Business Rules Revolution

Business rules are the rules by which you run your business. Sounds too simple, right? Wrong. They can encompass any area, from tax withholding for employees to marketing strategy when a major competitor turns up the heat. Many are unspoken. They reside in the legacy code held within your computer systems. And they reside within your executives’ heads. Therein lies the problem, and here cometh the “revolution.”

“We’ve been implementing business rules ever since computers became mainstream,” says Ron Ross, a member of the Business Rules Group, an organization of professionals from the public and private sector who are dedicated to developing and supporting business rules standards, among other things. “We’ve taken a rule and translated it into computer code so your systems do what they need to do when they need to do it to help you run your business.”

Not necessarily revolutionary. But, with the increasing popularity of business rules engines— software that can be bought as a stand-alone item or as part of an enterprise system—your business rules have become simpler to create and change. “You use rules engines to change the behavior of your programs without having to reprogram anything,” explains Paul Haley, founder, EVP and CTO of Haley Systems, Inc, a technology solutions provider specializing in business rules management systems.

For example, he explains, take any sort of financial business. “Your staff goes by many rules. They probably say things like, ‘Revenue from a contract will not be recognized on balance sheets until the invoice is paid’ or ‘Here’s how we delineate between expense and capitalization.’ These rules are changes that occur on a regular basis as your business situation or pricing, etc. changes. You used to have to call in your IT people every time something like this was altered. They’d bring in an army of programmers who would then code everything to reflect the change. This could take some time and could get expensive on projects you had outsourced. A rules engine takes the specification of conditions, if X then Y, out of programmers’ hands and puts it into your executives’ hands.”

That change is key, says Rolando Hernandez, CEO and chief rules architect of BIZRULES, a firm specializing in business rules, business process and knowledge management. “You save time because you’re not hard-coding rules, anymore. Business rules engines are basically software development programs that minimize programming. They separate business logic from computer code, which allows business people—not programmers—to edit and change rules using a simple, user-friendly interface and plain English.”

The advantages, Hernandez explains, are plentiful. You reduce your time to market. You prevent business mistakes and fraud. You retain knowledge that might otherwise be lost through attrition. You manage risk by increasing the probability of across- the-board compliance. And you reduce application development and maintenance costs because you have enabled your own businesspeople—who make the rules—to write the rules instead of relying on a programmer to hard-code them.

Revolutionary? Yes. But not exactly new. Business rules in this form began in the 1980s, when rules engines were known as “expert system inference engines.” Which means that, while many companies haven’t yet taken advantage of business rules engines, they are far from their nascent stage, and are already a proven mission-critical technology in the Fortune 500.

But if you’re after revolutionary and new, then here you go: According to Hernandez, many call center operators here and overseas ultimately will be either aided by artificial intelligence (AI) business rules engines or replaced by knowledge-based expert systems that will give the right answer every time, 24/7.

“Imagine a call center with 200 people,” he explains. “There is high turnover in the center and a lot of your staff is new much of the time. These are your front-line employees, not senior execs, on the phone with your customers. The problem is that customers get different answers depending on who they talk to. Business rules can be applied here to improve service delivery. If operators were using rules engines, your customers would get the same, right answers every time. You could put this intelligence on the Web and enable customers to help themselves, using the knowledge and rules of your best experts. That could eventually eliminate some of those operators, but it will certainly reduce customer service costs. AI-based and rules-based self-service customer support websites will emerge and customers will love them. Expert answers; instant gratification.”

Hernandez sees global clients reap immense benefits from rules engines. “One of our Fortune 10 clients is using rules engines for global statutory compliance, including SOX,” he explains. “How do you manage global tax compliance across multiple tax jurisdictions, multiple ERPs and multiple P&Ls? How do you manage risk across hundreds of legal entities and P&Ls over 200 countries, and a variety of products, services and IP? How do you manage a tax return consisting of over 20,000 pages across many countries in every region of the world? How else can you close the books on time, every time? A $3 million investment in business rules engines, rules harvesting and knowledge engineering has helped this client greatly increase its chances of across-the-board compliance. This change done via the traditional hard-coding programming route would have cost $30 million.”

Compliance with Sarbanes-Oxley regulations is a natural fit for business rules engines, according to our experts. “SOX maps very well to this solution,” says Hernandez. “If you go to all that time and expense to document, assess, test and certify your processes and controls (i.e. business rules) anyway, then it’s relatively easy to get to the next level of compliance by using a rule engine to simulate and automate them.”

With business rules automation, says Haley, “You gain precision and control. What you say is what runs in your systems. And you know what is running in your systems. Put simply, it gives your executives more power, speed, agility and precision. The IRS, Wells Fargo, GE, GM, Cigna and a host of other companies are doing this. I’ve seen analyst estimates that 80 percent of companies will be using business rules by the end of 2007. In 2005, I think it was something like 20 percent of companies. Business rules are here.”