I just held a presentation at our ISIS Papyrus OpenHouse in Vienna and I presented the comparison table of central, decentral and outsourcing parameters. I proposed that indescriminate outsourcing for a large organization has many negative side effects. Obviously that caused objections from the visitors that are in the outsourcing or services business. I am in a squeeze here, because many of ISIS Papyrus’ customers are huge outsourcing companies from all over the world. Our software helps them to be better outsourcers because they can be a lot more dynamic and customer focused. Nevertheless it is my position that outsourcing is heavily overrated as a cost-lowering device. I propose that most cost lowering actions cause a drop in product or service quality and so does outsourcing for cost reasons. Most companies outsource because they do not have the right people and/or the right tools. So outsourcing covers up a management weakness and presents it as financial chuzpe to lower costs. Initially these cost reductions can be achieved and no one asks questions later. Hm, so now I am also attacking my non-outsourcing customers? No, I am not attacking anyone, I am just voicing what everyone knows to be the case. Let me explain my position on outsourcing more clearly.

The typical claim is that outsourcing allows a business to focus on its core competencies. Is that all there is to it? I can focus on my core competency and do the support services myself as well if their quality is important to me. One example was that when a car manufacturer purchases parts to build cars that is also outsourcing. I disagree, because that is having a supply chain. The other objection was that our customers outsource software development to ISIS. I disagree, because we do not develop anything specifically for a particular customer. Customers buy our knowhow, but they do not outsource THEIR knowhow to us. It is one of the reasons why we do not outsource our core development, not even to freelance programmers. I would never outsource our call center or service or support hotline. We do not even outsource our software sales to partners, because we see our customer relationship as THAT ESSENTIAL! Having said that I admit that we will use outsourcing for projects and non-core programming.

First, outsourcing a non-core competency can obviously be good, but where do you draw the line? Much of the cost saving is an illusion. We have corporate customers who have three different outsourcers for their IT. One does the hardware, another one network and a third does software. We have seen expensive consultants sometimes sit around for days not being able to move the project forward while waiting for these IT outsourcers to do something for them. That may cost the business a 1000€ in unproductive time if you outsource and use consultants. If you have a large business and there is one such situation each day - that is not a lot - then the outsourcing costs an extra €30k a month or €300k per year. That is a lot of cash. Over the usual 5 year timescale of outsourcing we could talk about €1m !!!

All in all that is just one example and there must be many such samples and situations. The extra cost of doing things that are not in the outsourcing contract must be staggering too. The drop in quality may even endanger future business. These things do not get calculated into the formula. Outsourcing anything that has to do with customer contact is in any case not a good idea in my mind. If a company outsources only to lower cost, then their core competency is to make money and not to be a good service business. When an outsourcer calls me my first question is; ‘Can you increase the quality of what I do?’

Having said that, there are a few good reasons to outsource non-core activities:

1. Measurable increase in quality for a special activity
2. Peak loads for anything
3. Short term special skills needs
4. Reducing risk for activities that are uncertain (a kind of insurance)
5. Continuous low volume requirement for special skills (manpower availability)
6. Activities where outsourcer has benefits of scale
7. Flexibility of manpower
8. A few more lesser subjects …

So I am not really against outsourcing as you can see. I am against outsourcing for a few quarters of illusionary cost savings that hurts a business in the long run.

I just read a January 2008 KMWorld collection of White Papers and here is my take on it. I particularly like Editoral Director Andy Moore’s musings on the BPM market. Moore first asks why business intelligence vendors (BI) are disappearing and if therefore BPM is new BI. I have voiced my belief that BI is creating knowledge illusions before and think BI goes the route of customer relationship management (CRM). Everyone does embedded CRM now. So will BPM do embedded BI? The vendors in this piece obviously think so. I agree that business process needs access to live data for decision making but no historic data. I don’t see the benefits of the predictive modeling part of BI either. Predictions are never properly weighted for probability. A prediction works on a SINGLE mathematical hypothesis that is built from inaccurate past correlations on inaccurate past data. The more historic data you use the less likely a prediction gets as the data correlation hypothesis can not model the variance of real causation. The world is not only changing now, but it was changing back then.

Laura Mooney of Metastorm believes that these problems can be solved by centers of process excellence where everyone in an organization collaborates on process strategy, analysis and execution. Well, here we go. What is a strategy? It is a high level plan that is now compared to an outdated correlation hypothesis. Excuse me, but a strategy silo will contain nothing but guesses about the past and future that are now compared to each other - no matter how you name them. It creates confusion and not understanding. Understanding is based on intuition related to real world observation. How likely is it that a group of very diverse people from operations, staff and IT will agree on anything when they collaborate on strategy? Get out from your silo and get real by speaking to employees and customers. When anything needs a center of excellence then it is too complex, too expensive and too distant from reality. Reality is NOW.

Brett Stineman of EMC at least moves closer to what I have been saying for 20 years. There is no process without content. I say the content is the process! The summary state of inbound and outbound communications content defines the process progression. Process flows are an oversimplified abstraction that cannot deal with unexpected events and complex process interdependencies and most of all - they resist change. The huge amount of intersecting flowchart grids are like the armouring of concrete. Andy Moore says that we need real-time responses to environmental stimuli rather than automated processes. I agree. But how would a strategy silo that verifies my analysis that drives my process execution react to stimuli in real-time? Beats me.

Rashid M. Khan of Ultimus says that “change is the mother of obsolence.” Right, Saddam Hussein has sneaked into our daily language more than he could imagine, but I agree here. I also agree that roles, rules, steps, forms, services and data are the core building blocks of processes. Kahn, in difference to EMC, completely misses the need for content. I do however not agree that XML is the right solution for a data model. XML is way too limited and hugely inefficient to move the data model around with the data in one of the most inefficient data structures there is. We at ISIS Papyrus dumped XML internally because a tag as such means nothing. Even when we use SOAP and WSDL there is a lot more logic needed within the XML writing and reading code to put the right meaning into the data. Therefore process management needs a central life-cycle repository to manage ALL above elements related to process and content.

Vasu Rangathan of ArborSys sees the need for content and for a repository but just wants to store his XML there. He speaks about XML offering WYSIWYG and I wonder when that happened. Is he talking abut XSL or DOCX or any other X-thing? XML is huge, slow, inefficient and hinges on the hope that all people of this world will agree on the same tag names and structures. Nope, will not happen. Not even within a business. 80% of Java code does XML parsing, XSLT transformations, and data validation without central meta-data control. It is a software management nightmare. The Semantic Web is a pipe dream. Rangathan further sees content as rigid documents, when the business reality is that each document is a dynamic mix of business data, text, dynamic graphics and images. Adobe InDesign doesn’t cut that!

Microgen plugs the need for processes also needing transaction like performance and fully integrated with business rules. I agree with that. A properly designed workflow system would allow parallel transaction processing across distributed servers - which most BPM systems don’t do. Well, there go all XML, Java, BPMN and BPEL based workflow systems out the window. No high speed transaction processing there.

Robert Shields of Telelogic mongers the usual amount of FUD (fear, uncertainty and doubt) before he flogs process flows and Visio modelling as the solution to bring multiple BPM, CRM and ECM products together with ERP. Good luck!

Let me conclude here: Yes, process management executes in real-time. It is therefore closer to business reality than strategy, process analysis and business intelligence. But process flows do not adapt in real-time. The truth is, state-of-the-art BPM is just another way to develop applications but admittedly more flexible than coding. The problem is the illusionary abstraction of process analysis by flowcharts. Work does not flow, but business content changes over time as people and applications interact with it. We need to cut out the strategy and analysis middlemen and put the people who do the work in charge. As they work with the content, the process management software needs to recognize the complex events behind their actions. These complex events represent the process progress. Change over time is no longer an abstract analysis effort but happens by learning from the users. Then we are finally real-time not only in execution, but also in adaptation. The Papyrus User-Trained Agent does just that. Hmm, that means management has no control over business process? Not so. Management has no need to audit the process analysis, but needs to audit what really happened. In a business process - according to Michael Hammer and every other BPM guru - the customer service outcome is relevant, and not how the process was performed. Suddenly we don’t monitor process execution against an abstract strategy and analysis, but care about business performance. And suddenly we don’t need BI guesswork.

By the way, can we drop that stupid word AGILITY? Its a dog sport, for Pete’s sake!

I recently discussed how Customer Response Management with the ISIS Papyrus Platform was different from Marketing Management. I will try to explain that in the following.

Rather than simply buying expensive hard-coded marketing management software that promises to reduce costs, boost productivity and grow revenue (like everyone!) businesses need to draw from their unique service strengths. Once all businesses have implemented the same (best-of-breed) marketing software by the same best practices they become tied down by the same unchangeable processes. All marketers in all businesses will identify and act on the same customer insights, run the same campaigns, use the same lead management, event triggers and campaign concepts, perform the same analytics, detect the same hard-coded behavior patterns and will thus have absolutely no competitive benefit from using standard software. That caused Nicholas G. Carr to propose in ‘Does IT matter?’ that Information Technology no longer represents a competitive advantage. But what now?

Business executives and managers need to ask themselves how an opaque business-to-prospects situation can be converted into a unique employee-to-customer service relationship with long-term customer loyalty. After all, existing customers are the most valuable prospects! The least an organization needs is marketing management software with disconnected processes from the rest of the business.

Rather than focusing solely on the needs of the marketing organization, innovative software needs to enable prospect and customer focused service across the business as a whole and not create another process island that will isolate the marketing team! A truly customer-centric business does not focus on one group of processes but enables customer processes to cooperate at any point and at any time in the business.
A consistent brand experience is important but it cannot replace a service relationship. The transition from prospect to customer must be as painless as customer to prospect. That is not a branding exercise but a service quality aspect and steps far beyond customer analytics, event-detection, campaign management, lead management, and marketing resource management.

In these days when information overload is already considered a clinical psychological condition, being a customer-centric business is today no longer about forcing more marketing information down a customer’s throat. Messaging is not about sending a certain message to a certain kind of person; it is about making the receiver aware without being seen as intrusive. A message is only a valuable message when it arrives in the mind of the receiver with a positive experience.

Complex data mining, exploration and analytics with dashboards and drag-drop-and-drill visualizations, create an illusion of statistical cross-channel customer behavior that is disconnected from customer reality. Each customer is an individual and deserves individual treatment, because only then he or she will respond with more awareness. The responsibility of innovative software is to enable that individuality at an acceptable cost in a mass marketing environment.

Before we can offer alternatives to service oriented process management solutions we need to clarify what the expected benefits for a large organizations are. Process management theory follows the same lines of thought as centralization. Because current taxation concepts favor capital gains over dispersing profits to owners, a common corporate strategy is to grow by acquisition to raise share prices, dominate the market and benefit from economies of scale. To gain those benefits companies needed to centralize and standardize certain operations. Centralized organizations were however found to be too bureaucratic and distant from the customer to optimize processes for the hoped-for benefits.

A few aspects make up the rationale behind these organization choices:
• Control – Ensuring corporate compliance
• Reuse – Learning from previous experience
• Flexibility – Enabling local customer focus
• Direct cost – Using economies of scale
• Process – Enabling unit cooperation
• Transparency – Consolidated financials
• Personnel – Qualification requirements

The arguments for a centralized IT include the cost of operation, the need for consolidated records and the reuse of processes. When centralized IT failed to optimize processes because of bureaucracy it was outsourced. It is fairly easy to understand the business case for centralization and outsourcing, but not that it broadly ignores the human aspects. Outsourcing admittedly makes sense in either highly specialized areas with varying throughput that require substantial idle standby resources or in areas of lesser strategic importance without customer contact. The main question is how high the flexibility to service customers with unique processes should be valued. The next question is whether IT is even able to support those unique processes. Outsourcing IT does not help the organization to improve its processes but it clearly turns IT into a commodity. When application software becomes a commodity, the people using it turn into a commodity as well as their creativity and skill is automated away.

Centralized IT by outsourcing perfectly combines all disadvantages of all options in exchange for a few quarters of virtual cost savings.

ISIS Papyrus Website

Most White Papers related to SOA, BPM or innovative application life-cycle environments monger the usual amount of fear, uncertainty and doubt. ‘Businesses are being forced’, ‘Markets change rapidly’, and ‘Governments require compliance’ is the common tenor. It seems that IT vendors need to intimidate businesses to sell their solutions. C-level management is being told that without huge investments into new technology, such as the ‘silver bullet’ of SOA agility, they are doomed. Remember, ‘silver bullets’ are used to kill vampires, which opens up the question who is sucking blood (money) from the corporate arteries? External consultants try to justify their expense by how many vampires (employees) they eliminate. ‘Blade’ said in the movie of the same name: ‘It takes a vampire to kill a vampire.’

Similes are fun and sometimes useful, but this one ends here because SOA is not a ‘silver bullet,’ lacking its key feature – simplicity and immediate salvation. If hordes of high-tech and business process consultants at exorbitant prices would have been needed to save us from vampires, Count Dracula would rule this planet today. Other vendors in other papers propose the 80/20 Pareto rule as a justification for huge BPM analysis expenditures or define ‘SOA sweet spots’ in their ‘Road Maps to Success’.

What you see on the surface in the information technology market has little to do with business needs, quality or functionality. It is shaped by billions of advertizing. It is distorted by how much money is spent on analysts. The market does projects where the consultancy companies see their revenue. It is important to turn away from the market buzz, ignore ‘vain’ benchmarks, and stop trying to leverage ‘Me-too’ best practices. Business executives and CIOs need to turn around and connect with their most important asset – the people that produce their products and service their customers!

ISIS Papyrus Website