Industry Research
Publication Date: 21 July 2005                                                                ID Number:...
TABLE OF CONTENTS

1.0       Management Summary .............................................................................
LIST OF FIGURES

Figure 1. BPM Portfolio ....................................................................................
ANALYSIS

1.0       Management Summary
There are many drivers for adopting business process management (BPM), and it has t...
3.0       BPM as a Dynamic Portfolio, Not a Static Package
The Gartner definition for BPM is, "the management of all the p...
Figure 1. BPM Portfolio

                                              BPM Life Cycle
 1. Business
 Process
 Analysis     ...
runtime environment needed to make the process work in real time. Again, a powerful
           combination exists between ...
as data. This solution set is further enhanced by the addition of the WebSphere Process
           Choreographer. This too...
Figure 2. BPM Impact on Gartner's Architecture Perspective


                                            Business (ISF) Ar...
•    BPMS includes rule engines and process analysis, which define how a process is to be
           carried out or optimi...
so that auditors can understand not just what the risk value is, but also how it was derived. Using
the rule engine, event...
These points summarize the issues that will drive the increasing adoption of BPM in investment
services.

6.1       Regula...
and make them cheaper to maintain. A mapping of all rules will enable ISFs to identify quickly
and accurately which applic...
Figure 3. The Vendor Constellation

                         Pure BPM
                    (+ Workflow, + ECM)
            ...
7.3       CRM Vendors
CRM vendors traditionally had horizontal offerings, but they rarely delivered a good functional fit
...
•    The staff required to deploy and maintain the solution, as well as maintain the rules and
           process by busin...
9.1       "The Disconnect"
When the left hand doesn't know what the right hand is doing — This is prevalent in ISFs that
h...
•    An ISF that has never used BPM before should start cautiously. Plan strategically but —
           at first — deploy ...
REGIONAL HEADQUARTERS

Corporate Headquarters        European Headquarters         Asia/Pacific Headquarters   Latin Ameri...
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Business Process Management Can Differentiate Investment ...

  1. 1. Industry Research Publication Date: 21 July 2005 ID Number: G00129997 Business Process Management Can Differentiate Investment Services Firms Peter Redshaw Investment services firms regard process excellence as a major differentiator. However, many lack the streamlined processes required for new business, customer service and operational transactions. Where BPM can be applied, to what end and by whom are key market issues to consider. © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.
  2. 2. TABLE OF CONTENTS 1.0 Management Summary ........................................................................................................ 4 2.0 Building a Business Case for BPM in Investment Services Firms ....................................... 4 3.0 BPM as a Dynamic Portfolio, Not a Static Package ............................................................. 5 3.1 BPM and Continuous Improvement ........................................................................ 5 3.2 BPM for Re-engineering .......................................................................................... 5 3.3 The BPM Portfolio and Its Components .................................................................. 5 3.4 What BPM Is Not ..................................................................................................... 7 3.4.1 BPM Is Not STP ......................................................................................... 7 3.4.2 BPM Is Not Message Routing or a Data Backbone................................... 7 3.5 The BPM Technology Layer .................................................................................... 8 4.0 The Impact of BPM in ISFs................................................................................................. 10 4.1 Lower Costs........................................................................................................... 10 4.2 Service Quality ...................................................................................................... 10 4.3 Flexibility, Agility and Speed.................................................................................. 10 4.4 Consistency and Accuracy .................................................................................... 10 4.5 Risk Management.................................................................................................. 10 5.0 Where BPM Can Be Used in an ISF .................................................................................. 11 6.0 Drivers in Investment Services for BPM Adoption.............................................................. 11 6.1 Regulatory Compliance ......................................................................................... 12 6.2 BPO and Intellectual Property ............................................................................... 12 6.3 Multichannel Integration ........................................................................................ 12 6.4 Optimization and Continuous Improvement .......................................................... 12 6.5 Collaboration ......................................................................................................... 12 6.6 Integration and Consolidation................................................................................ 12 6.7 Maintenance .......................................................................................................... 12 6.8 New Entrants ......................................................................................................... 13 6.9 Inhibitors ................................................................................................................ 13 7.0 BPM Vendor Types for Investment Services...................................................................... 13 7.1 "Pure-Play" BPM Vendors ..................................................................................... 14 7.2 External IT Services Providers and SIs................................................................. 14 7.3 CRM Vendors ........................................................................................................ 15 7.4 Middleware and Application Server Vendors ........................................................ 15 7.5 Investment Services Software and Investment Services Specialists.................... 15 7.6 Process Specialists ............................................................................................... 15 8.0 Vendor Differentiation......................................................................................................... 15 9.0 The Right Time for BPM in an ISF ..................................................................................... 16 9.1 "The Disconnect" ................................................................................................... 17 9.2 "The Treadmill" ...................................................................................................... 17 9.3 "The Slow Coach".................................................................................................. 17 9.4 "The Spendthrift" ................................................................................................... 17 9.5 "The Loner"............................................................................................................ 17 10.0 Conclusion .......................................................................................................................... 17 Publication Date: 21 July 2005/ID Number: G00129997 Page 2 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  3. 3. LIST OF FIGURES Figure 1. BPM Portfolio ..................................................................................................................... 6 Figure 2. BPM Impact on Gartner's Architecture Perspective........................................................... 9 Figure 3. The Vendor Constellation................................................................................................. 14 Figure 4. When to Adopt.................................................................................................................. 16 Publication Date: 21 July 2005/ID Number: G00129997 Page 3 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  4. 4. ANALYSIS 1.0 Management Summary There are many drivers for adopting business process management (BPM), and it has the potential to benefit an investment services firm (ISF) in many ways. It can also be applied to numerous different processes and lines of business (LOBs), from trading to risk management, and from payments to regulatory reporting. So it is important for ISFs to understand the full BPM portfolio in breadth and depth. That will help ISFs to deploy it strategically for greatest effect and value. For example, BPM is often linked with straight-through processing (STP), but they are not the same thing — see Section 2.4.1 and "Enterprise Nervous System Functionality Can Benefit the Investment Industry" (G00126078). Users must be educated that BPM is more than glorified workflow and that it includes a whole range of tools and engines for analysis, modeling, deployment, operation and optimization. Its potential should not be limited to high-volume, low- value back-office transactions. ISFs also need to appreciate that BPM is a dynamic technology that should follow a life cycle, not a one-off deployment. ISFs should benchmark and then monitor their processes — then use BPM for optimization and continuous improvement of these processes. As an overarching technology that could expand to span many departments and functions, BPM needs to be deployed strategically — to date, it has been used tactically. Alongside middleware and messaging, it will become an essential component in ISFs' enterprise nervous systems (ENSs). So, to realize its full value, BPM cannot be deployed just by an ISF to solve its "pain points" or by the IT department to help unify its systems — it needs a holistic approach that involves all relevant parties. Finally, ISFs must be aware that BPM is likely to be one of those technologies that mean different things to different people. Even with a common definition, the diverse histories and backgrounds of the vendors will mean that they have contrasting approaches to its use and deployment. ISFs should choose a BPM vendor with care — looking beyond price and functionality to criteria like strategic fit, buy-vs.-build philosophy, architectural standards, and knowledge of the processes, applications and interdependencies within various types of investment firms. Using a vendor that offers industry templates and content will speed up process modeling, provide a foundation for process modification and improve the deployment timeline. 2.0 Building a Business Case for BPM in Investment Services Firms The temptation to rush to invest in BPM must be hard to resist when every vendor seems to be extolling its virtues, and their personal expertise in deploying it — and when ISFs are under pressure to improve the return on assets, to retain customers, to improve profits and to become compliant with new regulations. But what if BPM is another expensive technology like customer relationship management (CRM) that is slow to deliver the benefits it claims? Clearly, organizations need a good business case to justify the investment in BPM technology. ISFs will need to understand not just the BPM drivers but also what it is, when it is appropriate to use, what processes it can be applied to, what the principal vendor types are, and how it may impact (or require changes to) the underlying IT architecture of the ISF. BPM cannot solve problems instantly, nor can it transform overnight a costly or failing ISF into an efficient and successful one. ISFs must understand BPM in depth and in breadth before attempting to deploy it. Publication Date: 21 July 2005/ID Number: G00129997 Page 4 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  5. 5. 3.0 BPM as a Dynamic Portfolio, Not a Static Package The Gartner definition for BPM is, "the management of all the processes supporting a business transaction/event from the beginning to the end, while applying the policies/rules needed to support an organization's stated business model at a specific point in time." That crams an awful lot into one sentence — for a full description of what makes up BPM, see "A BPM Taxonomy: Creating Clarity in a Confusing Market" (T-18-9669). To simplify matters, ISFs should understand the basic elements of BPM. 3.1 BPM and Continuous Improvement BPM has its own life cycle, and ISFs that treat BPM as a "one-off," static project will fail to realize its full potential. Optimization of business processes and BPM deployment within the broader context of an ENS is the key to realizing the full benefits of BPM. While many quick wins could be realized in a one-off project (for example, automation of reference data maintenance), the greatest return on investment (ROI) will come from the continuous improvement that BPM can deliver and its use across the enterprise. 3.2 BPM for Re-engineering BPM includes tools and technologies to support process modeling, maintenance, modification, analysis and simulation. Initially, BPM modeling tools can be used to test many "what if" scenarios. Note that these are process scenarios — for example, which channel a subset of transactions might use, not what kind of investment should be performed (where a risk management tool might be used). The chosen process can then be implemented and, more importantly, monitored. If bottlenecks are identified or a new decision point is required, then the process can be re-engineered. ISFs should continually monitor processes and keep repeating the BPM cycle to identify where they can be optimized. 3.3 The BPM Portfolio and Its Components BPM is not a package that can be bought off the shelf. It is more akin to a portfolio of solutions (or a technology suite) that can be deployed individually or as a whole. It comprises many components (see Figure 1): Publication Date: 21 July 2005/ID Number: G00129997 Page 5 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  6. 6. Figure 1. BPM Portfolio BPM Life Cycle 1. Business Process Analysis 2. Business (BPA) — Rule Engine 3. Business Model What-If (BRE) — Activity Scenarios What Goes Monitoring Where (BAM) — Spot 4. Re- When Things engineer Go Wrong the Process Analyze and Manage Build and Model (All and Optimize Automate Resources) Monitor Integration B2B Workflow (Apps and Collaboration People) Source: Gartner (July 2005) • Business process analysis (BPA). This is often split between a graphical modeling tool and the underlying analytical engine. BPA allows the modeling and analysis of what- if scenarios by ISFs. What if the bond yield goes up by so many points? What if an extra 10 percent of deals could be automated? What if broken trades and exceptions could be reduced by five percent? • Business rule engine (BRE). This is a central repository both for the application logic that used to be embedded in a myriad of applications and for the rules that governed the processes and people that linked the applications. Extracting the application logic is a prime driver for BPM — first, for simplifying the maintenance of those packages (you change one rule in just one place), and second, for increasing the level of "cross-silo" automation across the whole ISF. The BRE will facilitate ISFs' ability to change processes quickly in response to a change of corporate vision, a new regulation, or a competitor's new products, added features, or enhanced terms and conditions. The BRE can be particularly useful as an alternative to outsourcing a function (adding internal flexibility not previously present) or as a complement to it (preserving a degree of internal control). • Code generation. Because of the business process models and business rules described previously, it is possible to generate the code that is used to link applications, invoke processes and prompt users. When used in conjunction with a BRE, ISFs will be able to more efficiently modify and improve processes that are embedded into legacy systems. Code generation will improve the organization's ability to preserve established applications, as well as work with new software components. • Workflow. This is where a lot of BPM functionality and its vendors evolved from. Whereas workflow is about routing tasks to individuals, BPM is about all aspects of the entire end-to-end process. Workflow is just one part of this; above workflow is the whole Publication Date: 21 July 2005/ID Number: G00129997 Page 6 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  7. 7. runtime environment needed to make the process work in real time. Again, a powerful combination exists between workflow and BRE because it facilitates the strategic move toward "automating the routine and manually handling the exceptions," or exception- based processing. • Integration and collaboration. BPM often employs links to middleware and messaging technologies that can be used to integrate applications and people within the ISF, and to collaborate with partners (like exchanges, custodians, clearance and settlement processors). Unified messaging will be a key collaborative area where BPM's suite of tools can be used. • Business activity monitoring (BAM). This enables the real-time analysis of processes. BAM can be used to spot bottlenecks (like delayed loan origination) and failures (like broken trades). See "A Bank Successfully Uses BAM to Aid in Funds Transfer" (CS-21- 6932). • Optimization. This is the renaissance of business process re-engineering; it allows processes to be tweaked or changed in response to the hard data provided by BAM and the scenarios tested in BPA. This re-engineering has two other advantages: It facilitates compliance with new regulations (for example, when a new decision point is needed for managing risk), and it provides the means for continuous improvement (for example, adding new asset types and instruments). 3.4 What BPM Is Not 3.4.1 BPM Is Not STP BPM should not be confused with STP. Although BPM can certainly facilitate STP, the two are not equivalent. Within the investment industry, STP typically has the goal of automating, as much as possible, the end-to-end process for trading: pre-trade, at-trade, post-trade (matching, confirmations and allocations) and settlement. The key challenge for STP is at the message level, where it must handle cross-platform connectivity and the translation between different standards, formats and platforms. That is not something that BPM is deeply concerned with. Where the various tools within the BPM portfolio can help, especially a BRE, is by: • Making it easier to manage STP by performing the exception handling • Extending STP to a greater range of financial instruments (for example, from equities to derivatives) by combining and managing rules from a central repository Clearly, the workflow aspects of BPM also have a direct relevance to STP, but this is diminished (though not necessarily eliminated) when a trade goes outside an organization's firewalls. 3.4.2 BPM Is Not Message Routing or a Data Backbone BPM exists largely at the logical level, managing processes and rules, not the routing of packets of data or software components. Hence, it should not be confused with those technologies at a more-physical level in the "technology stack" used primarily for message routing or brokering (like IBM's MQSeries Integrator) or as a data backbone (like Tibco's enterprise backbone or a "bus" for messaging, monitoring and managing). However, the logical vs. physical distinction is becoming more blurred as links are forged between the two levels: • IBM has complemented MQSI with MQSeries Workflow — both products have rules, but in MQSeries Workflow, they are part of a preplanned process model, and in MQSeries Integrator v.2, they are dynamically alterable and capable of reacting to events as well Publication Date: 21 July 2005/ID Number: G00129997 Page 7 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  8. 8. as data. This solution set is further enhanced by the addition of the WebSphere Process Choreographer. This tool can work within MQ Workflow but it is used for orchestrating software components in a "composite application," not for managing a process or a message. • Tibco has acquired BPM technology through its acquisition of Staffware and is now building industry frameworks that link BPM with its enterprise backbone. • Companies like Computer Sciences Corp. (with E4), HP (with OpenView BSM) and Unisys (with 3D-VE) have created architectures that are built around the concept of linking processes and services to applications (with reusable software components) and to the physical infrastructure, but without embedding them in it. • The latest generation of enterprise application integration (EAI) software and application server software also mimics some of the integration that BPM can achieve, but at a more-physical level. It is not an either/or situation (BPM is better at the logical side, EAI is better at the physical side), but the gap is closing. This includes software from vendors like Tibco (ActiveEnterprise), IBM (WebSphere suite), BEA (WebLogic and Tuxedo), Sterling Commerce, CrossWorlds, SeeBeyond, Vitria, webMethods and others. ISFs should analyze whether failures are occurring due to a broken process or because of poor systems integration, to determine which route will provide the best ROI. 3.5 The BPM Technology Layer It must be recognized that, though BPM uses data, it is applied to the management of processes and not to the management of data. That means that a BPM implementation is most effective when applied not to a single application but to a subset of processes that may be owned within a single line of business (LOB). As an overarching technology that integrates disparate systems and resources, it needs a strategic and holistic view (see Figure 2). Publication Date: 21 July 2005/ID Number: G00129997 Page 8 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  9. 9. Figure 2. BPM Impact on Gartner's Architecture Perspective Business (ISF) Architecture Business Relationship Technical Grid Architecture Infrastructure Business Domain Processes, System Styles Management Domain Patterns Security Domain Bricks Information Data Architecture Domain Application Point-of-Access Domain Integration Domain = Potential BPM Impact Zones Domain Source: Gartner (July 2005) Three dimensions make up this architecture: business, technical and information. The business architecture dimension includes two business layers and two technical layers: • Business relationship grid (BRG). Each cell represents a different organization or person outside the host company that it may interact with. The cells represent the suppliers, partners, regulators and so on. • Business process and style. Each cell is a business process that is carried out by the host company or one of the other organizations that it interacts with in the BRG. Processes that are similar (for example, online transactions) may be grouped together as styles. • Patterns. This is the logical layer where the technical and information dependencies can be represented. This is where a pattern for a client/server model or a service-oriented architecture (SOA) model would be defined. • Bricks. This is the physical layer where specific technologies and configurations are logged, like whether some software component is made available in Java 2 Platform, Enterprise Edition or .NET, and what server and operating system are used. See "Patterns and Bricks Are an Architect's Two Best Friends" (COM-21-7390) for more details. The BPM suite (BPMS) can affect this architecture at almost every level. Note that the red ellipses for BPM impact are just examples — anything outside those ellipses is not actually excluded or impossible. BPM works at these many levels because: • BPMS includes workflow, which co-ordinates the interaction between people and systems across many departments, so it crosses the BRG and business process layers. Publication Date: 21 July 2005/ID Number: G00129997 Page 9 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  10. 10. • BPMS includes rule engines and process analysis, which define how a process is to be carried out or optimized, so it works in the business process layer. • BPMS includes content management capability (linking digitized documents to transactions and accounts), so it crosses the business process and pattern layers. • BPMS includes process execution and integration capability that complements traditional integration technologies, so it works in the pattern layer. 4.0 The Impact of BPM in ISFs Using BPM for automation, exception handling, rule implementation and process re-engineering can in theory deliver many benefits to an ISF. 4.1 Lower Costs BPM can help ISFs reduce their costs: 1) by reducing the cost of application maintenance; and 2) through automated and exception-based processing. Externalizing and centralizing the process logic via BRE can also reduce the maintenance costs for applications, which often far exceed the initial purchase and deployment costs. Additionally, automating routine tasks enables expensive staff to concentrate on exception handling or on more-productive customer-facing tasks (like selling). Automated and exception-based processing will enable ISFs to handle higher volumes with greater accuracy and fewer staff. 4.2 Service Quality Using BPM to orchestrate the different applications (including customer relationship management) in a process can allow an ISF's staff to be better-informed about their customers and, therefore, more helpful. For example, they know what stage a trade has reached, they can call up digital copies of relevant documents or they can make a real-time decision according to best-price execution. Furthermore, BPM can help ISFs with workload balancing (auto-assignment based on skills or availability) and automated event notifications. 4.3 Flexibility, Agility and Speed BPM's ability to optimize and re-engineer processes (for example, by adding a new product, feature or decision point or by swapping resources) should enable ISFs to be more flexible and agile. Greater automation of processes and effective workflow can speed up processes like an initial public offering (IPO). 4.4 Consistency and Accuracy ISFs are already under huge pressure from regulators to offer the correct advice to customers. With multiple channels, it becomes imperative to offer advice that is not only correct and timely but also consistent. Customers must always receive the same response to the same question, whatever the channel. That is difficult when many ISFs are still stuck in product-centric or channel-centric architectures. BPM can improve consistency and accuracy by modeling the inquiry process and then helping to route requests from different sources to a common application or data repository as part of a broader, SOA strategy. 4.5 Risk Management BPM can be an important component in the march toward integrated risk management. Better credit risk engines and more-advanced algorithms are not enough on their own. Combining credit, market, and operational risks and aligning those with internal ratings-based approaches to risk are complex, enterprisewide tasks. BPM facilitates that task by adding the process to the data — Publication Date: 21 July 2005/ID Number: G00129997 Page 10 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  11. 11. so that auditors can understand not just what the risk value is, but also how it was derived. Using the rule engine, events and decisions can be electronically recorded and logged. 5.0 Where BPM Can Be Used in an ISF Many of the early BPM implementations in investment services have been aimed at automating horizontal or enterprise processes with a relatively low level of specialization, like reporting, HR or procurement. These are the same processes that are often first considered for BPO, being noncore and noncritical. Examples include: • Providing standardized processes to facilitate the tracking of work done by external consultants and paying contractors' fees for IT development services • Tracking and monitoring work that an ISF has outsourced, giving greater visibility into the IT project management process • Tracking and monitoring travel approval, new employee provisioning, consultant registration and purchase approvals • Producing regulatory reports or customized financial prospectuses, as well as using workflow technology for automated calculations and compilation to improve speed and accuracy The benefits of such BPM should be higher productivity, lower costs and greater consistency. Exceptions that cannot be dealt with automatically are re-routed and assigned to ISF staff for manual handling. Vertically specialized processes within investment services to which BPM has been applied include: • Exception processing. This improves throughput and quality by automating the normal transactions and facilitating the manual checking for exceptions and broken trades. • Facilitating STP. BPM can facilitate STP in conjunction with other technologies. A BRE can make it easier to manage STP and extend STP to a greater range of financial instruments by combining and managing rules from a central repository. • Integrated risk management. BPM helps organizations move away from the old silos for nonintegrated credit risk, market risk and operational risk. A lot of the information and business logic needed for integrated risk management (such as risk-adjusted return on capital) is buried in isolated applications. BPM can help to liberate that information by using centralized logic and workflow. • Regulatory reporting and compliance. "Time to compliance" is now as important as the current focus on "time to market." BRE will help to ensure compliance and auditability across the enterprise by implementing standard and auditable rules in a consistent fashion. • Back-office processing. This is especially for those areas that are considered for BPO, such as custody and trustee, vault and coupons, and proxy voting. 6.0 Drivers in Investment Services for BPM Adoption As BPM matures, it will become an essential component in the IT architecture of most ISFs, especially those with large, complex IT infrastructures and multiple channels. The majority of ISFs could benefit from using one or more BPM components to improve their internal processes. Publication Date: 21 July 2005/ID Number: G00129997 Page 11 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  12. 12. These points summarize the issues that will drive the increasing adoption of BPM in investment services. 6.1 Regulatory Compliance Organizations must deal with the U.S. Public Company Accounting Reform and Investor Protection (Sarbanes-Oxley) Act of 2002, the Basel II Capital Accords, and International Accounting Standards, among other regulations. BPM, through its use of BRE and application integration, can centralize and standardize the way that ISFs react to regulatory changes. BRE can be used to consolidate multiple policies and standards for compliance in a single tool that may ultimately be linked to event-capture systems. This should improve time to compliance and help counteract an ISF's tendency to "re-invent the wheel" if it has to launch a project for every set of new regulations (and every time an established set is revised). 6.2 BPO and Intellectual Property A BPM deployment can facilitate the transition to BPO because: 1) the process is already modeled; and 2) it can help with the interfaces (human and IT systems) between BPO provider and BPO recipient. BPM's tools and repositories for rules and workflow can also help to preserve an ISF's intellectual property that is locked into its processes. That gives the ISF the option to bring an outsourced process back in-house, and it guards against loss of intellectual property when key personnel leave the ISF. 6.3 Multichannel Integration The rules, workflow and integrative ability of BPM can facilitate the evolution of an ISF toward the persistence and consistency needed for a truly integrated multichannel experience. 6.4 Optimization and Continuous Improvement BPM can help to automate processes that span many LOBs, and those processes can also be continuously improved through the use of BAM and BPA. This is important for ISFs that want to preserve the advantages they have gained and stay ahead of their rivals. 6.5 Collaboration ISFs are already working with business partners to provide a wider range of products at lower cost. Building the collaborative processes to enable seamless working with such partners and third-party providers will be an essential skill in the future. Unified messaging is now a hot topic within the collaboration area because traders and brokers in many countries are demanding real- time delivery of messages (for example, when another channel makes a commitment to a customer or offers new terms or products). BPM can drive real-time messaging to ensure a consistent experience whatever the medium or device. 6.6 Integration and Consolidation BPM can include the technology — or provide the links to it — that is needed to link diverse systems, giving a new lease on life to trusted legacy applications. A sophisticated BRE means that it may be possible to consolidate established applications, for example, by running more asset types from one application. 6.7 Maintenance Using BPM to extract the rules that were embedded in multiple applications should improve the speed and efficiency with which ISFs can react to market changes (for example, interest rates) Publication Date: 21 July 2005/ID Number: G00129997 Page 12 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  13. 13. and make them cheaper to maintain. A mapping of all rules will enable ISFs to identify quickly and accurately which applications house which rules, to ensure that all changes are made. 6.8 New Entrants For new companies entering the investment services world, like new electronic communication networks, BPM can be a vital means to becoming competitive quickly. Software packages and hosted services (for example, the back-office operations) only solve half of the problem for such an initiative. BPM helps to span the gap between operational data and customer service. 6.9 Inhibitors BPM will be harder to deploy and less effective if: • There is not already present a robust infrastructure with the other components of an ENS. • The company politics may work against achieving the greatest effectiveness for BPM. Many LOB managers still have incentives that reward a more-focused and tactical approach within their departments and do not encourage a broader end-to-end process- based approach. • There is no commitment to taking a more-holistic approach to processes and the ISF remains tactically focused on products and applications. • Processes have not been benchmarked and business metrics have not been established that can prioritize where BPM should be applied and how effective it has been. • There is no iterative cycle of continuous improvement through BPM. 7.0 BPM Vendor Types for Investment Services The competitive landscape for BPM vendors is wide and varied, though less so when applied specifically to the investment services industry. Many vendors with different backgrounds use the BPM label (see Figure 3). Publication Date: 21 July 2005/ID Number: G00129997 Page 13 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  14. 14. Figure 3. The Vendor Constellation Pure BPM (+ Workflow, + ECM) — FileNet, Pegasystems, Staffware/Tibco, Ultimus, Action Techs, Documentum/EMC, Insession, Savvion, Fuego BPO Specialists — Xchanging, Euroclear, Clearstream, Exigen ESPs/SIs — Accenture, Capgemini, EDS, Fujitsu, SBS Package Vendors — CSC, Middleware, EAI Unisys, BT and App Server — Tibco, IBM, Microsoft, BEA Source: Gartner (July 2005) Note that many vendors could occupy more than one of these categories. For example, Tibco is in middleware and "pure" BPM because it acquired Staffware. Also, EDS is an SI and BPO provider. Finally, IBM is an SI, application integrator and middleware vendor (WebSphere and MQSI). Prominent BPM vendors in this sector include Action Technologies, CommerceQuest, FileNet, Fuego, Insession Technologies, Intalio, Metastorm, Pegasystems, Savvion, Staffware and Ultimus. For a comprehensive list, see "Magic Quadrant for Pure-Play BPM, 2Q03" (M-20-0930). 7.1 "Pure-Play" BPM Vendors Many pure-play BPM vendors have evolved from a workflow or an enterprise content management background. The challenge has been to add all the various components like BRE, BPA and BAM to offer a complete portfolio. The expertise will lie in the BPM toolkit itself, more than project management or banking applications. Many of these vendors currently lack industry templates (pre-created process models for banking-specific processes, like loans), but may be in the process of building them with early adopters. Those with vertical competencies and industry templates will provide faster deployment and process modeling. 7.2 External IT Services Providers and SIs External IT services providers (ESPs) and SIs have formed a wealth of alliances with BPM, business intelligence (BI) and CRM vendors. The most-forward-thinking ESPs/SIs have developed IT frameworks and templates especially for investment services that distill and capture the best practices from multiple projects. They have then complemented these frameworks and templates with the BPM/BI/CRM expertise of their partners. Publication Date: 21 July 2005/ID Number: G00129997 Page 14 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  15. 15. 7.3 CRM Vendors CRM vendors traditionally had horizontal offerings, but they rarely delivered a good functional fit (or a quick ROI) when applied to a very specialized and process-driven industry like investment services. Many CRM vendors have therefore built vertically orientated versions of their products, including industry templates for sales, marketing and service activities. However, they lack comprehensive BPM functionality and must be supplemented by other BPM solutions for enterprise workflow, process simulation, BAM, and rule management. 7.4 Middleware and Application Server Vendors Vendors of middleware and application server technology have now added BPM as part of their offerings, merging message integration at a data level with the application integration at a process level. These solutions may lack vertical content, however, and are only one requirement for enterprise BPM. 7.5 Investment Services Software and Investment Services Specialists Vendors of investment software packages (like algorithmic trading) and investment services specialists (like clearance and settlement) now recognize that BPM is a key part of their clients' overall IT architectures. Rather than bolt on a half-hearted attempt at workflow as part of their own packages or services, many such vendors have extensive relationships with pure-play BPM vendors. The provision of application programming interfaces for BPM will emerge as an additional criterion for the selection of algorithmic trading or clearance vendors. 7.6 Process Specialists Specialized investment services BPM offerings come from startups, consulting firms, banking application vendors and BPO providers. New offerings have been created that focus on a single investment services process, like payments or trading. Solutions come with the fundamental BPM technologies (which could be from a BPM partner or created by the provider), plus heavy industry content for that specific process. Users would take the industry template and then modify it to match their company-specific processes. Templates and blueprints that cover many processes, that can be applied to many clients and that distill best practices from numerous engagements will be key differentiators in vendor selection. 8.0 Vendor Differentiation The different vendor types we have described may differentiate themselves from rivals according to several criteria: • Their position in the "buy vs. build" spectrum is important. Some BPM vendors follow a more off-the-shelf software package approach, whereas others will position BPM as a toolkit where the solution has to be built from scratch. The majority will be somewhere in the middle — where they will use some prebuilt templates combined with internally built projects. • The degree of verticalization that is present in the BPM solution must be considered. This has to do with the degree and amount of investment services content and process models that come with the solution or that are made available to the user. • If this is a BPM toolkit, is it the vendor's proprietary technology, is it a more-widespread technology like VisualStudio, or is it completely "open"? This may affect the ease of integration with other applications and will certainly affect the market availability of programming staff. Publication Date: 21 July 2005/ID Number: G00129997 Page 15 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  16. 16. • The staff required to deploy and maintain the solution, as well as maintain the rules and process by business analysts or users, is also a factor. It is important that rules and processes can be easily maintained by the business users (for example, setting limits in the middle office) rather than requiring the involvement of IT staff. Finally, architectural concerns include the data storage philosophy and the ability to support industry standards. Does this BPM vendor favor physical data stores (for performance) or virtual data stores (to avoid duplication)? Does the vendor support banking-specific data standards, like Financial Information Exchange or SWIFTNet? The evaluation of BPM itself and BPM vendors should not be treated like a package selection exercise. ISFs must consider factors such as strategic fit, vendor viability, buy vs. build, integration requirements, model and rule maintenance, data storage techniques, support of industry standards, open standards, and the overall impact on IT architecture. 9.0 The Right Time for BPM in an ISF ISFs need to know when it is the right time to adopt, or even just pilot, BPM in their organizations. The paradox here is that without BPM, and components of it like BAM, it may be difficult to identify and be alert to some of these indicators, and warning signs may be missed (see Figure 4). Figure 4. When to Adopt The Disconnect — Your left hand doesn’t know what your right hand is doing; customers are confused The Treadmill — Application maintenance is a constant (not an occasional) activity; exception handling is a burden The Slow Coach — You take longer than your rivals to react to changes in markets, to events or to customer demands The Spendthrift — Your key metrics (like cost per transaction, employee productivity) are worse than those of your rivals; you get a low ROI for IT outlay The Loner — You have great difficulties in collaborating with partners and with IT organizations or BPO providers Source: Gartner (July 2005) There are some indicators that may show the right time is "now." Publication Date: 21 July 2005/ID Number: G00129997 Page 16 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  17. 17. 9.1 "The Disconnect" When the left hand doesn't know what the right hand is doing — This is prevalent in ISFs that have gone through mergers or acquisitions, have multiple product providers, and have a wide network of channels. With different LOBs operating in silos, the message to a customer is a confused one. BPM can improve cross-LOB integration and so help to avoid these disconnects. But this has to be a management-led approach, not IT-led — BPM is a useful tool here but not a cure. 9.2 "The Treadmill" When application maintenance is a constant (not an occasional) activity and exception handling is a burden — With logic and rules embedded in dozens of applications, the IT department finds itself spending 80 percent or more of its time simply maintaining systems to keep them operational and to keep them up-to-date. All projects are tactical and focused on survival. Centralizing the process logic in a BRE could help reduce the time and effort spent on application maintenance. 9.3 "The Slow Coach" When the ISF takes longer than its rivals to react to changes in markets, to events or to customer demands — Ever faster time-to-market and time-to-compliance are features of modern investment services. Customers are less loyal than in the past and may easily switch to a more- responsive provider. ISFs need to monitor the benchmarks for their new business and customer service processes, as well as compare them to their rivals. Using the BPM capability for centralized rules, BAM and the ability to run what-if scenarios via BPA should help address these issues. 9.4 "The Spendthrift" When the ISF's key metrics, like cost per transaction and employee productivity, are worse than those of its rivals and it gets a low return on its IT spending — The worst-case scenario for an ISF is being more costly than its rivals and less responsive. That is not an improbable scenario, because systems that are slow to adapt are also likely to be the most expensive to maintain — a "lose-lose" situation. Workflow and BRE could help improve the productivity of an ISF's personnel and its IT systems. 9.5 "The Loner" When the ISF has difficulty in collaborating with partners and with IT organization or BPO providers — Proprietary systems and protocols might be fine for an insular ISF, but once it evolves to become an extended enterprise, it needs open processes that can span more than one company. BPM can help to open up those processes and ease the transition to a style of interaction that is based on Web services. 10.0 Conclusion To assist organizations in their efforts to create their BPM strategies, we have these recommendations: • BPM has strategic implications, because it will become an essential layer in the IT architecture for an ISF. BPM will be a core requirement for most ISFs to support service- supplier collaboration, customer service, profitable new business and improved risk management. Publication Date: 21 July 2005/ID Number: G00129997 Page 17 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  18. 18. • An ISF that has never used BPM before should start cautiously. Plan strategically but — at first — deploy tactically. Gain experience through small pilots with clear wins before attempting the big projects. • ISFs should understand the full portfolio of BPM tools and technologies in breadth and depth (even if they are deployed tactically) before evaluating vendors or deploying solutions. BPM is more than glorified workflow and should not be limited to high-volume, low-value transactions. BPM should be used for specific processes (for example, program trading or risk management) and enterprisewide transaction processing. • ISFs should benchmark and monitor their processes and then use BPM for optimization and continuous improvement of these investment services processes. BPM should follow a life cycle, not a one-off deployment. • ISFs should choose their BPM vendors with care — look beyond price and functionality to criteria like strategic fit, buy-vs.-build philosophy and architectural standards. Identify whether you need prebuilt industry templates and what benefits they would provide to your organization. Acronym Key and Glossary Terms BAM business activity monitoring BI business intelligence BPA business process analysis BPM business process management BPMS business process management suite BPO business process analysis BRE business rule engine BRG business relationship grid CRM customer relationship management EAI enterprise application integration ENS enterprise nervous system ESP external services provider ISF investment services firm LOB line of business ROI return on investment SI systems integrator STP straight-through processing Publication Date: 21 July 2005/ID Number: G00129997 Page 18 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.
  19. 19. REGIONAL HEADQUARTERS Corporate Headquarters European Headquarters Asia/Pacific Headquarters Latin America Headquarters 56 Top Gallant Road Tamesis Level 7, 40 Miller Street Av. das Nações Unidas 12.551 Stamford, CT 06902-7700 The Glanty North Sydney 9 andar—WTC U.S.A. Egham New South Wales 2060 04578-903 São Paulo SP +1 203 964 0096 Surrey, TW20 9AW AUSTRALIA BRAZIL UNITED KINGDOM +61 2 9459 4600 +55 11 3443 1509 +44 1784 431611 Publication Date: 21 July 2005/ID Number: G00129997 Page 19 of 19 © 2005 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

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