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Business process management (BPM) and business process optimisation (BPO) are the two longest-standing and most efficient ways of managing processes with a focus on continual effective monitoring and improvement. The emergence of distributed and decentralised ledger technologies with smart contracts and the internet of things (IoT) can be instrumental in disrupting and revolutionising these business practices.
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Distributed and decentralised systems such as blockchains can holistically manage steps and relationships where participants will share the same data source, such as financial relationships and transactions connected to each step. Security and accountability is factored in, as well as compliance with government regulations along with internal rules and processes. The result is consistency, reductions in costs and time delays, improved quality and reduced risks.
By integrating IoT with decentralised, distributed blockchain technology that incorporates smart contracts, BPM and BPO will enter a world where just about anything can be connected to communicate intelligently. Enterprises that embrace this phenomenon will be able to provide a better user experience and value-added services, as well as gain competitive advantage and differentiation.
The global and ongoing progression of digital transformation is a huge and complex challenge for any enterprise, no matter the size. Added to this complexity is the fact that some parts of a process are not executed by the enterprise itself.
Companies of all kinds are increasingly using technology partners, channel partners, contract manufacturers, warehousing and logistics partners, service partners and other outside services to handle all or part of a business process. Most enterprises come to view these partners as the extended enterprise, and look for ways to have tight integration and collaboration with them.
IT systems need to talk to each other
Generally, enterprise BPM systems only provide visibility into activities that are automated using IT and, to some extent, those carried out by humans. Human activity is visible only when it involves interaction with information systems, or when a human reports an activity status in the BPM system.
Control systems made up of sensors, meters, measurement instruments, actuators and control units have been used to manage operational processes in real time in industries such as manufacturing, energy exploration and distribution, chemical plants and transportation for a long time. However, these control systems have typically used proprietary or specialised protocols, and the span of control and management has been limited to small sets of devices and actuators managed by a control unit.
Due to the heterogeneity and lack of standards in operational technology, interoperability is a challenge. Devices and equipment from different suppliers are unable to communicate with each other or the enterprise IT systems. BPM and BPO systems have largely lacked visibility into operational technology, which has resulted in blind spots in the business process.
Humans often need to bridge the gap between the control systems and IT by updating information systems based on the status of activities and tasks that are carried out by them. However, this approach leads to delays, lack of sufficient insight into operational technology and potential for human error. Additionally, current models cannot scale, and do not provide real time insight into the activities carried out.
Fortunately, technology stacks used for operational technology and IT have begun to converge. The transformational change brought about by the internet of things is that “things” will be internet protocol (IP)-enabled and connected to the internet, opening a world of possibilities such as:
- Each of these “things” will be uniquely addressable via their IP address.
- Sensors, devices, actuators and equipment from different suppliers will interoperate via the common internet protocols.
Digitising business processes
Digital business process management (DBPM) is critical to support your customer’s digital journey and enable your company to be more agile, deliver faster and more situational decisions, and achieve substantial cost savings.
A modern DBPM will integrate IoT and smart contracts to enter a new paradigm. The business strategy behind a DBPM will deliver dramatically shorter cycles with continuous improvements and enhance the efficiency of products and services to the benefit of a rich and seamless customer experience. Business and operational benefits to be achieved include consistent workflow, less human intervention and streamlined operations. This would result in reduced costs, greater accuracy, improved efficiency, transparency and business agility.
There are some issues to overcome before this new paradigm becomes the accepted business practice. In manufacturing and supply chain management, security authentication, management and communication protocols for IoT devices are still at an immature level. Distributed ledger technology itself is in its infancy and there are some challenges to overcome, especially the ability to handle large amounts of data and the distribution model for it.
The disruptive potential for blockchains for BPO, however, is undeniable. It still remains vital to look at blockchains much like network standards: focus on the needs and the value proposition while avoiding getting too focused on specific low-level blockchain technologies. Also avoid too much investment in bespoke blockchain products beyond proof-of-concepts and experimentation until decisive standards and trends with a wide backing of key industry players occur. This relates in particular to smart contracts, smart objects and the emerging blockchain as a service.
Bruce Hughes is a senior analyst at KuppingerCole.