BPM: improving the process of process improvement

A couple of days ago I listened into Pegasystems’ annual earnings analyst call to find out what the company – the largest specialist “pure play” BPM technology provider by revenue, by my reckoning – managed to make of 2009.

Off the back of 50% license revenue growth in 2008-9, the company achieved another year of 50% license revenue growth this year – with overall revenue growing 25% to $264m. This is a company on a strong growth path, and let’s not forget: Pega is not a fresh-faced VC startup growing from zero revenue. Turning 2 consecutive years of 50% license revenue growth is a pretty spectacular result for a company that’s been going for 27 years. As CEO Alan Trefler said on the call: “it’s been a remarkable year”.

I’ve long said that BPM is one of those areas of business-IT investment which is both cyclical and counter-cyclical from an economic perspective: in bad times people look to BPM to become more efficient; in good times people look to BPM to bring products to market faster, integrate acquisitions more quickly, and so on. Bearing in mind that Pega’s heartland is financial services, it’s fair to say that the company has succeeded in a pretty chaotic environment.

What’s the secret of Pega’s success? Well, of course it’s not the only company in this space doing well – most of the pure-play vendors have been turning in very healthy growth. And its technology certainly isn’t the sexiest to look at or most instantly-consumable.

But the technology is very flexible and powerful – and on top of this foundation Pega has maintained a very tight focus on building up competence, credibility, reusable functionality and referenceability in a few key process areas – many of which relate to customer interactions (sales, service and support).

Pega is definitely “going for growth” – last year it added 60 sales & marketing staff, and 60 R&D staff. This year it’s set to do the same, with particular focus on international expansion, growing partner relationships and broadening its pre-built frameworks across more process scenarios and industries.

As part of our forthcoming set of BPM offering assessment updates, I’ll be revisiting Pega’s offering in detail in the next month or so. In the meantime if you’d like to read our free Capability Summary and Overview of Pegasystems’ BPM software offering you can get it here. Advisory service clients can read the Full Capability Assessment for Pegasystems here. For more analysis of BPM trends and best practices, click here to download free Guest Pass reports, and click here for more on our premium BPM advisory service.

Yesterday I had a briefing from Paul McNamara* and John Carione of Adobe regarding the recently-announced LiveCycle Managed Services offering.

LiveCycle Managed Services is powered by Adobe’s LiveCycle ES2 BPM suite, hosted on Amazon’s EC2 platform. The company had previously introduced LiveCycle Developer Express, also hosted on Amazon’s EC2 platform.This offering provided an online subscription service aimed at developers, helping them get started with LiveCycle quickly. What’s interesting here, though, is that Adobe is positioning LiveCycle Managed Services as a production-strength platform for customers which should be considered as fully equivalent to on-premise deployment.

Adobe has wrapped the basic Amazon hosting service with a set of management services – provisioning, support, maintenance, upgrades, backup and recovery. Support is provided 24×7 by a dedicated team of NOC staff (the staff are actually part of the team that supports the recently-acquired Omniture service). In delivering the service Adobe has traded off flexibility for security, based on what it says are customer requests: it reserves Amazon computing resources as single-tenant instances, dedicated to each customer – and additionally it encypts all data before it’s written to Amazon’s S3 or EBS storage resources.

This is not a “pure Cloud Computing” offering – with utility pricing and flexible subscription – and Adobe has wisely steered clear of trying to position it as such. It’s a set of managed hosting services that Adobe is delivering on top of Amazon’s Cloud Computing platform (and just because a Cloud Computing platform is used in some part of the supply of an end service, doesn’t make the end service also a Cloud Computing service).

The pricing model is in line with what you might expect from such an offering – the model is based on an annual subscription. Customers pay for the components they use; annual pricing is set at 85% of the cost of a perpetual on-premise license for the same components. Adobe can offer customers a staging environment as well as a production environment; staging resources are priced at 50% the cost of production resources.

Adobe is pitching this as a way for customers to get started with new LiveCycle projects quickly, proving the value internally before potentially investing in on-premise infrastructure and management services to support internal deployment. However it also believes that LiveCycle Managed Services will be attractive as a continuing alternative to on-premise deployment for prospects in industries like retail, construction, mining and utilities where the geographic distribution of users and/or the lack of appetite for investment in-house IT infrastructure makes on-premise deployment difficult to sell. It’s too early to tell how strongly this new model will be taken up by customers, so we’ll be watching Adobe’s progress with interest.

*As an aside Paul is titled “Entrepreneur in Residence” at Adobe, and is responsible for Adobe’s “enterprise Cloud” business. He’s ex-CEO of innovative application-development-in-the-cloud provider Coghead, which was absorbed into SAP at the start of 2009 when its venture funding commitments fell apart.

Today Salesforce.com formally announced the availability of a new element of the Force.com platform – Visual Process Manager.Visual Process Manager is a toolset and platform for modelling and executing workflows that’s integrated into the Force.com platform. It’s based on technology acquired from call-centre automation specialist Informavores in 2009. Prior to this, Salesforce.com only had a *very* limited workflow capability on-board.

There are four main pieces to this newest element of the Force.com platform:

1. A graphical process design tool
2. A form / wizard designer for specifying user interfaces for process participants
3. A “process simulator”. Right now, it’s not yet clear to me how much this offers “real” simulation functionality – but that’s not necessarily an issue, frankly, bearing in mind how much organisations use deep process simulation in anger in mainstream BPM work
4. A runtime engine.

Although Salesforce.com pitches Visual Process Manager as something that will “help companies rapidly automate any business process”, it’s important not to get too carried away: Visual Process Manager can’t currently be reasonably compared to the tools and platforms of best-in-class specialist BPM providers. Nevertheless, that’s not really the point.

There are plenty of specialist BPM technology providers out there forging ahead with plans to create scads of innovative new features for those customers with heavy-duty process improvement and automation requirements. The general software platform providers (IBM, Oracle, SAP, TIBCO, Software AG, Progress) are getting in on the act too, and they’re looking to extend today’s market by offering large enterprises BPM functionality alongside lots of complementary software infrastructure.

But the real untapped opportunity in the market for BPM-related technology is in addressing the needs of organisations that don’t currently express requirements for specialised BPM tools – but they do want tools that can help them work smarter. They’re more likely to be attracted to low-cost, lightweight process improvement tools that can easily fit into their existing environments without requiring big commitments or culture shifts.

Visual Process Manager looks like being a really interesting development not because it’s an arse-kickingly advanced BPM toolset, but because:

1. We know from our research that the most commonly focused-on business areas for process improvement are those relating to customer interactions (sales, service, promotions, and so on).
2. Visual Process Manager is integrated with Salesforce.com’s existing Sales Cloud and Service Cloud applications, so customers of those applications can start building more sophisticated workflows straightaway.
3. Visual Process Manager is part of the Force.com platform so it’s a capability available to any Force.com application developer.
4. As mentioned above, prior to this, even entry-level workflow functionality was conspicuous by its absence from the Force.com platform.

Lastly – let’s not also forget the very likely integration of Salesforce Chatter (about which, more here) with the Visual Process Manager runtime. One of the hot developments in BPM right now is “social BPM” (see our recent free webinar) – well Salesforce has probably  just side-stepped into that arena with a deft shimmy. (This is one of the areas I’ll be keen to dive into when I hear more from Salesforce in a few days).

Today, one of the gradually-evaporating pool of specialist BPM technology providers – Appian – shared some details of its trading in 2009. We’d already seen revenue increases of 20-30% from some of the other pure-play vendors, but Appian’s figures today do yet more to demonstrate the power of BPM discipline, and the specialised technology that can be used to supercharge it – even (or especially) in hard economic times.

The highlights: in 2009 Appian’s license revenue grew 67% and its customer base more than doubled. Additionally, “international” (ie non-US) revenue grew 59%. In my book this means Appian actually has more opportunity to draw on internationally: here, it’s building on a much smaller base, and all other things being equal, I would be expecting international revenue to grow at least as fast as US revenue in 2010 (although this depends in part on how much US stimulus-related money washes Appian’s way via its deep links into US Government agencies).

Business process improvement is one of those rare business-technology investment areas which appears to be pretty immune to economic cycles. In good times, organisations look at BPM to help them bring products to market faster, enter new markets faster, buy competitors more efficiently… in bad times, organisations look at BPM to help them wring cost out of their business.

The company is privately-held, so full disclosure is hard to come by – these figures are naturally the most exciting highlights. Although Appian is making a lot of noise about the takeup of its on-demand offering (Appian Anywhere) it’s not yet published hard facts about revenue, so it’s difficult to say precisely how much Appian Anywhere has contributed to the company’s growth. Nevertheless customers we’ve spoken to (and researched in-depth – see our case study of Appian customer Surrenda-Link Investment Management) see real value in the ability to work and explore a BPM opportunity in an environment which doesn’t demand big up-front investment.

There’s no doubt that today, Appian is a robustly healthy contender in the market for specialised BPM technology. 2010 should be a very interesting year for the company given the shifting competitive landscape.

You can read our free Capability Summary and Overview of Appian’s BPM software offering here. Advisory service clients can read the Full Capability Assessment for Appian here. For more analysis of BPM trends and best practices, click here to download free Guest Pass reports, and click here for more on our premium BPM advisory service.

Progress Software announced today that it has acquired Savvion, one of the (slightly diminishing) pool of specialist independent BPM technology suppliers. The acquisition comes hot on the heels of IBM’s acquisition of Lombardi, and it’s likely that the two acquisitions are in part related: Savvion, like Lombardi, was venture-funded and it would be no surprise if Savvion’s backers had been keen to secure an exit via a company sale.

For Progress, though, this is without doubt a smart move. Early in 2009, the new CEO (and former COO) Richard Reidy laid out his ambition that the company would double its revenues to around $1bn by “reorienting sales towards multi-product suites, as well as aiming marketing messages more at business executives than IT workers”. At the time, I wrote a post highlighting Progress’ marketing and positioning challenge.

Since then, Progress has settled on a unifying theme around which to try and pull a set of customer offerings together: operational responsiveness. In the company’s own words: “operational responsiveness is the ability of business processes and systems to respond to changing conditions and customer interactions as they occur, enabling business leaders to capitalize on opportunities, drive greater efficiencies, and reduce risk.”

The obvious challenge: until now, Progress had a number of assets (Apama, Actional, DataXtend, etc) to help companies capture and analyse intelligence about changing conditions and customer interactions – but it had no direct way to tie this to a system to help customers drive responses in business processes. The Savvion acquisition plugs this gap – and at the same time, it helps Progress more directly engage business executives in conversation.

I say in theory, because Progress has historically been very much a technology company for technology people – and indeed a very significant proportion of its revenue has come from third-party licensing of its platform. Savvion can of course help it take its messages to line-of-business audiences, but this will be easiest if the Savvion brand and people remain. At the same time, though, Progress needs a level of integration (of ideas and philosophy if nothing else) from Savvion in order to pull a “1+1 = 3″ story together.

So – just as is the case when any infrastructure technology company buys a BPM specialist (just ask any Fuego employee from when the BEA acquisition happened, or indeed any Staffware employee from the time of the TIBCO acquisition) it’s a fine line that Progress has to tread. If it succeeds, the Savvion acquisition could be a very important piece of the puzzle that Progress has to solve as it seeks to make Reidy’s vision a reality.

For Savvion customers, based on past experience (see acquisitions of Apama, Actional etc) it’s likely that Progress will in the short-to-medium term at least give the company a decent amount of autonomy – so there’s likely to be little initial downside to the Progress acquisition.

Just before the Christmas holidays, I published a “gut reaction” post on the newly-announced acquisition of Lombardi by IBM. The post was written before I’d had a chance to hear the analyst briefing, and since then I’ve had the chance to hear more from both IBM and Lombardi and so it’s only fair that I revisit my initial take.

Here’s my updated take in just a few words: it’s not wholly surprising to see Lombardi get bought, but the acquirer was still a bit surprising. How IBM positions and sells Lombardi’s technology is the fulcrum on which IBM’s strategy will work (or not), so getting this right is crucial. The danger is that Lombardi’s proposition gets diluted to homeopathic strength, and it just ends up as a tint on the packaging of WebSphere products.

If you’d like to read more, here it is…

The title of my earlier post was “Holy crap, IBM is buying Lombardi“. Why such an eye-catching title? After all, software companies get bought by other software companies every day – and IBM is responsible for a big chunk of that (it spends $billions on software company acquisitions every year). Open-source BPM software vendor ProcessMaker’s Brian Reale, in a market economics-focused post, points out that, based on numbers from IDC and others, the market for BPM technology looks to be ripe for VC-fueled activity.

The reason for the post’s title was twofold, really: first off, IBM’s public position on BPM until the point it announced the planned Lombardi acquisition was pretty much “we have BPM covered, thanks to our WebSphere and FileNet portfolios.” Indeed as MWD’s own assessment of IBM’s BPM offering shows, its challenge is not one of a lack of BPM products. Secondly and more pointedly, Lombardi’s public position was pretty much “anti-IBM”. As I pointed out in my last post, this is true from a product and technology perspective: but it was also true from a marketing and positioning perspective. Lombardi President/CTO Phil Gilbert, for one, had made no secret of his disdain for IBM’s BPM rhetoric.

Looking at this from another angle, the big gap between Lombardi’s market position and IBM’s was, according to IBM’s Craig Hayman (head of the WebSphere division), the real driver behind the acquisition: as he said on the analyst call, “we’ve been looking to expand our BPM conversations with business managers, and we’ve been consistently getting one answer when we try and do this – Lombardi“. But IBM is trying to straddle a particularly pointy fence here. By validating the value of Lombardi’s “business focused” position, it’s exposing the truth about the position it had itself tried to project – of a set of IBM tools and people that could talk to business managers as well as IT folk. Clearly, this was more aspiration than reality – but IBM doesn’t want to talk about this, quite understandably.

This dilemma is probably behind the strange position (explained nicely by Bruce Silver) that IBM tried to attach to the Lombardi offering in its initial calls and presentations about the acquisition: that Lombardi is for “departmental” BPM and that the rest of IBM’s offering is about “enterprise-wide” BPM. This just doesn’t make sense (and in a later call I had with IBM it was acknowledged that there’s more work to do).

What IBM probably can’t bring itself to say instead is that the Lombardi offering is “business-focused” – designed 100% around enabling businesses to quickly deliver targeted value in solving their process problems; whereas the WebSphere (and FileNet, to a lesser extent) BPM piece is much more naturally aligned with the comfort zones of big enterprise IT shops and a more traditional (highly structured, controlled, slower) way of translating requirements into software systems.

So where does this leave everything?

Although I previously highlighted how different Lombardi’s and IBM’s BPM technology offerings are, I don’t think that the delivery of an integrated stack of products is at all vital in this acquisition. Certainly, it’s nowhere near as important as IBM retaining Lombardi’s combination of smart sales, marketing and development groups – and clearly and accurately positioning Lombardi’s offering vs. the rest of IBM’s BPM portfolio. If IBM can keep a critical mass of Lombardi talent on board and learn from them, rather than forcing them to fit into a general-purpose IBM template, then it will do absolutely no harm if Lombardi’s products remain almost completely ring-fenced – at least in the short term. Work on things like BPMN 2.0 support should, over the next few months, enable IBM to deliver interoperability for customers where it really matters – even if conceptually the result is less than elegant.

Echoing something that Mark Smith of Ventana blogged recently, I too wonder whether – taking all the above into account – WebSphere is the best place for Lombardi. The recently-created Business Analytics and Process Optimization division of IBM Software actually seems like a more natural fit. Ambuj Goyal, the guy leading this new division, is very much building it to be centred on business-focused solution selling and productised services – rather than just a list of software products. Everything about how this division is being built shouts “business relevance” – rather than “IT relevance”. Let’s wait and see, though.

As Craig Hayman said on the analyst call before the holidays: “You will challenge us to make sure we do the right thing and don’t screw this up.” IBM is very experienced at the mechanics of software company acquisitions: I’m really hoping it also gets the soft stuff right here, because I’m an advocate of business value for IT customers – not of value for IT company shareholders.

With that in mind, what does this mean for Lombardi customers? Well, if IBM can live up to the promises it’s made about continuing to support Lombardi customers and avoid drowning Lombardi in Blue-wash, then I think we’re all good – and along the way IBM certainly has a lot to gain, too. The biggest danger is that some kind of organisational immune reaction within IBM occurs, Lombardi can’t take the position that it should, and its strengths are diluted so it ends up as a homeopathic remedy which only shows up as a tint on the packaging of the WebSphere portfolio.

I’m scheduled to be revisiting IBM’s WebSphere and FileNet offerings in our assessment programme in the next couple of months, and with any luck I’ll be able to capture Lombardi post-acquisition too. So watch this space for more detail as things shake out.

You can read our free Capability Summary and Overview of IBM’s BPM software offering here, and the Overview of Lombardi’s offering here. Advisory service clients can read the Full Capability Assessment for IBM here, and for Lombardi here. For more analysis of BPM trends and best practices, click here to download free Guest Pass reports, and click here for more on our premium BPM advisory service.

For perhaps no other reason than to chart the rise of the blog as a marketing/promotion/positioning tool, it’s interesting to see how some of Lombardi’s competitors have used corporate blogs to publish reactions to the recent news of Lombardi’s impending acquisition by IBM.

Here’s Appian’s take from CEO Matt Calkins (fun quote: “Lombardi has now marginalized itself, and will soon be entangled in the IBM stack.”)

Here’s Pegasystems’ take from CEO Alan Trefler (fun quote: “Having multiple BPM suites that rely on excessive integration is a recipe for frustration.” Although I disagree with Trefler’s comment “They say they will ‘preserve’ Lombardi within its mix of disparate stack applications… is that a good idea? We don’t think so.” What’s the alternative? Tell all Lombardi’s customers to go jump off a bridge? There’s clearly a challenge here, but IBM would be mad to curtail support for Lombardi customers.)

Here’s an irreverent take from Software AG’s Miko Matsumura (fun quote: “For a Venture Capital backed company, the term ‘undisclosed sum’ is almost like ‘left to spend more time with his family‘”. This is sleight-of-hand: IBM never discloses the sums it pays for privately-held companies it acquires, quite possibly to avoid giving any future acquisition targets clues as to what IBM is willing to pay.)

Lastly for now, here’s something from the horse’s mouth: IBM’s Angel Diaz (fun quote: “Lombardi’s department-level approach to delivering process management complements IBM’s existing strengths in enterprise-wide process management software.” This “departmental” positioning of Lombardi is something that a number of commentators have already picked up on, and I sense that IBM is already starting to revisit that to refine it.)

Of course it’s important to take all these posts with a pinch of salt – in my book they fall under the heading of “well they would say that, wouldn’t they”. But there are interesting nuggets in there nonetheless.

Thomas Stoesser from Software AG posted an entry on the AlignSpace blog yesterday titled: “We are still alive“. The fact that he felt the need to write the post says it all…

As I said to one of the company’s BPM competitors in a call recently, AlignSpace has some really interesting features and potential as a collaborative process analysis and design environment (I saw what I think was the first public demo in the UK a few weeks back). The problem is, it’s been extensively trailled but there’s been very little follow-up and people are starting to wonder if the company is really committed.

I can understand how the acquisition of IDS-Scheer might have forced some reappraisal of AlignSpace – but heavens, this was positioned as not only a tool, but also a social knowledge and practice sharing forum. Surely the most basic thing Software AG should have been doing – regardless of the ultimate fate of the tool/environment – was continuously communicating with the many people who expressed an interest in taking part in the community and getting access to the service.

Thomas has promised to provide more concrete detail of Software AG’s plans soon… I worry that the company’s in danger of running out of time (and others’ attention), so let’s see.

Just a few minutes ago I saw a tweet from Lombardi’s Phil Gilbert announcing that IBM is buying Lombardi – one of the most high-profile and successful of specialist BPM technology vendors.

There’s going to be a briefing from IBM a little later today so I’m not yet in full possession of the detail – but with that caveat, here’s my off-the-cuff reaction for anyone who wants it:

• Lombardi has built a very significant market presence in BPM and as an independent analyst who’s looked deeply at the products and services it offers, I’m a strong supporter of its capabilities and approach. Of course it’s not the onlyspecialist vendor out there with strong capabilities (Appian and Pegasystems also spring to mind), but I do think it does a lot of things very well.
• Lombardi is not a company that was outwardly showing any signs of commercial distress. Although the company is privately held and therefore its financials aren’t 100% transparent, based on briefings I’ve had there’s every reason to believe this is a company that’s been growing strongly – riding off the strong demand in BPM over the past couple of years, even despite (and partly because of) the recession.
• IBM is a company which already has a very broad set of BPM capabilities, even if they could be more smoothly integrated – and it’s been promoting itself as a BPM vendor for some time. This acquisition isn’t about breaking into the BPM market.
• The former FileNet products provide some really good capabilities, and WebSphere has some good stuff too. What’s more IBM has done a lot to push its BPM story forward in the past year – BPM BlueWorks and Business Space are two key areas where the story has been made much stronger. Not to mention the integration of ILOG into the mix. Nevertheless my view was always that if anything, IBM needs to put *less* BPM product in front of customers, not more.
• Although the strengths of Lombardi’s tools are different from IBM’s there is almost 100% product overlap. What’s more the design philosophy of Lombardi’s offering is almost diametrically opposed to that of IBM’s offering – many of Lombardi’s strengths come from its tightly-integrated toolset and repository. It’s not straightforward to see how these things can come together to form a coherent portfolio – unless they’re basically fenced off from each other and positioned as supporting different kinds of BPM scenario (with Lombardi focused on “people centric” processes, WebSphere on “system centric” processes). That brings its own challenges though, particularly for FileNet.

Right now, this is one analyst with a whole heap of questions: this isn’t one of those acquisitions where I think “well duh, of course”. I’m hoping that the rationale for this deal will be clearer to me later in the day. I’ll update this blog later once I know more.

UPDATE 22:00 – I listened to the IBM/Lombardi call but didn’t really learn anything that wasn’t in the press release (+ Phil Gilbert’s Global BPM piece). I still have lots of questions. I might have an opportunity to ask some on Friday; so more to come from me on this. In the meantime take a look at Bruce Silver’s blog: he makes some good points (particularly about the “departmental” vs “enterprise” positioning conundrum – this is something I feel, too).