By Nancy Feig
Bank Systems & Technology
June 21, 2007
It has been said that business process management (BPM) is where business and IT converge. It's the act of putting what businesses do on a day-to-day basis into IT systems to optimize the processes and gain efficiency. While BPM traditionally has been viewed as a method of visually representing workflows, it's actually much more than that. In fact, when implemented thoughtfully, BPM can change the competitive position of a financial institution, according to experts.
With the growing popularity of BPM, banks are taking a fresh look at their processes, which at many financial institutions still tend to be siloed and manual. The resulting ability to streamline and often automate key functions -- such as lending, payments and account opening -- has become a key factor in the race to win new business, improve productivity and gain a competitive edge.
While BPM initially emerged as an efficiency play, the drivers for BPM initiatives have changed. According to Phil Gilbert, chief technology officer and EVP of the products group for Austin, Texas-based Lombardi Software, which provides a suite of BPM software, BPM most often is implemented today to improve the customer experience -- for internal and external customers -- rather than simply boosting efficiency.
Mary Pilecki, a senior analyst with Forrester (Cambridge, Mass.), says the goal of improving customer satisfaction is driving banks to automate their processes. "It's not about saying 'hello' and being friendly," she says of the customer experience. Rather, it's about "the process customers have to go through."
Of course, BPM technology and methodology have matured, allowing banks to rethink how they deploy BPM. And now that BPM is available as thin-client technology as opposed to host-based solutions, banks are expanding its use throughout the enterprise.
"Banks first used BPM for case management tools -- research requests, adjustments, retractions," notes Pilecki. "Now they are expanding out."
But there is no one common area of the business in which banks are implementing BPM, Lombardi's Gilbert asserts. "We have a customer that is doing optimization around customer-statement generation, loan-officer onboarding and normalizing the loan process across all loan types," he relates. "Another bank is doing teller support, all of the back-office support; [and another] is doing the debit card charge-back process. It's all over the map and comes back to areas of pain for that particular company."
BPM Best Practices
Memphis-based First Horizon National ($38.8 billion in assets) implemented BPM to optimize sales and service across its entire organization. "We wanted to optimize processes on an end-to-end scale," explains Robert Salazar, the bank's SVP of enterprise technology. "We were very effective and efficient at the functional or department level, but we felt there was an opportunity to improve operational abilities as they spanned groups."
First Horizon's BPM implementation received a gold seal of approval in a September 2006 Forrester best practices case study, which featured Salazar's seven best practices for successful BPM implementations. The first is to start with a common view of overall process. "Understand what you are really trying to achieve -- your organizational needs," Salazar says. "And from there make all your other decisions."
Salazar's second best practice is to obtain C-level support. To justify the costs of First Horizon's BPM project to non-IT business leaders, Salazar relates, he and his group drew up a list of a half-dozen projects and demonstrated how BPM would increase efficiency and quickly lead to cost savings. The items on the list were "cost-justified on a project-to-project basis," he explains.
Salazar's third best practice is to choose a flexible business process management suite (BPMS). After more than six months of searching, First Horizon chose a BPM suite from Fuego (which since has been acquired by San Jose, Calif.-based BEA and made part of the vendor's AquaLogic business service interaction product line).
"We really weren't looking for a workflow tool, but [rather] a true
process management environment," Salazar explains. To vet and deploy a
solution requires that you think process and collaboration, he adds.
"There's a very tight correlation between decisions at process design
and how those decisions translate -- without much technical work,"
Salazar says.
First Horizon began its BPM initiative with the low-hanging fruit -- best practice four -- including easily attainable automation opportunities in loan delivery, compliance, risk management, mortgage banking and delivery services, according to Salazar. To accomplish his fifth best practice -- developing a consistent and reusable process methodology -- Salazar began with Fuego's methodology and then adapted it around the bank's existing project management office procedures. "Methodology needs to be based on collaboration across all the stakeholders that partake in the process," he explains.
Following the establishment of methodology, Salazar says, each process should be assigned a clear owner responsible for making final decisions in the case of an impasse -- best practice six. And the final best practice is communicating the successes, which helps build momentum for additional BPM projects, he notes.
Finding the Right BPM Solution
When Steven Liles, manager of integration services at Winston Salem, N.C.-based BB&T ($118 billion in assets), speaks about his bank's successful BPM implementation, he often stirs the listeners into a "frenzy," he says. "We did it in a very agile way," Liles explains. "The implementation time was literally 90 days."
Just a year ago, executives at BB&T realized it was one of the only top 20 U.S. banks that did not offer automated account opening on the Internet, according to Liles. They wanted that fixed in the fastest way possible. "There was a push from management to get this done by Q4 no matter what," Liles relates. Liles' integration team had wanted an opportunity to implement BPM within the bank and realized this was a great place to start, he says.
BB&T first examined building a BPM rules suite in-house, but the project timeline would have been more than a year, according to Liles, so the bank turned to packaged solutions. After reviewing the vendors that performed well in Gartner's Magic Quadrant for BPM, a report that examines the solutions marketplace, BB&T selected Cambridge, Mass.-based Pegasystems' SmartBPM solution. Liles says he chose the solutions for its agility, something that other BPM experts encourage.
Forrester's Pilecki advises banks to look for a BPM suite that a vendor
has prebuilt for financial services. The vendor also should understand
the specific needs of financial services firms and their core processes
so they are not starting from scratch every time they need to build a
simple process, such as account opening, she adds. All those things
being equal, banks can look to differentiators such as ease of use,
robustness of the rules engine, interfaces and simulation abilities,
Pilecki says.
The technological aspects of a BPM implementation, however, can be challenging, according to Dimitris Livas, director of retail IT strategy for EuroBank (US$72 billion in assets). The Athens-based bank currently is expanding both its footprint and product portfolio within and outside of Greece, Livas explains, and turned to BPM to alleviate its growing pains. "We need to close the gap between business and technology, and that is what BPM is doing for us," he says. "We want to automate the business processes of the bank."
While some of the basic tools that go into BPM for defining and deploying rules, and optimizing and analyzing processes have been around for a while, "integrating all these things is quite new," Livas asserts. "We need guidance on how to use them," he adds. "They are very early suites [and] we have a lot to learn and improve upon."
Mature or not, BPM solutions are going to be big business in the coming years. According to Stamford, Conn.-based Gartner, the worldwide market for BPMS will exceed $1 billion in 2007 in total software revenues and will reach $2.6 billion by 2011. The BPMS proliferation, which began in 2005, marks the end of "pure-play" solutions that focus solely on human workflow capabilities in specific areas, according to Gartner.
Recent innovation in BPM technology has largely been in simulation capabilities, says Ashish Mohindroo, senior product director, Oracle (Redwood Shores, Calif.). Newer systems have the ability to tie in with business intelligence (BI) tool sets and capture data to create real-time business insight and create more realistic pilots, he says. In fact, many experts are pointing to BI's integration with BPM as the future direction of the technology, including using historical data for process development as well as building real-time data integration into decision-based processes.
"In banking, things change in real time," Mohindroo continues. "Banks have to be nimble to adapt and adjust to market changes."
Cultural Changes of BPM
Of course, BPM brings its own changes. "BPM is a religion that the company acquires over time," Mohindroo continues. Because BPM is not department- or product-specific, it can break down barriers between business and IT, and topple silos of functions, he says.
The renewed focus on business processes necessary for BPM also should secure IT more of a voice in the bank's decision-making process, adds Mike Nichols, president of the American Society for Quality, a Milwaukee-based trade organization focused on the tools and strategies that support quality. "Technology [traditionally] is not invited on the front end when people are defining the problem," Nichols says. "Technology groups have to change this -- they have to be on the front end because they are in the best position to challenge processes."
While the technology behind Eurobank's BPM efforts was an important piece of the puzzle, the bank's Livas stresses that IT was simply the facilitator -- the business drove the project. "This is not a software project," he observes. "This is a business project because it is a cultural change."
Livas adds that the cultural changes resulting from a BPM initiative are long-term. "BPM is not just for one thing," he says. "We have to be able to manage and define the business rules that we use. ... By understanding those rules and defining the process, the business can pass those definitions through tools to IT." Livas notes that Eurobank now has business process engineers who design processes and the associated rules, then turn those deliverables over to IT for deployment.
While these cultural changes enable improved efficiency, IT is not used to having responsibility over the policies and strategies that go into developing business rules. As a result, the new way of doing business also introduces new roles for IT and business executives, such as the business analyst.
BPM and SOA
Any discussion of BPM would not be complete without mention of service-oriented architecture (SOA). According to First Horizon's Salazar, SOA and BPM are opposite sides of the same coin, and banks should keep them tightly coupled.
BB&T's Liles says he never could have implemented the
account-opening process so quickly if it hadn't been for SOA. "If you
don't have SOA, you start with simple workflows where you are not
integrating with anything," he explains. "If you want to automate and
not just manage process, you want to do [BPM] on top of SOA."
While First Horizon was implementing BPM, it was also moving to SOA, the bank's Salazar reports. "The better the SOA, the faster we can do automation," he says, adding that the reusable services created with SOA give the bank the speed to quickly deploy new solutions and products.
"If you simply use a BPM platform without an underlying architecture, you can get value," says Lombardi's Gilbert. But "to do this at scale and make it an organizational competency, you will need to have an underlying technology architecture for the part of BPM that is technology," he stresses.
As a result of its BPM initiative, Eurobank is tying together previously separate processes to add value for its customers, according to the bank's Livas. "We can offer more-sophisticated, bundled products" with the new level of automation, he says, adding that the bank markets the combined products. For instance, customers that fill out a mortgage application also will have provided the information needed for a credit card, which the bank now can offer them on the spot, Livas relates.
BB&T similarly has added value to its services following its BPM implementation. BB&T's new online account-opening system, for example, allows new and existing customers to open accounts, receive approval decisions and transfer funds into a new account from BB&T and other banks immediately, according to the bank's Liles, who adds that BPM also has enabled the process to be completed across channels. If a customer begins account opening on the Internet and runs into problems, he then can call the call center and a customer service representative will be able to find the in-progress application. "They can pick it up and complete it for the customer over the phone," Liles says.
BB&T's BPM implementation has also led to increased sales, reduced costs and improved customer experience, Liles continues. Completed and funded applications per month rose by a factor of five and the number of employees required to maintain Web applications fell from 20 to 3, he says. Further, exceptions for account opening are less than 5 percent, Liles adds.
BB&T's online account-opening system also received high marks from Forrester, which said that it "promises to be the envy of the industry." And the bank is already leveraging its BPM solution to other areas of the bank, Liles says, noting that it currently is building a centralized dispute-management system and launched a lead-management system for merchant checking and payroll in early June.
First Horizon's Salazar says he measures his success by the fact that he continues to get approval for more BPM projects throughout the bank. But there are more-tangible results, he points out. "[BPM] has measurably reduced internal costs related to operations processes and reduced service turnaround time at customer touch points," Salazar says.
Similar reported results of BPM implementations across the industry have made a believer out of Forrester's Pilecki. "I love BPM," she says, adding, "It's not going to solve all the problems of the world, ... but if banks haven't looked at it yet, they really should. It's a critical tool in financial services."