The next frontier for software: Smart process applications fill a big gap

Collaborative processes—like drafting and negotiating a contract or developing a business plan—are fundamental for any business to succeed. Businesses and governments have invested billions of dollars in core enterprise applications that automate business processes by codifying the best practices for a specific process or industry sector that are needed to maintain the critical electronic systems of record. Along the way, they have eliminated mountains of paper, created a more efficient workforce and reduced human error from manual activities.

But in what Forrester has called the "age of the customer"—when the focus on the customer now matters more than any other strategic imperative-businesses need more than process automation for transactions and systems of record.

Let's face it: Traditional packaged software options simply do not provide the advanced levels of adaptability and flexibility inherently necessary in highly dynamic collaboration activities. Forrester calls the unautomated and semi-automated work surrounding today's packaged solutions "untamed processes." Those untamed processes form in the seams and shadows of the enterprise, representing all the work involved with end-to-end processes that packaged apps cannot address. But new developments in business rules, event processing, business process management software, advanced analytics and cloud computing make it possible to tackle those untamed processes by creating applications that support collaborative activities far more effectively and efficiently than ever before.

Business executives want smart process applications—a new generation of packaged applications that are designed specifically to support business activities that are people-intensive, highly variable, loosely structured and subject to frequent change. That next generation of packaged applications will encapsulate current best practices, yet make it possible to reflect continuous improvements to an organization's structure and dynamic activities.

Five elements

Smart process applications are built on what Forrester introduced in 2008 as dynamic business application principles, a set of software design principles that are created for people and built for change. They fill the gap between customer-oriented systems of engagement and systems of record by automating both the structured and unstructured activities and information involved in a collaborative process. Forrester defines smart process applications as containing all or most of the following core features. See Chart 1.

• Imported or embedded awareness data relevant to the business activity. All collaborative business activity starts with a set of data. For example, in the creation and management of contracts, the data will be the repository of existing contracts and standard contract terms and conditions, while in a utility's field service activities, the data will be real-time information on electrical usage, and the location and layouts of electric distribution lines.
• Document capture for pertinent documents, forms and faxes. Many collaborative processes rely on incoming physical documents that require manual work to process, such as new account information, customer requests and feedback, and sales orders. To tackle this paper burden, smart process applications will support an integrated document capture solution for scanning and indexing, managing incoming faxes and supporting electronic signatures.
• Embedded analytical tools designed for the task at hand. Individuals engaged in business activities will need analytical tools designed specifically for a task or workflow, not just a generic set of business intelligence reports and query tools. For example, those involved in corporate risk management will need predictive analytical tools that can highlight potential threats to the business operation or assets, while a sourcing team will need analytics that identify the best spend categories for strategic sourcing negotiations.
• Collaboration platforms to create content. Individuals engaged in a collaborative business activity must be able to work together to create a deliverable. Smart process applications will allow employees to share ideas, submit solutions, and critique and comment on the work of others—regardless of physical location.
• Business process management (BPM) tools to manage the steps of an activity. Once employees identify and create a solution, remedy or call for action, they need to turn the plan into reality. That is where business process management elements of workflow, rules engines and dynamic case management come into play.

Three segments

While Forrester expects the total global software market to grow at an 11 percent compound annual growth rate from 2010 to 2015, smart process applications will grow almost twice as fast because of their ability to address critical, previously unaddressed business needs. Forrester categorizes smart process applications in three segments, with different dynamics in market size and growth. The three segments—existing smart process applications, BPM suites for building custom smart process applications and vertically oriented smart process applications—totaled $14.7 billion in global vendor revenues in 2010, with the combined market set to grow to $34 billion by 2015. See Chart 2. The segments include the following:

• Existing smart process applications that have emerged as complements to transactional applications. Over the past few years, applications to manage contract information, employee performance, governance and risk, and budget forecasting have emerged as extensions of core traditional applications. While most companies view them as individual products that support stages in a business process, Forrester sees them as having common elements that fit the definition of smart process applications, such as embedded awareness data and task-appropriate analytics.
• BPM suites that allow companies to build custom smart process applications. BPM suites are not themselves applications, but have evolved from tools for connecting applications that support a process, to platforms for building smart process applications. In this stage of the market, smart process applications are still embryonic, making BPM software the most practical and easiest route for building custom smart process applications. This segment—currently known as BPM suites or dynamic case management, which, Forrester believes, will evolve into and be renamed smart process platforms—will experience steady growth of 15 percent from 2012 to 2015, leading to an overall increase in the smart process application share of the market from 8 percent in 2010 to more than 10 percent in 2015.
• Vertically oriented smart process applications that will be built on BPM platforms. Just as traditional application vendors have built smart process application extensions of their core systems, vertical application vendors, such as Siemens in hospital management systems, have built industry-specific custom applications. This segment has explosive growth potential as vendors and individual companies realize that applications created for a singular firm have relevance to many others in the same industry.