BPM in Action

I usually leave my investment research to my own web site (there’s a link over to the right somewhere) but the May 14 announcement that Metastorm is going public is important to business process management (BPM) users as well as investors.

Metastorm is not the typical initial public offering (IPO) in that Metastorm itself is over 30% owned by another public company, the Internet Capital Group (ICGE). But the offering still serves the purpose of legitimizing the market for those of you who are arguing with your boss about whether BPM is legitimately a separate software function or just a part of an ERP suite (as I discussed here).

And the offering also gives us analysts a sanity check on market sizing estimates. I estimate there was about $2.5 billion spent on BPM software and services in 2007. This is roughly consistent with the Gartner estimate provided in the Metastorm S-1 that the market will grow to over $5 billion in 2011, with a 2006-2011 compounded annual growth rate of 24%. Sizing the BPM market is particularly difficult because most of your BPM market choices (and my estimating data points) come from companies that also have other product lines. That group includes Adobe, AT&T/Sterling Commerce, Autonomy/Verity/Cardiff/Dralasoft, Axway/Cyclone, BMC/Remedy, DST Systems, EMC/Documentum, Fujitsu, Global 360, GXS, Handysoft, IBM/Filenet, IDS/Scheer, Microsoft, Oracle/BEA/Collaxa/Fuego, Pegasystems, Red Hat/JBoss, SoftwareAG/webMethods, SAP, Sun/SeeBeyond, TIBCO/Staffware, TSA/ACI, Vignette, Vitria and W4/Akazi. These companies either do not report BPM as a separate business segment because it is still a minor part of their revenue under SEC (or equivalent) regulations or they do not report their revenue at all because they are private companies.

That leaves Appian, Cordys, Intalio, Lombardi, Mega, Metastorm, Savvion, Ultimus and a few others as “pureplays.” In fact, even Metastorm does not identify itself solely as a BPM provider in its SEC S-1 filing. NOTE: I do not recognize “pureplay” as a separate market research segment and don’t think you should consider pureplay as a feature when looking at BPM (or any other software) choices. There is no reason why a company that only offers BPM should have a better BPM product than one that offers multiple types of software.

But publicly traded pureplays sure make market sizing easier. Metastorm’s S-1 indicates that it did about $40 million in revenue in 2006 (as I had estimated) growing to close to $60 million in 2007 (my 2007 research on the BPM market size is not completed). The S-1 numbers are probably not backcast for 2006/2007 acquisitions (because that is not required under Generally Accepted Accounting Principles) so the growth rate is not quite as high as advertised but still appears to outstrip the market’s. Metastorm has a reasonable presence (30% of revenue) outside the United States, which is important in convincing the boss that it can grow with your company. The products appear to be particularly popular in the government sector, which accounted for 26% of Metastorm’s business in 2007

Along with legitimizing that there is a separate BPM market (after years of acquisition of BPM players by larger ERP software suppliers), market sizing estimates are another proof point for you to take to the boss.

-- Dennis Byron

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Co-incident with the insurance industry’s Association for Cooperative Operations Research and Development (Acord)/Loma conference in Nevada, insurance-industry-specific BPM press releases are hitting the wires. (By the way, LOMA has been around for almost a century and I cannot find the meaning of the acronym; the “L,” I believe, stands for life insurance. Anyone that knows, please send me an email or leave a comment.)

Patni announced a new BPM-based framework for insurers. It incorporates Business Process Management (BPM) from Global 360 and Business Rules Management technology from Corticon, as well as Patni’s insurance reference model that covers all lines of business. Patni said it chose Global 360 and Corticon because they have been tuned to the insurance industry. Conversely, Patni joined Global 360’s partner program.

Pegasystems has followed with a claim servicing package. The new contact center framework, CPM for Insurance, centers around an intent-driven approach with capabilities needed to operate multi-channel, including screens, scripts, processes, scenarios and rules that be modified without additional programming.

The announcements highlight the re-emphasized importance of industry specificity in BPM. After all, early BPM grew out of industries such as insurance and legal. Conversely, BPM is only a late entry in the manufacturing and healthcare delivery space. Increasingly, it will not be enough for a software or service supplier to offer you a one-size-fits-all BPM approach. Instead we expect the most successful BPM suppliers to hone and productize their industry domain expertise just as the ERP and other packaged applications suppliers have done over the last 15 years.

As with the ERP industry 15 years ago, this will be done in partnership with services providers such as Patni. Even one of the biggest services providers, IBM, uses partnerships as illustrated with another BPM-related insurance industry announcement out of Nevada with Thunderhead.

ebizQ plans to follow this trend closely and invites you to provide information about industry-specific BPM products and services for our research file. I can be reached at dennis@ebizq.net.

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A recent Xconomy article celebrated the 25th anniversary of Pegasystems, a company that clearly highlights the technology and business model evolution behind business process management (BPM).

When analysts have their annual debates about who the leading BPM suppliers are and who to count when answering that question—dancing on the head of a pin over workflow vs. BPEL vs. document management vs. SOA, and so forth—we often forget to include SAP, which has really been leading BPM all along. The problem is that to call SAP the BPM leader you have to recognize that it’s because of SAP R/3’s 8000 prepackaged business process sets. A few years ago SAP figured out that maybe everyone did not want to use only the 8000 business-process-set possibilities that SAP had figured out for them. Belatedly SAP began selling its NetWeaver middleware separately as a BPM tool. (For anyone that wants to argue that SAP tried to sell ABAP back in 1996, I agree. But let’s take it offline.)

Pegasystems figured out this desire by users for more choice even earlier. Just as SAP began as an ERP software supplier, Pegasystems began as a bank-platform application supplier in the 80s. (The platform is the place in old-fashioned banks where you used to “step up” to deal with the loan manager or the administrator that was going to open an account for you.) In the 1990s Pegasystems morphed into a customer relationship management (CRM) application supplier, realizing that most of the business process sets that support dealing with customers on the “platform” of a bank apply equally to the front office in other industries.

But much sooner than many applications suppliers, Pegasystems figured out that its customers wanted the flexibility to use its “middleware” to integrate their business processes their own way. Pegasystems moved to a BPM message early this decade and has been strengthening its related technology ever since. Each transition (banking to CRM and CRM to BPM) caused a hiccup for the company but it seems to have weathered the storm.

Congratulations on the anniversary, Pegaystems. Many other applications suppliers never figured out that their customers wanted flexibility and they no longer exist as any kind of technology supplier (or exist as only one of the many pieces of Infor).

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