A Work in Process

The overarching drivers in enterprise software in the 1990s were (1) functional automation and (2) platform change.  The platform changes were client-server and then N-tier architectures (a.k.a. Web).  Over the course of the decade every functional unit from back office to front office spawned a category-killer application company – SAP,  Siebel, Remedy, Clarify, etc., all were examples.   

The organizing principle was “who is the buyer?”  The economic buyer was the functional manager looking to automate his/her staff, and IT was the technical buyer.  That is to say IT could kill the deal.  These sales usually included a healthy dose of Accenture/ BearingPoint / etc.  as process glue and outsourced IT staff.   

Those days are over.  And enterprise software is dead.  Or is it? 

Over the last few weeks I have seen several enterprise-focused software companies.  Without revealing specifics, I do note some interesting commonalities.  Needless to say, they are all Software as a Service (SaaS).  But that’s just packaging.  That’s as interesting as saying “and they ship on a CD-ROM” in 1990.  While they are different in more ways than they are similar,  they do share one overall interesting attribute.  They are not focused on functional departments.  They are focused on core business processes.  They are blending Transactional Computing (classic Enterprise SW) with Social Computing (soon-to-be-classic Web 2.0). 

What do I mean by core business processes?  Here is a bunch of examples from a consulting firm called EBS Consulting.

• Assess-to-Develop
• Attract-to-Onboard
• Cash-to-Invest
• Design-to-Deploy
• Engage-to-Close
• Install-to-Maintain
• Order-to-Support
• Plan-to-Act
• Plan-to-Produce
• Plan-to-Reward
• Propose-to-Complete
• Record-to-Measure
• Request-to-Resolve
• Source-to-Settle
• Target-to-Engage
• Track-to-Deploy

There are at least two major reasons why are vendors are emerging to automate processes rather than departments. 

• First, as my friend Jeff Nolan is prone to observe, a large percentage of knowledge worker activity is now in exception management. Exceptions are expensive disruptions of brittle processes. This is where the business case resides.
• Second, the rise of worker mobility and activity outsourcing each contribute to a need to reintegrate processes that span organizational boundaries.  This is where the pain resides.

A second theme shared by these business process SaaS companies is a focus on the middle market.  The buyer motivation is a need for business process integrations, but not with an Enterprise 1.0 price tag. Semi-custom is often good enough.  Change happens frequently in core processes.  You can't afford to overinvest in fully optimized implementations.  Often good enough is good enough.  (It is analogous to the market for electronic systems where product design cycles are longer than product life cycles, leading to families of products based on variants and semi-custom designs. Think the of Sony Walkman as the originator of this strategy twenty years ago.)

Change happens infrequently in peripheral processes, because the operating leverage just isn't there. Peripheral processes can be moved to service businesses (SaaS or traditional services) precisely for this reason.  I think of ADP and similar payroll companies as precursors of this movement.  Payroll has long been a business process  that was handled at the periphery.

So if the last two weeks are any indication, expect to see business processes emerge as an important startup theme in enterprise software in the near future.  And expect to see it in two flavors -- one being process solutions software based on notions of superflexible organizations, the other being services leveraged by software for unbundled, perpipheral services like an ADP. 

Solutions for superflexible core business processes always touch multiple departments.  As an example, think of the latest "strategic partnership" your company created.  Even if the product or service isn't being customized in support of the opportunity, it almost certainly involves changes to pricing models, promotional programs, content, incentives, performance measurement, service level agreements, etc.  It requires a new process; one which cuts across, and integrates with, existing processes and programs.  Can you really afford this strategic partnership?  Can you really afford not to?

In both cases (core and peripheral), the challenge will be "Who is the buyer?" Core processes roll up to general management.  Peripheral processes roll up to functional departments.  I think the natural market for business process software that enables superflexible core business processes will have to be the SMB and middle market.  My intuition is that business process complexity (the number of touchpoints and subprocesses) increases exponentially with organizational size. This explodes the complexity of product design, requirements planning, and decision making.  The Order-to-Dispatch process in a two location plumbing company with a small fleet is a quick solution sell. Maybe even a self-provisioned solution -- a little Google Ad Words, a list SaaS, and Bingo! Contactual is doing exactly this for the Help Desk process The same decision process for Safeway Stores is far more complex, even though each store is a single local, point of presence. It is an impossible order to get (for a startup) in a national organization where fleet-based delivery is core, i.e., Domino's Pizza or UPS.

A word of caution is in order here.  This report of business process-oriented software solutions is based on a supply-side observation.  I am talking about startups who sense (or perhaps hope for) an opportunity.  This is not a demand-side conclusion. Companies are not asking me for these solutions. But why would they?  That's what due diligence is all about. That's why I think this wave is still a work in process.

Comments

[jon]

So in enterprise/office 2.0, will email and relational databases (oracle, sqlserver ect...) fade into the past, being replaced by im or content specific messaging specifically related to the business process and which can easily fit into and blend with current and future systems?

[Peter Rip]

No, I cannot imagine such a thing. Legacy systems don't die in enterprises. They get augmented.

[Andy]

I've spent the last three years immersed in "Enterprise Social Networks" and your comments are right on the mark. To a great extent the typical enterprise has already implemented a process framework that substantially meets its day-to-day needs. They have neither the desire nor the budgets to modify these standardized models. However, there is a widespread recognition that standardized processes models only work "most of the time". A lot of enterprises are open to discussions around exception handling - particularly in the context of a distributed and fluid workforce.

[Nic Brisbourne]

Peter - I hear what you are saying and have seen a couple of process focused enterprise2.0 initiatives over here in Europe. It is going to be a struggle to scale these businesses though if the market is limited to SMEs.

[Kevin McDonald]

Peter, thank you for the insightful posting. I can't fully agree with your 'intuition'. It has been my experience that SMBs actually have a higher degree of complexity/variation in their business processes than larger organizations. The smaller the company the more inclined they seam to be to customize business processes for trading partners where larger ones have created rigid processes and standards. Anybody that has been a supplier to IBM will back me on this point. My intuition is that the larger the organization's size the simpler their processes are and therein lies the opportunity for these flexible process solutions. Big pain--Rich prospects.

Until software companies create a truly self-service sales process, the cost of sales to SMBs will be to prohibitive- since I have just stated the obvious I'll stop typing.

It will be interesting to see how this process solutions space plays out.

[Pano Anthos]

Don't forget that the largest driver of all was Y2K. That drove fear into the hearts of executives and rushed forward ERP decisions that would normally have occurred at a much smaller pace.

And while SaaS is an excellent delivery model for these processes, they will never get very, very large for the reasons that you noted above: (1)core coverage by the big players; (2) lesser valued solutions at the edge