Panagiotis Leontios

BPM vs. ERP

In Business on 19/05/2015 at 4:46 pm

versusThe following questions are still valid in contemporary businesses:

  • How does BPM compare with ERP?
  • Does BPM compete with ERP, does it replace ERP, or can it co-exist with ERP?
  • What is the value of BPM to me?
  • Which should I do first?

Let’s start by defining the two “opponents”:

ERP (Enterprise Resource Management):  In simplified terms, I see ERP as a way to integrate the data layer of different processes (e.g. AP/AR, Payroll, Order Entry) within larger processes (e.g., Financials, HR, SCM). Although workflow is an embedded part of any ERP system, it is not intended to support enterprise processes. The workflow itself is functionally-driven (e.g., materials management) vs process-driven, where the process can potentially span many different functions (e.g., requisitioning, recruiting). The value ERP provides is an integrated system and single view into customer data. The data is updated on demand. Customers expect ERP to support their processes, but often they have to change their process to match ERP best practices. As a result, ERP software and implementation costs are significant.

BPM (Business Process Management): In contrast, BPM enables users to create business applications incorporating different people, data and documents, which in turn span multiple divisions, systems and/or data sources. Process function is almost irrelevant. In a structured BPM scenario, workflow activities derive from specific rules (i.e., roles, responsibilities, policies, procedures, deadlines, escalations). In a dynamic BPM scenario, users completely control routing in run-time. The value BPM provides is a platform to create multiple applications that improve productivity (effectiveness, efficiency), greater business agility (traceability, innovation, optimization), and ensured compliance (auditability). Furthermore, process definition components are reusable and changeable.

BPM might compete with and/or replace ERP on smaller scale projects. BPM absolutely compliments ERP by creating a “single view” into processes spanning multiple groups/systems (e.g., customer on-boarding, purchase requests). BPM also covers processes that fall completely outside of ERP systems such as Correspondence Management, Project Management, and Action Tracking.

BPM provides visibility to all process participants across an entire process that spans different functions. Think of BPM as the infamous conveyor belt in an assembly line circa early 20th century. Every worker can see the next item coming and are prepared to perform their assigned task in a timely manner, then it moves to the next worker, etc. ERP can’t provide this view, and that’s why users have to resort to conventional communication like phone calls and emails to check on status of a particular transaction. For example, imagine a transaction that spans few tasks within multiple departments. It’s like trying to find a needle in a haystack. BPM on the other hand, is “pushy” by nature. Once a task is done, BPM pushes it to the next person wherever they are. BPM will ensure compliance with time, resource, business rules, and output levels as pre-defined by the users, which is exactly what ERP lacks and hence the need for BPM to fill that void.

BPM is focused on process deliverables & measurement of how well they’re done. That counts the most vs. ERP which is focused on “how” data is transferred and processed from one step to the other. Data management and integrity are important, but that doesn’t ensure a company’s survival. What ensures it is the ability to maximize use of resources to “accomplish” something, be it a transaction or a process outcome. When was the last time we heard that ERP measures how well a company processes invoices on time or can gauge how much it costs to process one? BPM is all about measurement and performance improvement, and not just feeding of data.

Which comes first? BPM or ERP? For those companies, especially in developing economies, that are in the process of migrating from manual processing, the conventional wisdom calls for moving 1 step up. What is this step? It’s getting used to work according to well-defined processes! BPM, ERP, and any kind of migration is considered a cultural shift in how work gets done. It’s not about automation. It’s all about changing how people work and interact with each other. To soften the impact of ERP system and the complexities most users face while trying to get to grips with it, an intermediate steps is needed. BPM can be considered as that step before an organization gets engaged in a full-blown ERP implementation. It’s fast, clean, relates to what users do every day, and the technology isn’t as intimidating. What can take years trying to implement, can take weeks to get users working systematically. What is often overlooked is the fact that ERP service providers start with mapping processes as a prerequisite. Then the same ERP service providers forget about the users and start engaging in defining systems parameters and fitting the processes into their solution which can take months on end without impacting how users. How about just stopping at mapping these same processes and having users utilize a BPM for few months before engaging them in ERP? The effort won’t be wasted as these processes will be migrated and linked to their relevant ERP modules.

Is there an additional cost to going BPM first then ERP? Sure. On the technology level companies will have to invest in BPM. However, on the services side, all the effort spent on building BPM won’t be replicated when migrating to ERP, if done right. Regardless of the additional cost, BPM pays for itself as it has a proven ROI. Additionally, the cost of softening the impact of migrating to an ERP system is worth the extra investment in BPM.

Lastly, building on the last two points, often ERP implementations are derailed due to trying to fit processes to pre-defined ERP system parameters. More than often, the users will have to change the way they work to fit a certain ERP template. On the other hand, changing processes and how a certain process functions at the BPM level is a breeze. It takes a short time. How short? Literally minutes! Try to make perform the same changes at the ERP level. Time and cost are often major constraints with the added costs associated with upgrading a customized ERP solution.

Original post by Sami Sultan.

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