Process in Action

Business process automation (BPA, shown at the top of the diagram below) is integral to the real-time enterprise. Just about any technology can be used to automate a business process. The key word in BPM, however, is management, which means that a company can create or change processes without messing with the hard coding in the technology plumbing.

To compete, companies are constantly launching new programs and campaigns. Launching a product promotion, for example, requires processes designed just for that initiative, which may last for only three months. Large companies may have hundreds or even thousands of such short-lived, business-driven process requirements that simply couldn't be met by rewiring legacy systems each time.

Real time doesn't just mean zero-latency transactions, it also relates to the time it takes to conceive, design and implement new business processes that can deliver competitive advantage, here and now, without an 18-month software development cycle. Legacy systems can be integrated into agile BPM systems and their process fragments and information leveraged to create new processes or modify existing ones.

So we've got two categories of business processes: the hard-coded processes embedded in our legacy enterprise systems, and the dynamic, customer-oriented processes that drive change. Characterizing the difficulty associated with changing processes in each category, Dr. Pehong Chen, CEO of Broadvision, calls hard-coded processes a "ton of lead" and dynamic processes a "ton of feathers." The hundreds or even thousands of dynamic customer-oriented processes must be developed or modified in days or weeks, in near real time, not in months or years.

How It All Comes Together

How do other technologies, particularly red-hot categories such as service-oriented architecture (SOA) and enterprise service bus (ESB), figure in the process-managed, real-time enterprise? The diagram on the opposite page draws an analogy to the growth of a tree. If we look below the topsoil, Web services provide a root structure. Just about any software component can be delivered as a Web service, including services extended from legacy ERP systems. Web services can commoditize common automation tasks, such as GetAccountBalance or CancelOrder, driving down costs and making it relatively easy to combine two or more components for a higher-level purpose in accordance with an SOA.

Composite applications are delivered over an ESB on which discrete, distributed services connect to each other through an asynchronous, message-oriented communications infrastructure. First Command Financial Planning, which serves active and retired military families, deployed Sonic Software's ESB to provide an integration layer to exchange information between its BEA-supplied Web portal and an IBM iSeries platform with third-party financial applications on the back end. As a result, customers can now see real-time views of their financial positions.

In many cases, IT vendors have produced integrated development environments (IDEs) for this type of distributed programming, to make it easier for programmers to build composite applications from Web services. This is a natural evolution in software development. The objective, however, is still to develop software applications — more and more software, more and more applications, keeping business automation squarely in the hands of technicians and on the path of software development.

But wait a minute: Isn't the objective to develop business processes, not more software? Doesn't the real-time enterprise need to craft or modify business processes at the speed of business, sometimes on the fly, not at the speed of software development cycles? To move time to the center stage, companies need a direct business process management capability — a native BPM system (BPMS)— not a programmer's application server.

Because business processes should be in sync with naturally dynamic business initiatives, you shouldn't view real-time enterprises as just larger edifices built with the same "concrete" as transaction systems. The real-time enterprise is about fluid, dynamic, flexible behavior, and that's something that BPM uniquely supports. Think of the BPMS as a CAD/CAM system for process work — it's a user of the technology stack, not part of it. Automobile designers don't require programmers to code their designs; they use CAD/CAM systems to directly manipulate automotive artifacts. Likewise, business analysts shouldn't need programmers to code their designs; they should be able to directly manipulate business processes. They shouldn't be limited to serving up requirements specifications that will be fed into the technologists' alphabet soup of BPMN, UML, BPEL, BPEL-J, WSDL, SOAP and UDDI and then simmered until done. Their requirements must be met now — implemented directly and immediately, not after countless translations through the technology stack.

When an accountant designs a spreadsheet, the design isn't translated into requirements specs, then design specs, then coding specs — it just executes. Similarly, with a BPMS, process designs just execute. Think of Web services and SOA as an underlying technical operating system for the BPMS, which, in turn, is the engine driving the real-time enterprise.

The Process Paradigm

A distributed computing infrastructure is necessary, below the soil, but it's not enough to let companies create processes that differentiate them from their competitors. That's the lesson Progressive learned when it first became a time-based competitor. The company continues to innovate with time-saving processes that delight its customers.

There aren't enough programmers in the world to design and code process-oriented systems using conventional software development, even with the aid of service-oriented software development methods. Processes need an architecture and a paradigm of their own, not a data-oriented information systems paradigm. Just as spreadsheets are placed directly in the hands of businesspeople without the need for a cadre of support technicians, BPMSs must be turned over to business analysts.

What's needed to get to the real-time enterprise isn't just a technician's SOA, but a process-oriented architecture (POA) that, as author and business process methodologist Martyn Ould describes, centers on "units of work," not "units of technology." A POA is a blueprint, and it is to the BPMS (an execution engine) what SOA is to the ESB. IT architects refer to units of work as discrete transactions; business architects define them as sets of processes that come together to get work done and deliver value to customers. It's time enterprise architects start talking about units of work in a business context. Software developers have used unified modeling language (UML) diagrams for years to specify and design software, but UML lacks business semantics — it's from software engineering sphere, not the business process modeling world, for which it was never intended.

As Ould writes in his recent book, Business Process Management: A Rigorous Approach, "Today's dedicated follower of fashion in information systems development is likely to be speaking UML and using one of the various development approaches based on the UML. We cannot view the business process management systems as just another sort of information system."

Information-oriented languages and methods have evolved around storing, retrieving and updating information, not the dynamic world of process. "We're moving from the Information Age to the Process Age," Ould elaborates. "We need purpose-built methods for working with processes to replace our methods for working with information."

The real-time enterprise demands that the center of automation shift from information processing to process processing, for it's the actual operation of the business — doing the work itself — not the recordkeeping that's the objective.

Again, the real-time enterprise represents a management strategy, not a new killer-application technology. If operational transformation of the kind realized by Progressive or Virgin Mobile is indeed the next frontier of business advantage, IT must move from the Information Age to the Process Age to enable time-based competition. The real-time enterprise is the process-managed enterprise. It's indeed prime time for real time in the world of business, but is your company ready for this extreme competition?

Peter Fingar, executive partner in the digital strategy firm, the Greystone Group, is the co-author of several landmark books including The Real-Time Enterprise: Competing on Time (www.mkpress.com). Write to him at [email protected].