Automating manual tasks is just one of many functions performed by improved workflow software
In the evolving world of workflow automation, both banks and applications are getting smarter.
Spurred by the need to create customer-centric models and the dynamics of doing business online, banks now use workflow
software to redefine processes, rather than merely computerize
formerly manual tasks. Workflow, experts now say, is about identifying the components of a system, weeding out those that don't serve any purpose while taking advantage of those that do, without rebuilding the whole system.
Once the vital components have been broken out, the options are endless. "Workflow is a desirable outcome, but it's components that will really make it go," said Tom Richards, research director, customer management practice at Meridien Research. "You can take any kind of component architecture and ultimately put those components together and make a business process or workflow out of it."
"The work we do to produce outcomes for a customer-centric organization is sometimes different than what we did in a product-centric environment," he added. "This is why it's so important for an entity that's trying to become customer-centric."
Given that the average mortgage document passes through some 40 or 50 pairs of hands on the way to closing, it's no surprise that a lot of cutting edge workflow automation is taking place in the credit space.
"Credit is a hugely paper-intensive and high-volume process," said Jaime Punishill, senior analyst at Forrester Research. "Documents are being sent back and forth, faxed, Fed-Exed and couriered-it's a nightmare. It's the perfect application for workflow automation, so it makes perfect sense that banks are going to spend some time here."
Still, the underlying architecture of many new workflow solutions makes them "component-ized" and scalable to other applications and other areas of the bank. At First Union, the loan area is turning out to be a workflow test case for other areas of the bank (see sidebar, page 30).
"It offers some very compelling reasons the rest of the bank is looking at it," said Bob Howell, vice president, strategic planning and sales operations at First Union Home Equity Bank. "It's very scalable. The way we built it, the product configuration is not hard-coded. You can take what we've got and use it for auto, credit card-a number of different areas."
Indeed, rethinking business processes throughout an entire enterprise is the key to workflow automation success, according to Punishill. "The biggest pitfall people encounter is merely automating the existing process. There's a fundamental lack of understanding about the way in which workflow actually flows-just following a document around and seeing what actually happens."
Popular Mortgage is learning that lesson. The mortgage banking subsidiary of Popular, Inc. and an affiliate of Banco Popular de Puerto Rico, Popular Mortgage is now up to version 3 of its mortgage processing workflow solution, which went live at its Executive Mortgage division in January and will soon be rolled out to other divisions. "Once we started in production, we got some results that were different than we expected," said Evelyn Salas, vice president of information systems at Popular Mortgage. "It's very exciting-we've had many brainstorming sessions to reevaluate our practices and make changes."
That's not surprising, said Meridien's Richards. In fact, flexibility is one of the chief advantages of a workflow project done properly. "How you become customer-centric isn't necessarily really clear at the beginning. You build a strategy, and from the strategy you define your business requirements, then use workflow managers to define the process. If I decide next week or next month that I got the process wrong, I can go back to my workflow manager and redefine the process. You don't have to open up a 32-year-old legacy application to make that change."
Popular, a long time user of MortgageWare from Bellevue, Wash.-based Interlinq Software, turned to the same vendor for its workflow solution, incorporating Interlinq's FlowMan technology for workflow and enterprise application integration into its mortgage lending product.
The bank's primary goal was to improve customer service and speed up processing time. This was accomplished by creating work rules to eliminate some manual decisions, as well as automating various tasks. "We realized there were too many manual decisions," Salas said. "We needed to eliminate some of those in order to improve overall quality control."
Implementing FlowMan has enabled the bank to link 20 distinct activities from point-of-sale to closing, with plans to tie post-closing and document tracking into the system by the second quarter of 2002.
Popular has also reduced processing time by 35% since rolling out the system, largely through a tool that allows supervisors to monitor an employee's workload. If a loan application has been sitting in someone's queue for more than 20 hours, the system sends an e-mail alert to a supervisor.
There is a hidden dilemma to including such performance-measuring tools in workflow solutions, however. Given the potentially disruptive
impact of productivity monitoring and other job function changes on employee morale, gaining user acceptance may be even more difficult than actually implementing the system, experts say.
"Folks like underwriters feel that they bring a lot of value to the process, and they're not particularly thrilled about a computer making the decisions for them," said Punishill. "You've got to get people who are used to doing this stuff by hand to stop doing it by hand-you can imagine that kind of political infighting."
First Union encountered difficulties persuading employees to accept its new customer-centric home equity loan process. "The biggest challenge we had was not the technical aspect, it was the cultural aspect," said Howell. "A lot of folks look at their personal value in direct relation to what their job is, and folks don't like change. This system changes the role of our salespeople. Now the focus is on selling our process and our customer service, and not hand-holding each deal."
The new system has also changed the number of people needed to underwrite loans. First Union has redeployed 80% of its underwriters, dropping from 50 last year to 10 this year.
The key to encouraging cultural acceptance is communication and allowing the employees to participate in the restructuring process. At Popular, biweekly meetings with employees solicit suggestions and improvements to the workflow operations. "By participating in the process, they become more committed," Salas said. "They know that they are part of the project."
And as organizations warm to workflow automation and its power to transform business processes, they are beginning to consider its wider potential-especially for e-commerce.
In theory, if business rules could be automated and shared among members of a trading chain, then all parties should benefit. That's led to the notion of "business rule exchanges," in which static business logic code is replaced with XML business rules, which can be easily updated, changed, shipped across the Internet and executed on trading partners' systems.
Although XML is fast becoming the standard for automating data exchange between business systems via the Web, XML on its own can only deal with data (like information from a database). XML does not tell people who receive the data how to use it or what others might know about it.
Software developers are addressing this by allowing business policy and knowledge about the data to travel with XML documents between applications. For example, XML would handle details of a customer profile, while business rules would handle customer preferences.
Software developers are also adapting their products for business rule exchange. For example, ILOG's XML-centric business rule engine, JRules 3.5, allows business rules to be dynamic and reusable in a standard format.
The availability of an XML-centric product will impact a wide range of applications. In a trade exchange setting, purchase requisition and shipment date business rules can be created in XML, so that companies can identify possible partners and suppliers instantly. For customer relationship management (CRM) applications, XML-centric business rules define customer preferences and allow them to travel over the Web with customer data. And in enterprise application integration (EAI) use, business rules determine how information stored in disparate applications can be manipulated and routed as part of a larger business process.
To further address the issue of interoperability of business rules, the Business Process Management Initiative (BPMI), an Aurora, Colo.-based software industry group, has released the Business Process Modeling Language (BPML), a meta-language for the modeling of business processes, much as XML is a meta-language for the modeling of business data. According to the BPMI, BPML "provides an abstracted execution model for collaborative and transactional business processes based on the concept of a transactional finite-state machine."
Defined as a medium for the convergence of existing applications toward process-oriented enterprise computing, BPML offers explicit support for distributed transactions, and therefore can be used as an execution model for embedding existing applications within e-business processes as process components.
BPML considers e-business processes as made of a common public interface and many private implementations as process participants. This enables the public interface of BPML processes to be described independently of private implementations.
BPML processes can be described in a specific business process modeling language layered on top of the extensible BPML XML Schema. BPML represents business processes as the interleaving of control flow, data flow, and event flow, while adding design capabilities for business rules, security roles, and transaction contexts.
BPML offers explicit support for synchronous and asynchronous distributed transactions, and therefore can be used as an execution model for embedding existing applications within e-business processes as process components.
Hi-yo Silver! It's the Loan Arranger
The need to create a customer-centric home equity loan process drove a recent workflow automation project at First Union.
Customers applying for loans want immediate decisions, but they also want to know that their requests have received careful consideration. And mortgage brokers want technology that maximizes the potential and speed of finding the right loan products for their customers.
Charlotte, N.C.-based First Union offers its own set of loan products and acts as a private-label aggregator for outside products, so matching loans with applicants is a time-consuming and challenging process. "It can be very complex, when a customer comes to you with a loan request and you have 15 different loans they could fit in," said Bob Howell, vice president, strategic planning and sales operations at First Union Home Equity Bank. "Rather than inundate our brokers with a lot of different rate sheets, we took the approach of being very customer-centric."
First Union accomplished this using software technology from ILOG, a Mountain View, Calif.-based supplier of C++ and Java components. "We came upon the realization that using a non-linear constraint-based approach was what we needed," Howell explained.
ILOG's embeddable optimization, visualization and business rules software components, which can be transmitted over the Internet, were the key factors in choosing ILOG, he added.
Using ILOG's optimization tools, the bank created an application, First Union Loan Arranger, that can evaluate all loan programs currently being offered, and find the ones that best suit a customer's needs, based on information such as debts the customer wishes to pay off or home improvements the customer plans to make. Loan requests are considered on a case-by-case basis and decisions are given to customers within seconds.
The optimization capability embedded within Loan Arranger can also offer alternatives if the requested loan product or amount isn't available, such as a counter offer or an entirely different product.
To use Loan Arranger, the broker first has to collect customer information-a little more than is needed just to pull a credit report. This takes about 10 minutes, but from there the decision, and a custom set of stipulations, is returned in just 20 seconds.
Mortgage brokers will be given online access to Loan Arranger in the fourth quarter of this year.
"Our competition requires the user to really structure the loan up front," Howell said. "Using a rules-based approach, it may take three to five minutes to get an answer. If you get a no, you have to try something else. With this approach, it evaluates all those options and offers alternatives in 20 seconds."
The ILOG Solver drives this approach. "The underlying concept of workflow doesn't really imply any real intelligence or speeding up of what you're doing. It really just helps you to understand the process," said Bob Cooper, vice president of industry solutions at ILOG. "That's where we feel workflow is lacking, because it lets you set up processes to mirror what you were doing without a computer, but it doesn't speed anything else up."
To remedy this, ILOG has started partnering with certain workflow providers to add a rules engine to more vertical software products, allowing processes to function more intelligently.