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Pega Announces Plans To Buy Chordiant: Maybe The Mad Hatter Isn't So Mad After All, Just Misunderstood.
Posted by Clay Richardson on March 21, 2010
Pega's announcement last week to acquire Chordiant sparked an interesting debate within the BPM world: Is Pega becoming a CRM vendor? Is Pega moving away from BPM? Is this a move by Pega to better connect customer experience and business process improvement initiatives?
Over the weekend I took my daughter to see "Alice in Wonderland" and couldn't resist comparing Johnny Depp's Mad Hatter character to Pega's recent move to acquire Chordiant. For those of you who haven't seen the movie, it's not as weird as the usual Tim Burton movie; but the Mad Hatter character is a little disturbing, with his rhymes and riddles that keep you guessing at his true meaning.
For many process professionals, Pega's recent move was just as confusing as having a conversation with the Mad Hatter. What exactly is he trying to say anyway?
To understand this latest move by Pega it's critical to understand the company's history and how it sees the the post-recession world evolving. It also requires you to abandon your world view for a moment to imagine a BPM world that is different from what we've been told and sold for the last 10 years. Ultimately, this is what Alice had to do in the movie: Imagine a world different from the picture that had been formed in her head - she had to imagine Wonderland.
First, let's explore the journey that Pega and BPM have taken over the last decade:
- Pega started out as small packaged apps player - It's interesting to read our 2004 review of Pegasystems. In the product review Sharyn Leaver points out:
"Pegasystems is a public, midsize ISV with 425 employees and more than 100 customers. But only seven are customers of the Process Commander platform — most are using one of Pegasystems' packaged applications for the financial services or healthcare industry."
Yes, even as recently as 2004, the bulk of Pega's customers and revenues came from their packaged apps solutions. Over the last decade Pega transitioned from packaged applications, to business rules, to business process management. However, the company never completely shed its packaged applications heritage to become a true "BPM Pure Play" that focused solely on BPM-specific capabilities. I like to refer to Pega as offering "quasi-apps" - because their solutions are packaged up just enough to accelerate time-to-value without pouring your feet in process cement. Ultimately, this combination of BPM+Apps set Pega on fire during the recession with companies - particularly financial services - looking for quick time-to-value solutions that provided flexibility and adaptability for future changes.
- For years we've been told to take sides - From the beginning, BPM suites have been juxtaposed against monolithic packaged applications. Process professionals were forced to see the world through the lens of BPM or the lens of packaged apps. Either you sign up for full flexibility offered by BPM - and build it yourself - or accept how Oracle and SAP thought your processes should run inside their packaged apps. There was very little middle ground. Sort of like the Queen of Hearts in Alice in Wonderland - you're either with her or "Off With Your Head!" Ask process professionals leading BPM projects and they see little value in their CRM or ERP solutions - they only value the ERP or CRM solution as a glorified data repository. While process professionals leading ERP and CRM implementations often saw BPM as a dog constantly chasing its tail. Although some process professionals tinkered around the edges to combine ERP and CRM, most remained skeptical of the combination.
- BPM and CRM (and ERP), so much better together - Over the past few years, Pega did a good job of winning deals in both CRM and BPM. So what does that make them, a BPM vendor? Or a CRM vendor? Or both. If you're world view values CRM, then you probably like what Pega offers from a CRM perspective and view them as a good CRM vendor. If your world view values BPM, then you would probably like what Pega offers for developing and deploying process solutions. But the reality is, these two things are just different sides of the same coin - packaged apps need more flexible processes, and process solutions need good data structure. Remember the 2006/2007 mantra: "BPM and SOA, much better together"? Maybe the 2010 - 2012 mantra should be "BPM + CRM (or ERP), so much better together".
Now, let's take a journey into the BPM future, looking ahead over the next several years (i.e., the post-recession economy):
- Pega betting big on a process-driven CRM future - I found an interesting nugget in Pega's analyst call announcing the Chordiant acquisition. Alan Trefler, Pega's CEO, made the case that many companies will need to update their CRM applications over the next few years and they aren't happy with their traditional options. Post-recession, Pega believes businesses will place a premium on retaining valuable customers and improving customer experience. And much of what we've been seeing in organizations supports this view. In 2010, businesses will begin to focus once again on top line revenue growth; however, most firms will continue to focus on protecting their turn and not losing customers through attrition.
- BPM consolidation will make things messy for a while - Looking at the current round of consolidation, Forrester expects the BPM market to fragment and morph into a new discipline over the next several years. We are already seeing splintering with Progress/Savvion creating a new category around "Responsive Process Management", and Pega aggressively promoting "Customer Process Management". Ultimately, all of these new categories will focus on "Dynamic Business Management" - an evolving discipline focused on managing business processes in the post-recession business environment. In response to the recession, we're already seeing early examples of companies developing new operating models to withstand future seismic economic shifts - sort of like displaced New Orleans residents that moved back and built their homes on flexible foundations that could withstand future Category 5 hurricanes.
- Business process guidance will become critical - One of Chordiant's many strengths was its ability to provide contextual guidance for customer service reps as they interacted with callers around specific processes. Process professionals - and by extension, BPM vendors - have alwasy assumed that process participants (i.e., end users) had enough information and understanding to complete the task at hand. However, with fewer heads in the workforce, firms are realizing that contextual process guidance is essential to improving process outcomes for critical business processes. For example, one recent client I worked with needed to provide contextual process guidance to employees based on numerous real-time factors. They couldn't simply automate the guidance through business rules, they needed to analyze real-time customer and operational information in order to help the rep drive the case towards the best possible outcome. In addition to Chordiant, companies like Panviva specialized in this type of process guidance for BPM solutions.
What's It Mean
As BPM market consolidation continues, Forrester expects increased confusion as vendors put out marketing messages and positioning to capture the growing opportunity around Dynamic Business Management. However, process professionals should not be confused by the blurring of lines between BPM and packaged applications. Both of these disciplines - and technologies - attack the same business challenge: improving business processes that are the lifeblood of the enterprise. Processes such as quote-to-cash, customer service, supply chain management, and workforce management just to name a few. The shift away from "IT-centric" inflexible solutions such as CRM and ERP will give way to more dynamic business-centric solutions that deliver the same process improvements with greater flexibility and adaptability for the business. Like Alice, process professionals will need to finally wake up to reality - the reality that packaged apps and BPM can coexist and work well together.
What's Your Take
I want to hear from you. Let me know if you think Pega's move will bring BPM and packaged applications disciplines closer together or if you think Pega simply acquired Chordiant to become a major player in the CRM space. If you're a Pega or Chordiant customer, let me know how you feel about the deal and if you have any concerns or specific questions about how this will impact your investment. Post your thoughts in the comments section or feel free to shoot me a quick e-mail at firstname.lastname@example.org.
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