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Software AG’s CMO on how classic process management doesn’t work in the era of the customer (Transcript)

Ivo Totev
Contributor: Ivo Totev
Posted: 09/18/2013

Information technology has moved from focusing on automating back office processes to providing solutions that help businesses differentiate themselves from competitors, says Ivo Totev, CMO of Software AG, one of the giants of the enterprise software market. Today, it's all about creating systems of customer engagement.

So what impact is this having on Business Process Management? In this PEX Network interview, Totev discusses what he sees as key trends shaping the BPM industry, what it means to be a digital enterprise, and the need to put more control back in the hands of the business.

Please note: this is a transcript of a recent podcast. It has been edited for readability.

Is the next wave of BPM all about real time information and customer engagement?

PEX Network: Digital enterprise is a term that seems to keep cropping up more and more these days, and I see it’s one of the things that your CEO will be speaking about at your Innovation World later this year. What does the term mean to you?

Ivo Totev: In the past IT technology was very focused on automating back office processes, such as managing enterprise resources or finance. The goal was to take out costs and streamline operations.

I believe that companies are pretty good at that today, and we do not see much innovation happening in this space. Today’s business expectations of IT have completely shifted. IT is now expected to provide solutions that help the business to differentiate. Differentiation means better customer engagement, better customer loyalty programmes, and so on.

These have a clear business outcome - increased market share and revenue - and therefore companies that are focusing on these kind of differentiating digital solutions are companies that are on the road to become digital enterprises.

PEX Network: What impact does the rise of these digital enterprises have, then, on how companies approach business process management?

Ivo Totev: These differentiating solutions are very focused on customer engagement and that means having a steady dialogue with individual customers. This requires a constant stream of decisions about the next step or action to take based on an understanding the needs of the customer.

So this looks, initially, very much like a classic business process. It has multiple steps, junctions and paths, based on available information rules.

However, there's a fundamental difference. When we compare the classic deterministic processes, such as order to cash, to these customer engagement processes, it becomes apparent that the previous generation of processes, which we were trying to automate for BPM were really more about static business rules. These static business rules, which were meant to determine the next best action in the process, don’t work any more in this customer centric environment.

Today, it’s really all about making sense of information, which is created in the "here and now", and that means using event processing in conjunction with business rules. Event information needs to be processed in real time and needs to trigger automatic actions that are much more situational, contextual, and personalised than ever before.

I'll give you an example. If a VIP customer enters a retail store and has to hang around in a queue before getting served, we have only a small amount of time to take action and provide the customer superior service that this customer deserves. So the whole aspect of contextual information, real time processing, and real time action becomes much more important than we have seen in previous business process management initiatives.

PEX Network: It sounds like to some extent that it’s the digitization of enterprises means that processes have to speed up and the amount of information that you bring into your processes also speeds up.

Ivo Totev: Exactly. And it's not only about the speed. It’s really about making sense of this real time information, and deriving the next actions, versus modelling static rules somewhere and using them for a long time.

PEX Network: Now, turning towards your business. Software AG has been around for decades, and is one of the giants in the enterprise software market but software is one of those industries where incumbents can quickly succumb to someone with a garage and a great idea. Are you worried about younger and more nimble competitors snapping at your heels?

Ivo Totev: Well, first, competition is a great thing. It keeps you nimble and agile, and we see that each market that lacks competition really loses speed of innovation. When we look at the software business in particular, size is very helpful, in terms of your ability to support customers in every corner of the world. It also helps to act in a sustainable way, looking forward.

You can take business decisions and invest into areas where the commercial success is a couple of years out. I believe that at Software AG we enjoy these particular strengths, having a large size and around €1 billion revenue a year. At the same time, with that ability and global reach we very much foster a culture of agile thinking. Our job is to combine those strengths from size with start up endeavours within Software AG.

The garage companies that you mention; there are many projects of this kind in our company. This is exactly what we have put deep in our company culture.

So, long story short, I think we're on a good path, and we've done pretty well on combining the strength of the size with a nimble approach to innovation, with small start up groups within Software AG.

PEX Network: How do you keep ahead of where the industry is going?

Ivo Totev: As we discussed on the new wave of business processes, it all comes down to real time decisions. I believe that we'll be moving away from static processes based on discrete business rules. We will start analysing what is happening right now and we'll become smart about taking advantage of that information.

For example, if you watch America's Cup, you will see the spectacular effect of the hydrofoils. This innovation really changes the game and makes catamarans - a boat we've been familiar with for a very long time - so much faster and more efficient as it literally flies over water. I believe this is very comparable to what you will see when you start combining real time information, based on event processing, with more traditional business process management technologies.

PEX Network: You’ve mentioned quite a few general trends. What do you think will be the key developments and changes in BPM over the course of the next decade?

Ivo Totev: BPM solutions will have to continue to push for a user-friendly approach. BPM is about about business processes, so the business has to get involved. This means that usability is very important.

On the other hand, we know that some parts of BPM systems enjoy relative ease of use, such as when you model processes and so on. Other parts of BPM systems are much more complex such as integrating with existing systems, having access to big data, and being able to make sense of this data.

I believe that many platforms today claim ease of use, but in reality have a steep learning curve to extract value from everything that's needed. In many cases these are not business user friendly tools.

At one point you have to focus on what is for the business user, make these parts easy to use. Then the parts that belong in the hands of IT, make that efficient for IT. Then you need to make sure that these components really work altogether.

The other important topic that BPM vendors have to work on is to introduce all the ingredients that are needed to extract the signals from the noise, in large data sets, which are created right now, so in real time. They will have to have the ability to manage dynamic business rules and take these data signals into account when deciding on the next actions.

In order for me to feel valid as a customer, I need my business partner to react to what I need right now. That is a very much real time challenge and this is the next big trend that we really see for BPM.

PEX Network: This leads me into my final question. It's a crowded market out there, in terms of BPM software. What do you think really differentiates Software AG from other vendors in the BPM market?

Ivo Totev: At Software AG we've been very focused on business processes for a long time. At the same time, we have forged ahead, and invested in game changers such as real time in memory and real time in analytics technologies. These are technologies you would not have associated with BPM a short time ago.

To stay with my previous analogy, you would not have associated wings and foils with sailing boats. But we have clients prove that this combination of these technologies makes a lot of sense. Our core strengths and differentiation lie in customers looking for BPM that is business user friendly but where you can still do the "hard" things, like integrating with existing environments, all the while combining the system with real time information.

Software AG will be among the BPM Software Vendors presenting case studies and product demonstrations at our upcoming online BPM Open House. It's one week of insightful presentations into what BPM Software can do for you and a chance for you to hear what results companies like Lockheed Martin, Jabil Circuits, Bank of Tenessee and more have achieved through BPM Software. Get your questions answered and find out more at www.bpm-openhouse.com.

Ivo Totev
Contributor: Ivo Totev
Posted: 09/18/2013