=Paper=
{{Paper
|id=Vol-2830/paper26
|storemode=property
|title=Improving Business Processes Efficiency and Quality by Using BPMS
|pdfUrl=https://ceur-ws.org/Vol-2830/paper26.pdf
|volume=Vol-2830
|authors=Igor Fiodorov,Alexander Sotnikov,Yury Telnov,Nixon Muganda Ochara
}}
==Improving Business Processes Efficiency and Quality by Using BPMS==
https://ceur-ws.org/Vol-2830/paper26.pdf
Improving Business Processes Efficiency and Quality by
Using BPMS
Igor Fiodorov1 [0000-0003-2335-0452], Alexander Sotnikov2 [0000-0003-2985-3704],
Yury Telnov 1 [0000-0002-2983-8232], Nixon Muganda Ochara3 [0000-0001-5736-7901]
1
Plekhanov Russian University of Economics, 36 Stremyanny lane, Moscow, 115998, Russia
Igor.Fiodorov@mail.ru, YTelnov@rea.ru
2 1
Joint Supercomputer Center of the Russian Academy of Sciences,
32a, Leninsky Prospect, Moscow, 119334, Russia
ASotnikov@jscc.ru
3
The University of Venda, University Rd, Thohoyandou, 0950, South Africa
Nixon.Muganda@gmail.com
Abstract. The tasks of economic growth is a priority for the BRICS countries.
It implies the rise of labor productivity. However, one should not expect that
this growth will be achieved through the expanded use of information technolo-
gies. Labor productivity is not determined by the level of technology develop-
ment or the equipment used. A high degree of automation does not guarantee
increase in productivity. The organization of production depends on both tech-
nical and governance factors. The latter t involves coordinated implementation
of various processes. It can be concluded that enterprises in the non-industrial
sector and public administration should pay more attention to their business
processes. The use of BPMS - process oriented IT systems can help these enter-
prises to increase their labor productivity, and the states to ensure sustainable
economic growth.
Keywords : BPMS; process oriented IT systems; virtual conveyor.
1. Introduction
Organizations that pose ambitious development challenges must choose a strategy:
either extensive, by means of quantitative increase of production factors, or intensive,
based on using increasingly more efficient production means. We use to think that the
change from the extensive development strategy to the intensive one depends solely
on automation. However, automation reduces the cost of individual operations,
whereas the main problem is in coordination sphere – cross-boundary collaboration of
company units. Publications frequently call the switch to process-based management
to be an important factor of innovative development. Unfortunately process manage-
ment in non-industrial sphere goes on hesitantly, the main causes often being the
complexity of business processes, high cost of modeling, questionable results of im-
Proceedings of the 10th International Scientific and Practical Conference named after A. I. Kitov
"Information Technologies and Mathematical Methods in Economics and Management
(IT&MM-2020)", October 15-16, 2020, Moscow, Russia
© 2021 Copyright for this paper by its authors.
Use permitted under Creative Commons License Attribution 4.0 International (CC BY 4.0).
CEUR Workshop Proceedings (CEUR-WS.org)
plementation. IT implementation, if we consider technological benefits, produces a
local effect and rarely increases efficiency and labor productivity of the whole enter-
prise, so that economic benefits are achieved only when they are supported by effec-
tive organizational practices.
According to IDC in 2016 Russia was among the top countries for IT expenditure
[1]. However, this did not serve the growth of labor productivity of Russian compa-
nies. The study fulfilled by McKinsey Global Institute (MGI) [2] analyzes the growth
of labor productivity in Russia within the last 10 years, compares performance indica-
tors in five main sectors of the Russian economy to the similar industries in US.
It is noted that, over the past decade, the average value of productivity in Russia
has grown from 18% (compared to the US level in 1999) up to 26% in 2007, which
provided 2/3 of the growth in GDP per capita. The economic growth in Russia was
ensured by extensive factors: thanks to the utilization of free production capacities
and the influx of foreign labor. The authors note that the low level of labor productivi-
ty of Russian enterprises in almost all areas of activity does not exceed 10-30% of the
level of labor productivity in the United States, which does not ensure either the sus-
tainable development of our economic system, or its competitiveness in the global
economy, or an increase in the real quality of life. most people.
Interesting conclusions can be drawn if we compare the performance by sectors of
the economy, given in the MGI report (see Figure 1.1) [2]. We are surprised to dis-
cover that the non-productive banking sector turns out to be by far the most prosper-
ous. Labor productivity in it is only 23% of that of the United States, while the aver-
age value of the indicator for all industries is 26%, although it is obvious that IT costs
in this sector are among the highest. For comparison, labor productivity in manufac-
turing sectors, for example, in the steel industry, is significantly higher than average
and amounts to 33%. The financial sector Russian remains to be one of the most au-
tomated and resourced [3]. During last decades IT investments in banking have been
much higher than in other market segments. It can be concluded from the above that it
is a mistake to think that productivity depends only on the level of automation and
technology development. High level of automation does not guarantee high productiv-
ity, the latter is the result of good labor organization. This confirms N. Carr’s observa-
tion that the key to company’s long-term market success are the effective business
processes but not the high-tech solutions [4].
Average across five industries 26
Steel industry 33
Wholesale 31
Retail banking 23
Civil construction Industry 21
Electric Power Production 13
0 5 10 15 20 25 30 35
Fig. 1. The Productivity in Russia (compared to US) by sectors of economy [2]
It is interesting to compare the findings in the MGI report on labor productivity in
Russia [2] with the results of a similar study by the same company: «US Productivity
Growth 1995-2000, Understanding the Contribution of Information» [2], which ana-
lyzes IT contribution to the growth of labor productivity in six sectors of US econom-
ics [5]. The study performed in USA demonstrated correlation of IT investments with
labor productivity in retail and wholesale sectors, heavy impact in semiconductor and
computer production sectors and weak influence in the retail banking sphere and hotel
industry. It can be seen that both in Russia and in USA IT contribution is best visible
in the same sectors – in the production industry, where the processes are well-
adjusted, the effect is considerable, while in banking and insurance sectors, where
process are less formalized, IT influence is less obvious.
It can be assumed that the obtained result reflects the peculiarity of the Russian
market, however, the research by MGI in the United States – « US Productivity
Growth 1995-2000, Understanding the Contribution of Information Technology »
investigating the impact of information technology in different sectors of economy
(see Table 1), refute this hypothesis [5]. It can be noted that both in Russia and in the
United States productivity is higher in manufacturing industries where organizational
and economic relations between the participants are well formalized, while in indus-
tries where these relations are less formalized, the impact of IT on labor productivity
growth is weaker.
Table 1. The impact of information technology in different sectors of economy [5]
The Contribution of Information Technology
Is perceptible Is insignificant
Electronic components man- Insurance services
ufacturing
Market Telecommunications Depository institutions
segmants Wholesale Investment and pension funds
Retail Consulting and business services
Dealing with securities Media business
The purpose of this work is to address the changing of paradigms of using state-of-
the-art IT, to find new representations that can help non-manufacturing companies
increase operational efficiency. We will try to prove that the implementation of busi-
ness process management (BPM) systems will be accompanied by significant organi-
zational changes, shifting of company management paradigm, focusing on business
operations, use of conveyor- production methods.
2. The reason for low productivity
What is the reason for low labor productivity in a non-manufacturing sphere? Let
us take the banking sector as an example. M. Hammer and D. Champy noticed that
not products, but effective processes of their creation and development, guaranty
companies long-term and sustainable success [5]. Most of manufacturing companies
pay close attention to their technological processes, which insure the growth of effi-
ciency [6]. On the contrary, the non-production sector does not too decisively move to
the process management, does not regularly improve its business processes. Compa-
nies are constantly looking for ways to reduce costs and, in terms of economic crite-
ria, optimize their organizational structure, cut staff, do not notice that the transition
to process management will not only improve efficiency and reduce costs, but will
also lead to an increase in the quality of customer service, risks reduction [7].
As it is noted [8], the banking services sphere is characterized by the absence of
strict procedures for personnel actions. In contrast to the industry, where managers
keep a wary eye on the observance of process requirements and punish for any devia-
tions from the technological process, in the financial sphere only the most general
description of personnel actions is considered to be admissible, which leads to high
variability of processes and, as a result, to low efficiency and client satisfaction.
The financial sphere traditionally goes by hiring top-ranked professionals, who
know individual operations. However the end-to-end processes binding up individuals
are drawn very general, showing what should be done, without explaining how it must
be done. Unfortunately the specialists are apt to vary their actions basing on their
individual experience gained in companies with different processes or level of auto-
mation. As a result, two employees performing same operation can do it differently.
Due to variability the end-to-end processes remain uncoordinated. Thus, the employ-
ers’ strategy of hiring top-ranked professionals does not guarantee the increase in
efficiency. Therefore reducing business processes variability is the primary objective.
3. The influence of IT on the enterprise labor productivity
Nowadays researchers are skeptical about the role of information technologies in
the improvement of business performance. First, the assessment of IT influence on the
increase of labor productivity is ambiguous, so only a limited number of implementa-
tions ensure positive effect for organizations [9], [7]. Second, there is a high risk of
failure during the implementation of corporate information systems [10]. At the same
time, it is obvious that qualitative changes in the company and enterprise management
technology are impossible without using up-to-date IT systems. However, local IT
improvement does not guarantee maximum efficiency of the overall organizational
system. Automation of individual process operations is not capable of solving the
global task of increasing labor efficiency, productivity and quality and may even
prove to be harmful for the entire organization. R. Solow, Nobel Prize winner in Eco-
nomics, has defined the so-called “productivity paradox”, which postulates that it is
not possible to conclusively demonstrate the connection between IT investments and
measurable results of organization productivity increase [11]. E. Brynjolfsson, L. Hitt
and S. Yang studied the correlation between IT investments and organizational and
human capital assets [12]. They showed that a modern effective enterprise should be
regarded as a set of complementary assets, so that the increase of one promotes profit-
ability growth of the others. Thus, a combination of IT and certain organizational
practices creates a greater value than each of them does individually. P. Milgrom and
J. Roberts’s studies confirmed interconnection between investments into information
technologies and organizational practices [13].
The research by P. Milgrom and D. Roberts confirmes the close relationship be-
tween investments in information technology and organizational practices [14]. They
believe that the main condition for the effective development of an enterprise is the
consistent creation and development of complementary practices, including IT tech-
nologies, organizational management, and human capital.
It can be concluded that labor productivity growth for the company is ensured only
by those IT implementations, which are accompanied by heavy changes in the com-
pany organizational practices. Thus there is a contradiction between the necessity of
ensuring economic growth and the capability of technologies, on the basis of intro-
duction of modern information systems, to ensure required economy growth rate.
According to G. Smith and P. Fingar [15], enterprise reengineering did not offer a
real solution to economic problems, commercialized, ceased to be attractive for busi-
ness. It is now associated with austerity and side effects of organizational structure
reduction. Reengineering consultants often substitute the transformation of business
processes with the introduction of IT, for example, expensive enterprise resource
planning (ERP) information systems, in which the so-called. best practice processes
are at the code level and can only be slightly modified through customization.
4. A process as a conveyor
The invention of a conveyor increases labor productivity in industrial manufactur-
ing significantly. The conveyor implies clear division of labor and observance of op-
eration sequence. All conveyor operations are clearly specified and detailed, deviation
from the process is not allowed. It can be said that the conveyor unify, regulate and
synchronize the participants.
When we talk about a non-manufacturing industry, we should consider a business
process as a virtual conveyor that consolidates the work of all the participants in order
to achieve the required result. Within a business process a work is broken down into
individual well-formalized operations, each is performed by the participant in its re-
spective role. The deviations from the procedure are not allowed. A business process
is labor organization regulating and synchronizing performance sequence with the
purpose of attaining the highest possible labor productivity and performance quality.
5. Process-based and functional IT
Let us look at the classification of IT systems by the use of business processes.
Functionally-oriented information systems automate the set of functions, while the
execution order of operations is not specified since it is controlled by the operator,
who plays the active role, while the system plays the auxiliary role – provides neces-
sary services. If some of execution scenarios were not completely identified during
the development phases, the operator at the execution time can implement it. As a
result, the user has to keep in mind all the process scenarios, so the work with such
system requires user training. On the other hand, when developing a functionally-
oriented information system it is important to define all the functions, but it is not
necessary to define all execution scenarios. That is why many process models identify
only frequently used scenarios and miss rarely used ones.
An IT system is called a process aware, if a business process model was used for
its design [16]. For example, implementation of most enterprise resource planning
(ERP) systems starts with process modeling, but can we say that those ERP systems
were created to implement the process-based approach? In these circumstances mod-
eling is performed in order to draw up the requirements. The IT system remains func-
tionally-oriented.
A process-oriented system coordinates interaction of participants with each other
and with other information systems in such a way that the tasks including information
and documents are transferred between the participants (people and systems) in ac-
cordance with the formalized procedural rules. Such systems play an active guiding
role, defining the order and the time of operation execution, while people play a sub-
ordinate role, their participation being reduced to fulfilling the tasks. This class in-
cludes numerous workflow systems. Some process-oriented information systems con-
tain hard-coded process logics. They are created by programmers, so changing inter-
action procedural rules can be a labor-consuming challenge requiring coding. For
example legacy workflow required coding in proprietary dialects of business process
modeling languages. Other process-oriented systems are model-driven, they are de-
veloped in a graphical notation and provide businesses with the capability of under-
standing their internal procedures. The model is designed in the terms of the applica-
tion domain, so the designer is protected from programming difficulties.
6. Business process management systems
The Gartner defines business process management [17] as (a) the information
technology of model-oriented development of process-oriented enterprise automation
systems with closed cycle of modeling, execution, analysis and modification of a
process model; (b) the management concept of continuous improvement of business
processes aimed at increasing efficiency, productivity and quality of those processes.
Business process management systems belong to two classes: process-oriented and
model-driven. They are intended to organize effective interaction between all the
process stakeholders, enable to monitor fulfillment of tasks with respect to both time
and quality in accordance with predetermined criteria, help the process owner win
through the results of deviations emerging during process execution [18]. The effect
of interaction coordination makes itself evident in the fact that procedures becomes
shorter, the execution becomes less costly, while quality increases. The process-
oriented systems are aimed at getting synergetic effect from coordinated activities of
company business units. We can say that the process-oriented systems are created to
implement the process-based approach.
7. The factors of BPMS economic impact
The economic impact of BPM system may be classified as direct, indirect and ex-
ploitative (see Table 2). The direct impact is manifested in the reduction of process
execution costs and product quality improvement, while the indirect impact is defined
by associated factors, like user loyalty, risks, productivity. The exploitative impact
reveal in costs of development and services. Let have a short look at these impact
factors. The execution cost depends on the number of operations to be performed,
time spend for each operation and labor fee of a personnel. BPM system implementa-
tion usually starts with process reengineering to eliminate the redundant and obsolete
operations. The execution time can be decreased by the use of self-contained tasks
that provide each participant the resources it needs to supply an output [19]. These
tasks are well defined thus can be performed by an employee with a less qualification
and smaller remuneration. The product quality depends on the variability of the pro-
cess and the assignment of responsibility [20]. The self-contained task encompass an
instruction on how to perform it, leaving only one way of execution and in this way
decrease the variability. The elimination of unnecessary operations makes easier to
find an employee in charge of the result. The exploitative impact includes costs of
design, debugging and maintenance. Due to a visual model oriented development the
design tine becomes shorter, most of the bugs can be found in the early development
phase. Business process executable model requires less coding compared to tradition-
al development while a round trip development makes easier the adaption of a model
to changes of customer requirements. According to Gartner assessments [21] 67% of
all BPM projects were successfully completed in less than 4 months, including 50%
in less than one month, all the projects had ROI above 10%, including 78% with ROI
above 15%.
Process management is considered to be the main factor of a client-oriented strate-
gy of company development. For the client it means simplification of all the proce-
dures and for the owner – business excellence due to optimization of operations and
compliance with all regulations. Unfortunately the evaluation of this factors requires
the metrics which are not always known to BPM implementation partner shows the
results of an empirical study of the factors of BPM system economic impact.
Table 2. The factors of BPM economic impact (in %)
Factors Impact
Elimination of unnecessary function 10
Reduction of execution cost 10
Wage bill reduction 20
Direct
Release of human resources due to the 05
switch to process-based management
Loss reduction due to the decrease of 15
reject rate
Increase of service quality -
Increase of client loyalty -
Indi-
rect
Reduction of risks -
Increase of labor productivity 20
Speed and cost of development 50
Exploitative
The cost of debugging 30
Speed and cost maintenance 25
Versioning of a process model 30
8. An example of BPM in Sberbank
Banks were the first to use the terms a «credit factory» and a «loan conveyor» un-
derstanding by this a conveyor for the processing of repetitive tasks implemented
through the instrumentality of a business process management system. In the
Sberbank of Russia the «credit factory» is a centralized automated crediting technolo-
gy, which comprises a complex of IT systems and bank employees performing the
procedures of decision-making, that covers the entire process from the moment of
client entering the bank office to get the loan and up to the moment of a loan granting
[22]. The technology includes the automated procedure of checking and assessing the
borrowers by the data obtained from internal and external sources, centralized deci-
sion-making on loan granting. This solution has been implemented in 701 Sberbank’s
loan sales points in Moscow.
The implementation of the «credit factory» allowed the bank reduce the time for
decisions making and decrease the number of client’s visits to the bank. If earlier it
took more than two days to get a decision on a loan, now it is available in less than a
day. Earlier the client had to visit Sberbank at least four times (or even six-seven
times if guarantees from physical persons were provided as collaterals) and after the
implementation of new system the number of visits has reduced to two. Furthermore,
the borrower now has to approach one desk only. The new technology has significant-
ly changed the procedure of decision-making. With legacy “paper-based” technology
some events, related to client history and important for making a decision, were not
taken into account. The switch to a «paper-free» technology brought about more
complex credit rules regarding the borrower’s assessment, where part of them is based
on statistically average data (event analysis by clients similar to this borrower), part –
on the information of client behavior in the past. As a result the method of borrower’s
paying capacity calculation has changed with an obvious effect on the reject rate re-
garding the issued loans.
The new mechanism has considerably increased efficiency and reduced the cost of
their execution. The efficiency of credit inspectors has increased by more than 2.5
times and of risk management employees – by more than 10 times. The process has
become controllable and clear, time of system response to changes has reduced.
9. Conclusions
We make a inference that the problems of productivity growth are not connected
with the shortcomings of the IT technologies, but with their integration into the enter-
prise business processes. It is wrong to restrict all problems only to the shortcomings
of the IT technologies, as this creates the illusion that the emergence of yet another,
new IT technology miracle will suddenly change the situation qualitatively.
We conclude that the economic effect of the BPM systems is associated with the
enterprise process transformation, but this concept is considered today unilaterally, as
the implementation of the process approach. We assume that the enterprise process
transformation is connected with a complex organizational change and presupposes
the emergence of new conveyor production methods.
The result is important for BRICS countries, that lack of labor productivity, espe-
cially in governmental sector [23]. It states that in order to improve the performance
and productivity the country should pay more attention to the organization of produc-
tion, rather than rely on implementation of modern IT. The widespread use of BPM
systems will provide an increase in the productivity of management processes, thus
guaranty sustainable development of BRICS countries.
10. Acknowledgements
The study is funded by RFBR and NRF according to the research project No. 19-57-
60004/19. The study was done within the framework of the state assignment (research
topic: 065-2019-0014 (reg. no. AAAA-A19-119011590097-1). The study is funded by
RFBR according to the research project No. 19-07-01137 A.
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