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Virtualization and Reengineering


  1. Virtualization and Reengineering

Article Description

Reengineering left a bad taste in many managers' mouths, and Business Process Virtualization looks very similar on the surface. However, as Martha Young and Michael Jude explain, BPV can deliver the benefits that reengineering promised, but never delivered.

In previous columns we explored the reasons that business process virtualization (BPV) is different than reengineering. Although both are concerned with optimizing a business process to achieve cost savings; reengineering seeks to implement automation to achieve short term cost gains through the down-sizing of organizations. BPV, on the other hand, is about implementing technology to achieve a greater leverage of personnel so that more attention can be devoted to customer facing functions.

In its absolute extreme, BPV seeks to achieve a 100% engagement of employees with customers. Reengineering seeks to retain the same customer/employee dynamics, but reduce the overhead associated with those dynamics. This last point is extremely important and serves to distinguish BPV from other forms of organizational optimization. BPV is not about downsizing, it is about engagement that drives increases in customer satisfaction and sales.

Consider the typical reengineering process. A company hires consultants who come in and do business process analyses, map out personnel to these processes, then suggest automation that will effectively replace personnel in the process. At the end of their report there is usually a time value of money calculation that shows that the automation, although having high implementation costs, has lower carrying costs. When the numbers are added up, surprise, it is cheaper to put in the automation than to have the people. Management buys in to the recommendations and deploys the necessary systems, fires the personnel performing the function before the new automation is fully functional, and then watches costs skyrocket, while productivity drops.

We saw a study in the '90s that claimed that only about 10% of the total number of reengineering projects at that time were successful. What has never been reported is that the reengineering activities of the '90s are still creating havoc a decade later. The impact on employee moral, executive credibility and corporate performance is even now responsible for a reluctance among corporations to adopt real world changing technology. Ironically, the very technology that could provide a quantum jump in profitability is, in many instances, sitting on IT shelves due to lack of executive sponsorship; the result of being bitten by the bad reengineering experiences of the past. Given the nature of the reengineering experience, it is not surprising.

BPV superficially looks like reengineering. Both seek to understand the business process in terms of who is doing what. BPV, though, goes beyond such simple analysis and maps the company's business and market objectives against the business processes designed to support them. In virtually every case, BPV discovers that company objectives can be furthered by optimizing the interface between the company and the customer. As a consequence, the fundamental question that BPV asks is: how can we place more employees in regular, direct contact with customers? When this question is answered, automation can then be put into placed to enable increased employee-customer interaction.

One result of this approach is that companies frequently find that they can't afford to downsize people. In many cases, they find they don't have enough personnel. This is because BPV is not focused exclusively on the cost side of the equation as reengineering frequently is. BPV also looks at revenue maximization. Revenue increasingly is generated by customer contacts.

Another fault of reengineering is that, consultants don't usually tell executives that such activities can significantly increase costs initially. This is because automation usually has bugs that need to worked through and automated processes need to be stabilized before they are placed in to production. Disasters take place when a new system is implemented and then flash cut into production. These can be exacerbated when the people who know the old process are let go before the new process is stabilized.

BPV does not guarantee lower costs initially. Instead, it guarantees higher initial revenues. Because people view the new automation as empowering rather than threatening, moral is not impacted as much. As the effectiveness of new systems reduces such things as the amount of superfluous information available to sales personnel, revenues are improved. Ultimately as the new systems stabilize, personnel working on more manual processes are transitioned into more customer facing roles.

It is true that many people do not want to be more customer centric. However, unlike reengineering, where the focus is on eliminating people who do not fit the new automation, BPV seeks to grow the organization so that support functions absorb personnel that are spun off from virtualized processes. When this is all explained to employees, unlike reengineering, there is usually a much more enthusiastic response to BPV implementation activities.

Reengineering has done quite a bit of damage over the years. While its objectives were noble, its approach was simplistic. BPV, with its more complete decision model, can deliver the benefits that reengineering promised, but never delivered.

Martha Young has more than nineteen years of experience in the technology market and is a partner in Nova Amber, LLC, a consulting firm. Martha is the co-author of The Case for Virtual Business Processes, published by Cisco Press. She can be reached at info@novaamber.com.

Michael Jude, Ph.D. is a well-known industry analyst with more than twenty years of experience in telecommunications and management automation. Michael is the co-author of The Case for Virtual Business Processes, published by Cisco Press.