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BPM or ERP or BOTH?

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BPM or ERP or BOTH?

Today at www.processgenie.com we have a guest blog from Garth Knudson Managing Director at Handysoft, with a common question we all get from our business side executives.  Enjoy!

I just got back from travels in the Middle East. What I discovered is that the MEA Region (Middle East & Africa) is about 3 years and 7 years respectively behind the market in its access to and evaluation of BPM and ERP solutions.

MEA not withstanding, many people have asked me about the differences between ERP and BPM.

Questions include:

I would like input on this matter.  But I submit the following:

ERP:  In simplified terms, I see ERP as a way to integrate the data layer of different processes (e.g. AP/AR, Payroll, Order Entry) within larger processes (e.g., Financials, HR, SCM). Although workflow is an embedded part of any ERP system, it is not intended to support enterprise processes. The workflow itself is functionally-driven (e.g., materials management) vs process-driven, where the process can potentially span many different functions (e.g., requisitioning, recruiting). The value ERP provides is an integrated system and single view into customer data. The data is updated on demand. Customers expect ERP to support their processes, but often they have to change their process to match ERP best practices. As a result, ERP software and implementation costs are significant. In 2007, the Aberdeen Group found that the average costs (software + services + maintenance) per user ranged from $2K/user (a company with on average 3365 users, 14 modules) and $18K/user (a company with on average 195 users, 11 modules).

BPM : In contrast, BPM enables users to create business applications incorporating different people, data and documents, which in turn span multiple divisions, systems and/or data sources. Process function is almost irrelevant. In a structured BPM scenario, workflow activities derive from specific rules (i.e., roles, responsibilities, policies, procedures, deadlines, escalations). In a dynamic BPM scenario, users completely control routing in run-time. The value BPM provides is a platform to create multiple applications that improve productivity (effectiveness, efficiency), greater business agility (traceability, innovation, optimization), and ensured compliance (auditability). Furthermore, process definition components are reusable and changeable.

Many BPM vendors provide templates that do not mandate workflow but act as accelerators to process execution. I could find no study like the one above, so I will base costs on experience. Say user-based pricing ranges from $500/user to $1500/user. A simple workflow is likely to cost $10K-$25K in professional services to execute, a mid-sized $40-$75K, and a sophisticated workflow $100K-$500K. Because the BPM platform is reusable, the customer only requires an investment in services to create new applications. If the average customer has 200 users with 5 mid-tier live applications, then the cost per user is $1K/user to $3K/user.

BPM might compete with and/or replace ERP on smaller scale projects. BPM absolutely compliments ERP by creating a “single view” into processes spanning multiple groups/systems (e.g., customer on-boarding, purchase requests). BPM also covers processes that fall completely outside of ERP systems such as Correspondence Management, Project Management, and Action Tracking.

Examples: BPM & ERP Working Together

In summary:

So again I ask, BPM or ERP or both?

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