Testing ROI Assumptions with BPM

As companies continue to be challenged with achieving a return on investment (ROI), many are realizing how critical a role their IT departments can play in achieving this goal.  In the past, IT departments have turned to business process management (BPM) vendors to help them in this endeavor. However, vendors have been unable to provide the appropriate calculations necessary to show how companies can reach their ROI goals. Without the right calculations, companies have been reluctant to make bold changes such as restructuring their business processes, changing they do business with other organizations, or redefining their application portfolio.

To help meet this challenge, the steps below highlight a method by which IT departments can help their companies more effectively calculate ROI for significant projects.

Define the Business Measures

Leveraging a business process modeler to simulate a current business process is a key step to obtaining the true ROI. The information generated from this process will be the crux of the derived income that will be part of the calculated ROI. First, the organization must define the business measures for a process model. Some of the measures that need to be captured are: 1.) Activities or work required to complete the process, 2.) Resources used to complete the process, 3.) Information used/modified/created and deleted during the process, 4.) Decisions that cause the process to be completed in a manner different from the normal flow, 5.) Metrics used to calculate cost and time performance measures. This information can be derived from a number of sources within the IT organization (IT, HR, Business Units, etc.).  A detailed breakdown of the example data elements are listed below.

 

 

 

 

 

Define the Business Process Flow

Second, gather the business process flow from one of the organization’s processes. Order-to-fulfillment is usually a good example.  Choose one that is the most troublesome because it should yield the highest ROI. Map the process flows across well-defined boundaries such as functional and organizational units. Break up the processes into well-defined sub-processes that can be reused across the organization. Based on the data collected for the process, the organization can start to define the automated and manual tasks, resources and roles, information input/output by task, and the decision points for the typical and unique business case scenarios.

Input Parameters to Business Process Modeler

Once the above steps are accomplished, the company can start to input this information into a business process modeler. This is where it gets interesting because the organization will start to analyze the simulated process for costs, cycle times, bottlenecks, and resource utilization. The organization can modify the process to compare the current to the future-state models to get the true cost savings based on process and application changes. Good process modeling tools produce comprehensive reports that can give the information needed to make informed decisions.

Calculate the ROI

The calculation for the final ROI is not easy. There are a lot of hidden costs to consider that will have to be factored into the company’s bottom line. A couple of hidden costs that seem to be constantly forgotten are the training and organization change expenses for the new processes. There are also dozens of ways to calculate the ROI. The analysis that seems to be considered a lot for the ROI calculation is the following because it is so simple. See below.

 

 

 

 

 

Determine the savings and derived income from the newly designed people/process and technology costs and subtract the investment costs to get the ROI.

Conclusion

Once the organization has completed the journey into the BPM world, it will be closer to becoming a real-time enterprise. The organization will be more effective in designing, managing, monitoring and optimizing its business processes. The ability will be there to deliver new business solutions faster and with fewer resources with flexible and integrated infrastructure.

I am interested in your comments and suggestions on this article. Please let me know what you think.

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