Why SaaS pricing will kill BPM in the cloud

Since my post of a couple of weeks about cloud computing there have been a few more entries from within the BPM blogosphere which have complemented it quite nicely. But one which made me think a little more about the concept appeared recently

Connie Moore from Forrester mentioned that the entry price from one of the vendors for BPM in cloud is around 3K/month for a single process.

This has been blogged about over at the Curious Cranium blog by Ashish Bhagwat. He has an interesting take on the whole concept of pricing BPM in the cloud. One of the points he makes is that:
“Every process, no matter how standard, has its own thumb-print in the organization. The benchmark of a simple process will require agreement on the number of steps (human & system steps), number of business rules, the data elements, the integration needs, participant requirements (users/groups/roles), the exceptional conditions, and multitude of other factors – all of which cannot be listed here.”
What is interesting here is that these costs then start to become a large factor in the lifecycle management of the process itself.

Let me explain

If you are dealing with processes internally in your organisation and you have a single owner for each process (As I recommend in my book ‘The Perfect Process Project’) then, logically, on a regular basis you will be reviewing the state of the process to try and understand what is happening to it and whether it is running optimally. At some point during the life cycle of the process you may wish to  look at modifying it. This could be as a result of changing business needs, increased volumes, organisational needs or any one of a dozen other reasons. This is the point at which we need to understand the impact of the factors Ashish lists in the quote I have shown above. Now we are looking at a potentially serious cost impact of changing a process.

In earlier times when a BPM system (or even a BPMS system) was purchased and implemented in-house it was a simple matter to increasing volumes, or add a step or two to a process. The incremental cost of doing so was minor in a large organisation (this was over and above the cost of implementing the tool or system in the first place). However, now that the initial implementation costs has been decreased through BPM in the cloud, the running costs will  come from changing the system during the life cycle of the process.

I contend that something such as this - if handled incorrectly - will cripple the ability of BPM in the cloud to proliferate appropriately.

But this is only if BPM in the cloud is offered in a SaaS model. If we refer back to my post from a few weeks ago I mention that this can all be done cheaper merely by building the components oneself, rather than taking this from a third party SaaS BPM provider. Free software, cheap cloud provision and the use of free social media software could revolutionise the way BPM is placed in an organisation - and all at a fraction of the cost of current solutions.

This cheap alternative should be one of the fundamental reasons why a SaaS bpm in the cloud offering should fail - although in reality we know that the costs of a BPM in the cloud offering will be covered by individual departments in daily operating expenses, whereas the cost of a project to implement BPM is scrutinised as a capital cost and isolated from the daily expenses. This serves to cause the project to be seen with a higher public profile whereas the expenses to be hidden amongst a myriad of other costs produced by a department. (Would you scrutinise a project costing $100,000 a month, more than a global below-the-line operating expense increase of $10,000 a month per department across ten departments? A company I worked at previously certainly would).


Costing models for BPM in the cloud will need to be carefully scrutinised to ensure that they will not inhibit the future development of the processes themselves. As such the owners will need to understand how the costing is done and what will be the impact of making a change. This will then need to be made transparent and matched against the cost of implementing such a system as an in-house cloud system rather than a purchased SaaS operation

Reminder: 'The Perfect Process Project Second Edition' is now available. Don't miss the chance to get this valuable insight into how to make business processes work for you.

Click this link and follow the instructions to get this book.

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