2011 was an exciting year all around for the BPM industry. As a BPMS (Business Process Management Suite) Vendor, the market continues to be strong. According to Gartner, the BPMS (business process management suite) market size in 2009 was valued at $1.9 billion growing to $3.4 billion by 2014, a compound annual growth rate of 12.2%. Certainly the BPM market is not the size of CRM, ERP or pure Enterprise Content Management, but it is still a good size. And the point about BPM is that it tends to blur the lines with the other markets that surround it. As a result, my estimate is that the BPM industry is quite a bit larger depending on how you look at it.
It is probably for this reason that so many complementary technologies are feeling compelled to move into the BPM space either through acquisitions or organic initiatives. Without a doubt the industry will continue to heat up in 2012. In the mean time, I think it is worth a glance back over 2011 to see what was hot and what was not. As a wrap up to the year, I’ve put together a top 6 list of the most important happenings in the industry from my perspective:
1) BPM goes Social
It’s pretty obvious that no one really knows what this means, but Social has taken over everything…BPM included. Social BPM is a hot topic right now. There is not a single analyst out there that doesn’t have a Social BPM presentation on SlideShare, or a white paper, or a few blog posts (or all three) regarding Social BPM. But what is also apparent is that most of what is being written really lacks substance at this point. Still, I don’t want to be too harsh. We are on the verge of something interesting and we are all struggling to take it in. So, this sort of discussion is healthy even if the pundits sound a little lost on this subject.
2) BPM gets even “Cloudier”
Was 2010 they year of the cloud? Well, if it was then 2011 is even cloudier. Everything is going into the cloud and fast including BPM software. We are seeing a tremendous increase in our own cloud subscriptions as compared to on premise subscriptions for ProcessMaker BPM Software. Virtualization software and solution vendors are really battling it out, and this has made it even easier for companies like Colosa to effectively manage its own BPM software cloud. Everyone is a winner in this scenario. The plethora of virtualization software has made it easier and cheaper for SaaS providers to offer their software. Customers are getting better service because they don’t have to worry about lots of details related to the delivery of the software – rather they can focus on the service that the software is providing. We still have a long way to go in terms of most vendors taking advantage of a true cloud infrastructure (totally on demand and totally scalable), but it is happening and fast.
3) ACM vs. BPM
Adaptive Case Management crawled out of the woodwork this year to begin presenting a legitimate challenge to BPM as the discipline of the future. ACM has positioned itself nicely as the concept/tool of choice for the knowledge worker (leaving BPM to be seen as a discipline associated with 19th century industrialization and the route worker). Analyst firms like Gartner still don’t consider ACM a market (I believe they define a market as having at least 10 identifiable players and having $1 billion + in revenue). However, Gartner did say that they believe ACM will be a market in the next couple of years. So, it looks like many of the BPM providers will be rushing to position an ACM solution or at least an ACM module. The dirty little secret is that nothing is 100% ACM or BPM, but rather most is a little of both. Remember, your physics – light is both a wave and a particle. Well, process and data is the same. Sometimes Data is the focus (ACM) and sometimes structured process is the focus (BPM) – and these two focuses tend to shift in and out at different moments in the same process.
4) BPMN 2.0 picks up more steam
The BPMN 2.0 specification was finalized in August of 2010. But in 2011, the OMG specification seems to really have picked up steam. There is a lot more customer and vendor chatter around the specification. Most of the major vendors (IBM, Oracle, SAP, etc.) still support the specification very poorly, but at least they are talking about it. Companies also seem to be investing more in BPMN education with different certifications and courses popping up around the world. Perhaps 2011 won’t be seen as a particularly significant year for BPMN in the larger historical context, but this does seem to be the year that BPMN (via the 2.0 specification) was able to firmly plant itself at the center of the industry.
5) BPM apps
This was really the first year that many vendors announced the availability of BPM apps. Many vendors seem to focus on the iphone while some have announced availability on the big three (ios, android, blackberry). There doesn’t appear to be much innovation going on in these apps, but then again just the basic functionality of the inbox, launching cases, and filling out forms is a pretty nice thing to have on a mobile platform. I am sure that most vendors will follow suite in 2012, but I don’t think significant innovation will happen until the following years. The question of whether HTML 5 will wipe out the market for apps still looms in the background.
6) The BPM market makes some moves
This was a healthy year for BPM related acquisitions. The big three acquisitions were the Open Text acquisition of MetaStorm ($182 million based on approximately $80 million in annual sales, i.e. 2.2x sales), the Lexmark acquisition of Pallas Athena ($50 million purchase price), and the Kofax acquisition of Singularity ($48.1 million for $16.1 million in revenue, i.e. 2.98x sales). All seem to make good sense in their own way. Still, I tend to think that the Kofax acquisition will bring the most bang for the buck and be the most successful over time. Pallas Athena will probably get lost in the Lexmark bureaucracy and the Open Text acquisition of MetaStorm just does not seem like a tight enough fit to be a good one. Time will tell…
The BPM Market in 2012
There will be more acquisitions in 2012. This seems like an obvious prediction, but I think there is more of interest here than simple M&A activity. In 2012 and beyond, we will see two types of acquisitions: 1) Acquisitions by BI, CRM, ERP, ECM, and related solutions in order to acquire process functionality, and 2) Consolidation strategies centered around industry specific verticals.
Regarding #1, the trend in the BPM acquisitions in 2011 was acquisition for the sake of acquiring technical functionality to add to a complementary product/technology offering. This was clearly the case for Open Text, Lexmark, and Kofax in each of their respective acquisitions. Of course, this brings revenue and expanded sales channels, etc, but this is much different than an acquisition for the sake of purely growing customers and revenue. I believe that this trend will continue in 2012.
Regarding #2, I believe we will also see more vertical, industry specific acquisition strategies as BPM players look to consolidate offerings in a particular industry. In this case, the acquisition will have the purpose of adding customers and revenues, but it will be very industry specific. Of the 70 or so BPM/Workflow companies in the market today, how many are doing more than $10 million a year in annual revenue? Certainly it is less than 10 and maybe it is less than 5, right? Singularity was only doing $16.1 million in revenue when it was acquired (and with a very unimpressive 6.2% net profit margin). If you subscribe to the mantra of Geoffrey Moore as explored in Crossing the Chasm (and most technology companies do), then you will realize that the only way to really grow revenues is to establish yourself as the #1 or #2 player in a few beachhead verticals. So, if you are acquiring BPM companies or investing in them, the question will always be – “Which verticals do you dominate?” A mid size BPM company doesn’t want to acquire a slightly smaller BPM company just to gain an additional smattering of clients across a variety of industries, do they? That offers no real strategic advantage. Today, there are no clear winners in the vertical spaces. I think in 2012, we will begin to see consolidation strategies occurring more obviously around verticals. Interestingly, this is where the lines between BPM software and custom applications is most blurred. If a BPM company wants to dominate a small segment of the financial services industry, their top acquisition targets probably won’t even be other BPM companies – it would be a custom application in the financial services segment. So, besides being vertical specific, many of the coming round of acquisitions probably will not be BPM companies acquiring other BPM companies, but rather BPM companies acquiring very niche custom applications.
You can hold me to the fire on this during my BPM roundup at the end of 2012.
Happy New Year and Best Wishes to you.