 | Level: Introductory John Medicke (medicke@us.ibm.com), Architect, IBM
Brian Hall (halljb@us.ibm.com), Solutions Developer, IBM
Bill Reed (billreed@us.ibm.com), Solutions Architect, IBM
01 Jun 2004 Some technologies are so extraordinary, they ultimately redefine the IT industry. The PC revolutionized personal computing, and enterprise resource planning (ERP) transformed core business applications. Business performance management offers the same potential for business intelligence. What is business performance management, why is it revolutionary, and how do you create a business performance management solution to exploit its capabilities? This article is the first in a series that addresses these questions and defines business performance management, explains the value it can bring to your organization, discusses inhibitors to success with business performance management, and highlights how the IBM business performance management offering can overcome these inhibitors to deliver a significant return on investment.
Introduction
In the past, business intelligence (BI) was hindered by a set of business and IT constraints that prevented a full transformational effect on business. Business performance management is a convergence of technology that removes these hindrances through integration and enhanced technology to help streamline business transformation. Business performance management comprises business intelligence, business process integration (BPI), business systems management, and collaboration (human interaction). These capabilities provide tight integration of operational and analytical environments, business and IT environments, and strategy with daily operations. Business performance management combines business processes, information, and IT resources, aligning your organization's core assets -- people, information, technology, and processes -- to create a single integrated view, with real-time intelligence, of both its business measurements and IT system performance. This integration of resources allows your organization to obtain business information faster, respond more quickly to market trends and competitive threats, and improve operational efficiencies and business results -- all attributes of an on demand enterprise.
The business performance management (BPM) offering from IBM is defined by a set of domains that creates a comprehensive infrastructure for monitoring, managing, and executing business performance information. These domains are:
- Business rules domain
- Enables the exploitation of business rules for dynamic business process control and adaptive performance management
- Workplace domain
- Delivers a collaborative workplace for users with specific role-based perspectives on performance management
- Business systems domain
- Bridges the gap between business and IT for systems management, enabling a business viewpoint on IT operations and an IT viewpoint on business events
- Process domain
- Provides tools and runtime engines for modeling, integration, management, and continuous improvement of business processes
- Common event infrastructure (CEI)
- Provides integrated enterprise delivery of business and IT events
- Information domain
- Specifies the technical interfaces that partners can exploit to analyze and report real-time business events and performance information
In this series, we'll define business performance management. We'll also describe the architecture of a business performance management solution and provide a detailed implementation of this kind of solution using an industry scenario. You'll learn about the technologies involved, including IBM products from DB2, Lotus, Tivoli, Rational, and WebSphere brands. Integration techniques for development of a business performance management solution are also highlighted.
Articles in this series cover:
- Introduction to business performance management
- Understand business performance management architecture
- Build a business process monitor
- Build a strategic analytical system
- Empower people
- Manage performance proactively
- Bring business context into Tivoli IT management
Overview
Around 1492, there was a discovery that would forever change commerce throughout the world. No, we're not talking about Christopher Columbus, but Lucas Pacioli and his invention of double-entry bookkeeping. Since then, financial management and management by numbers continue to increase in importance to such an extent that no business today, whether small or large, makes decisions without financial data in hand.
This need for financial management gave rise to management-decision support systems driven by repositories of financial information. The repositories evolved into central warehouses of historical information called data warehouses. Managers quickly realized that the data warehouse was useful for more than just financial information; it could be used to better understand customers, to enhance marketing and merchandising, and to optimize their supply chain. The benefits of tapping into this information have turned business intelligence into a multibillion dollar business.
Business process integration arose from the need to connect applications together. Application APIs evolved into remote procedural calls (RPCs) between applications, which gave rise to enterprise application integration (EAI). EAI extended the point-to-point connection with an integration hub that provided transformations, routing, and coordination. It quickly became clear that the value of this external integration node extended beyond application integration -- it could also be used for externalization of processing from the applications.
As a result, business processes were no longer locked inside individual business applications. By moving the business process outside of each application and associating it with a set of modeling and process choreography tools, new levels of flexibility were introduced into the business environment. If the business process needed to be modified or extended, it was no longer a code development effort.
This flexibility meant businesses were presented with new opportunity. The growth of business intelligence provided information about business performance. And BPI provided a vehicle for process reengineering to improve business operations. If these two attributes could be combined, a more intelligent and flexible business process environment could be created.
Overcome inhibitors to business performance management
Several business and IT hindrances stand in the way of a successful business performance management solution. We'll discuss these inhibitors and how to deal with them. A sound business performance management solution must address the inhibitors; responding to them within the context of the solution can dramatically improve return on investment. We will also lay the foundation for the scenario and solution that will be discussed throughout this series.
The following table describes the inhibitors and suggests ways to overcome them.
| Inhibitors to business process management | How to overcome inhibitors |
The monolithic application
This application subsumes all business activities, operations, and processes under its wing. If you need to make changes to a process, the application also requires modification -- at significant cost. This type of application creates inflexibility within your business processes; monolith applications are often compared to wet cement prior to installation, only to become hardened cement after installation. |
To achieve more flexibility in processing, it is important to begin adopting a component model. Architectures like service-oriented architecture (SOA) provide a sound model for moving from monolithic all-in-one applications to a portfolio of business components that can be choreographed into various types of business process flows. These components are not only end points for business operations, but add to the business performance management ecosystem by contributing events across the common event infrastructure. | Information overload of the business intelligence environment
A manager stated that he printed more than a thousand BI reports daily. Clearly, such a large volume of information is impossible to handle. Finding important or critical data becomes extremely difficult in a mountain of reports. | To manage large amounts of data requires a realignment of the business intelligence food chain so that it is driven by strategic thinking. Key performance indicators (KPIs) aligned to strategic targets help establish what is important for business growth. By restructuring business intelligence reports to focus on key performance indicators, many reports can be reduced, allowing management to focus on important data. | Stale information
Information contained in reports quickly becomes irrelevant because populating data warehouses and printing reports are usually extremely time-consuming processes. Once complete, the information is often already too old to be useful. | To keep data relevant requires reduction in latency of information updates. The key is moving to a more real-time business intelligence environment. Several reasons contribute to stale data: the difficulty of the extract, transformation, and load (ETL) process for the data warehouse and the processing time required for the roll-up of the enterprise repository and data mart. But, there are alternatives. By capturing business measures directly in the BPI environment, this data can bypass the ETL processing and be immediately available for analysis. | The action gap
You need the ability to transition from business intelligence data to actionable knowledge and finally, to take action. Important data often does not impact the business because there is no linkage of the data with an action. | To fully utilize data requires the business to operate in a processing environment that is event-, analysis-, and action-driven. The technology of business performance management facilitates the sensing, detecting, deciding, action, and feedback loop necessary for making performance management actionable. It enables automation of daily management (for example, when a product is out of stock, the reorder is automated) and the reengineering of longer-term strategic processes. | Organizational and communication barriers
The way that people in an organization communicate can negatively impact business performance. Inefficiencies in execution arise if teams are isolated and do not share data or collaborate on solutions. | To maximize communication, the organization needs a collaborative component that breaks down organizational barriers and facilitates communication. The business performance management process provides this capability through problem-solving collaboration at the analysis level to understand what is wrong and how to fix it. Role-based user notifications are required at the alert level to inform the appropriate people of the need to address a problem. It also means coordinating all the users working to solve the problem through people integration and BPI workflow. |
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Understand new BPM-enabling IT technologies
So how can you overcome these obstacles to make business performance management a business-transforming activity? By leveraging several key new technologies and the convergence of these technologies as an integrated solution. Take a closer look at some of these technologies.
Business process integration
Every organization's business processes are different. They are often extremely fluid, continually evolving, and hopefully, improving over time. However, if those processes are locked inside homegrown custom applications or purchased package applications, there is significant effort and cost in changing the process. BPI extricates the process from the application into an environment that allows for easy management and modification of the business process. This capability puts tools in the hands of business people so they can manage their own business processes. See Figure 1 for an example of business process integration.
Figure 1. Business process integration
As Smith and Fingar state in their book, Business Process Management - The Third Wave: "Once embedded in a computer program, the IT department owns the process - forever...Give ownership of the business process management back to the business people."
BPI involves three primary activities:
- Modeling
- Allows the business user to describe the current business process, to model the new business, to simulate the execution of the business process to determine the derived benefit of the new business process, and to fine-tune the business process iteratively.
- Execution
- Provides a runtime component for the execution of the business process and for the integration of the process with applications and with people participating in the process.
- Monitoring
- Allows for the capture of business measures associated with the process. These measures provide real-time business performance management data for business people on the execution of business processes and how they relate to their key performance indicators. The measures also create a historical record of actual process execution that can be used by modeling activity to do the next generation of simulation and process improvement.
Performance management
Strategic performance management systems allow for the definition, monitoring, and management of strategic business measures. These systems are a product of the evolution of a business intelligence reporting system to strategic management systems, providing key performance indicators and scorecard capabilities. They include the fourfold balanced scorecard reporting capability of:
- Financial performance management
- Process performance management
- Customer performance management
- Employee development performance management
With these strategic systems in place, the performance management environment transitions from a report warehouse to an integrated and aligned strategic system. Various business intelligence reports are linked to strategic key performance indicators measures that support business goals. Performance management systems can be combined with strategic planning systems that allow business people to collaboratively set strategic targets, as shown in Figure 2.
Organizations that are improving financial management through activity-based costing (ABC) can institutionalize the management of ABC in their strategic performance systems. The process or activity chargeback approach of ABC increases the manageability of process reengineering and provides better data for strategic management.
When combined with BPI systems, this approach allows a coordinated management of process improvement for the enterprise, with integrated strategic measurement of the improvement. It allows the business to drive business improvement at every level, from the corporate to the divisional to individual business activities -- all while maintaining the necessary strategic alignment.
Figure 2. Strategic performance management systems
Collaborative portal technology
Portal technology provides flexible role-based integration of the applications and processes that an organization uses. This technology, as an aggregation and unifying technology, eliminates many of the adoption problems of new business systems. Portals also allow for standardization of user interfaces, which helps eliminate user confusion and frustration with new business systems. Portals serve as an aggregation point, letting users easily find the business system or business report they need to access. This accessibility increases usage of the new operational system or analytical report, creating more opportunity for real process improvement. In addition, portals allow organizational structures to be represented through portal places and role-based application views. This transparency provides a human touch to the process and improves employee receptiveness with process change.
Collaborative components, shown in Figure 3, increase communication among employees, allowing members of organization teams or virtual teams to easily locate each other, communicate, and share work and ideas. Collaboration allows teams to collectively brainstorm on performance data, increasing the effectiveness of performance analysis and improving the team resolution and decision-making process. Collaboration has multiple manifestations, including teamrooms, instant messaging and chatting, e-mail, wireless connectivity, notification systems, and Internet meeting centers for the interaction of geographically distributed teams.
Figure 3. Collaborative portal technology
Automation and business rules technology
A successful business performance management solution means that all performance analysis and action response cannot be human directed. At least some automation of analysis and notification of the potential problem situation to the appropriate person is required. In more advanced business performance management systems, you see automation of the action response itself.
To accomplish automation, the business performance management needs to have a monitoring capability of business measures and business events. With an integrated common event infrastructure and integration of the analytical environment, monitoring can source these to drive automation, as shown in Figure 4.
There are multiple scenarios of automation in the business performance management space, including automatic:
- Event correlation
- Detection of business measure out of bounds
- Detection of KPI target not being met
- Detection of business trends
- Detection of related conditions
- Notification of potential problems to a user
- Initiation of a business process for problem resolution
Automation capabilities need to involve business rules. Rule capability empowers the business person to articulate complex business conditions that should be monitored. As processes improve and the business environment changes, new conditions need to be monitored. The monitoring needs to be tightly linked to the both the BPI process management and the strategic performance management systems. BPI business measures are consumed by monitors and execute the appropriate rules to detect problem situations. New strategic KPI targets are candidates for monitoring for rules that are detecting deviations from target goals.
Figure 4. Automation and business rules
Business systems management technology
Since business performance management is a set of IT implementations -- as are the core business systems that run the business -- management of IT elements is an integral part of the business performance management solution. IT outages impact business processes, and IT problems can degrade or prevent business operations, which can directly affect strategic goals and prevent an organization from meeting its key performance indicator targets.
It is crucial to align IT operations management and systems management with a perspective on the business process and business operations, as shown in Figure 5. In the same way that ABC helps organizations understand how their capital assets are being applied to specific projects and processes, business systems management aligns systems management to business processes. Business performance management helps organizations understand what IT assets are integral to which business processes, allowing them to coordinate systems operations with business operations. This coordination can extend beyond problem management to include asset management, security management, configuration management, and other system-management activities.
Coordination keeps IT locked in step with the business as it implements business performance management, allowing events that are both IT and business in nature to share the same infrastructure and concurrently flow through dual paths of business monitoring and IT system monitoring.
Figure 5. Business systems management
Converged technology
A successful solution brings together the core technologies in an integrated fashion to help organizations leverage business performance management for real business impact, as shown in Figure 6. Now that we've introduced this business performance management and described the critical elements required to succeed, we'll look at an industry scenario that showcases how business performance management can be realized.
Figure 6. The integrated BPM environment
Business scenario
International Goods and Groceries (IGG), a super-store chain that sells groceries and household products, recently installed a Manager's Dashboard System that assists store managers in their day-to-day tasks. The dashboard, based on IBM WebSphere Portal, gives managers integrated access to store operations and to the planning systems they need to get their job done. The company has realized significant cost savings in migrating from multiple-point, legacy-system clients located in each store to an integrated Web-based desktop for all the business applications.
IGG is ready to go the next step. Early feedback on the Manager's Dashboard is that it provides tremendous value and improved efficiency. However, store managers are still overwhelmed with daily tasks and overloaded with information, and corporate reports pile up on the Manager's Dashboard. The business suffers because managers spend excessive time focused on paperwork instead of dealing with customers. IGG's upper management notice it is very difficult to roll out new policy changes and manage compliance with new strategic targets. And because the store manager is unaware of them, simple problems that could easily be resolved are unaddressed.
After attending a seminar, Sally Winston, the CIO, concludes that business performance management is the best vehicle for IGG to align the company with better strategic management. She wants to take the efficiency and productivity improvements to the next level by fine-tuning store management through an integrated business performance management system. A recent corporate task force identified internal alignment, communication, and organizational boundaries as inhibitors to adoption of new business initiatives across the corporation. The combined capabilities of business performance management along with better organizational collaboration will significantly help to address these issues.
Meanwhile, IGG stores have been rolling out Radio Frequency ID (RFID) technology for several months. Early estimates are that RFID can dramatically improve the efficiencies of their inventory management and supply-chain processing. However, Sally read some eye-opening information about RFID in a recent article titled, "Are You Aiming Too Low with RFID?". She noticed that many companies implementing RFID are making the mistake of focusing on infrastructure and production systems while ignoring where the real value of RFID lies. The article states that the value of RFID is in process transformation and in the analytical value that this new information brings about.
Sally is immediately reminded of the business performance management scenario and the value of integrated performance management aligned with BPI. She decides that in early adoption of business performance management, the company should address RFID as one of the key scenarios, which will help ensure that IGG is at the forefront of gaining real value from RFID technology. She begins to work with her IT staff to plan the implementation of a business performance management solution for the company.
Next steps
In this article, you were introduced to business performance management and the value it can bring to the organization. We also discussed some of the inhibitors to success with business performance management and highlighted how the domains of IBM's business performance management offering can overcome those inhibitors to bring about real return on investment (ROI).
Part 2 in this series covers specific user scenarios that are part of the retail business performance management project on which this series of articles is based. The scenarios serve as the use cases for the business performance management implementation. You will also learn about the architecture of a business performance management solution.
Resources
About the authors | 
| | John Medicke is the chief architect for SMB in Research Triangle Park, NC. He has worked in industry-solution development for the past seven years across various industries, including financial services, retail, health care, industrial, and government. He is the author of the book titled, Integrated Solutions with DB2 as well as multiple articles in various journals. You can contact John at medicke@us.ibm.com. |
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| | Brian Hall is a solutions developer with the On Demand Solution Center in Research Triangle Park, NC. In his spare time, he enjoys flying model airplanes and spending time at the beach. You can contact Brian at halljb@us.ibm.com. |
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| | Bill Reed is a solutions architect with the On Demand Solution Center in Research Triangle Park, NC. You can contact Bill at billreed@us.ibm.com. |
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