Business rules are back

Today's business rules engines (BREs) and Mark Twain have something in common: News of their death has been greatly exaggerated. Or as research firm Gartner puts it, business rules technology is back from a ''near-death experience.''

Business rules technology standardizes and automates much of an organization's business and decision-making processes, removing to some extent the human element that is prone to inconsistency and error. Business rules determine what action should be taken based on a company's internal guidelines, business practices and/or regulatory compliance. For example, business rules might determine a loan applicant's credit eligibility.

''Think of [a BRE in the same way] as database management software manages data -- so a rules engine manages business rules across applications. It's an enabling technology to build flexibility into an application, and to manage business rules separately and apart from that application,'' said Colleen McClintock, Ilog JRules product manager at Ilog, Mountain View, Calif.

But early manifestations of business rules technology -- several products have their roots in the realm of artificial intelligence (AI) and inference systems -- were complex, expensive to run and maintain, and not business-user-friendly, thus their ''near-death experience,'' noted Gartner's Jim Sinur, vice president and research area director.

The time is now ripe for the current generation of BREs and rules technology, observers say, due to the confluence of several factors. First, empowerment of the business analyst ''is a trend we've been seeing over the last five years,'' said Peter Urban, senior analyst at AMR Research in Boston. ''BREs that empower the business analyst represent a growth market. People are looking for this kind of stuff; they don't want to go to IT every time they want to add logic to applications.''

Gartner's Sinur likens the acceptance of business-user-friendly BREs to the adoption of reporting tools targeted at business users, who can now run their own reports rather than going through IT. ''I think the businesspeople are ready,'' he said. ''I think IT folks will resist because it's also threatening. But just like letting business users do their own reporting, BREs let them change the rules.''

Another factor driving acceptance of BREs, according to Sinur, is improved technology, including enhanced usability, scalability and performance, as well as less costly maintenance. AMR Research's Urban agrees: ''It's taken a while for the software to become usable, with graphical user interfaces rather than programmatical [ones].''

''Expert systems were a lot harder to work with,'' added Mark Allen, president and CEO at Corticon Technologies Inc., San Mateo, Calif. ''They required programmers and knowledge engineers to analyze the rules and their interdependencies. The other area was integration; [expert systems] weren't friendly to integrate with databases and existing systems. Usability, auto-analysis and integration are areas we've targeted with Corticon Decision Management Software.''

As businesses move their applications to the Web, they are looking for products that comply with the latest standards and technologies, such as Java, XML and Web services, and vendors are delivering. In addition, the general business climate -- do more with less, faster -- is helping to drive acceptance of BREs. By enabling business users to respond more quickly to change, organizations will have greater agility and improve their time to market, and thus their competitive advantage, said Gartner's Sinur.

Ken Molay, director of product evangelism at San Diego-based HNC Software Inc., the developer of Blaze Advisor Java-based rules management software, said business rules technology provides a value-add for organizations on three fronts. ''The first [front] is time to market -- saving time on getting whatever it is into production and out to market, both from initial development and later for making changes. The second is improving consistency across the organization by making the same decisions the same way, with one centralized set of rules that apply to your applications. The third is saving money on the development work needed by being able to allow business-level users to make changes. If we can get those changes off the plate of the IT group, they can concentrate on mission-critical tasks.'' (HNC and Fair, Isaac and Company Inc., a developer of predictive modeling, decision analysis, intelligence management and decision engine systems, recently agreed to merge under the Fair Isaac name.)

Indeed, for CIOs like Ed Leveille, putting more application development responsibility in the hands of business users is a goal. ''The concept I have in developing applications is trying the best I can to get coders out of the mix,'' said Leveille, vice president and CIO at Providence Washington Insurance Co., Providence, R.I. In 2000, Leveille was charged with developing an Internet-based commercial lines quoting system to be used by internal employees and agents. ''I was looking for user-friendly tools that would have a nice GUI where the users could do some of the business logic,'' he said.

Leveille decided to go with Ilog JRules. ''Any product I pick has to have most of the current standards and an open architecture,'' he said. ''And the company has to prove themselves as being sustainable; Ilog fit all of those [requirements]. Another benefit of Ilog was the XML-based messaging, which fits within my strategy of communication and integration of all my components,'' he added.

Providence Washington Insurance has been piloting the use of Ilog in two lines of business over the last 10 months. ''We've virtually automated the underwriting guidelines manual, taking out the need for someone to look up code or rules in this thick manual; the system guides users through the classification and pricing of a given risk,'' said Leveille.

''We're also using the Ilog engine to score our risk and, based on that score, to adjust the premium up or down,'' he added. ''And we use it to automatically slot a piece of business into the proper special program and the correct pricing tier. For example, if you have good loss experience, you might go into an A+ plan and get our best price.''

Opening the applications up to insurance agents was the driver for automating previously manual business processes, added Leveille. And because they were targeting agents, usability was key. ''Opening up our system to 5,000 or more people, the training had to be almost zero, which is another benefit of the [Ilog] rules package,'' he said.

According to Leveille, the JRules engine, rather than being embedded into the application, ''is called as a service by our application. At various points, the application sends it a message asking for some kind of decision; Ilog [then] sends the message back giving us the answer. Our information is in a SQL database, and the Ilog information and objects are stored in their database. So there are two content stores: mine is the insurance information, and the content Ilog has would be questions and answers to whatever the business rule is.''

The benefits of using a BRE at the insurance company are twofold, said Leveille: ''The quality of our data and the quality of our underwriting will be greatly enhanced,'' he noted.

Choosing a BRE
Companies like Providence Washington Insurance have various options to weigh when choosing business rules technology today. Packaged ERP applications have some embedded business rules technology. And enterprise application integration (EAI) solutions may also offer some business rules capability. ''Rules in ERP packages cover basic rules, but if you have a complex financial scenario, for instance, you would need to extend rules,'' said AMR Research's Urban.

BREs are ''more sophisticated and you have the ability to manage rules across multiple stovepipe applications,'' explained Gartner's Sinur. ''Business rules affect more than one system, so it would be nice to have a centralized rules engine or rules managed by a single source,'' particularly for those developing homegrown applications or integration pieces, or for those extending or integrating legacy systems.

In addition to consolidating rules in one spot, some BREs auto-analyze rules to ensure that they are logical and not contradictory. ''Corticon is a good example,'' said AMR Research's Urban. ''It prevents you from doing contradictory rules, and it makes you process things all the same way, which is a plus.''

Another distinction among rules engines is what Gartner's Sinur dubs ''outboard'' rules vs. inference capability. Sinur said outboard engines have a simplistic forward-chaining approach, and are geared to business users who make changes in English-language or decision-table fashion, in near real-time or real-time. Inferencing capability means the engine can do both forward- and backward-chaining, he said, as well as use deductive capabilities. Many inferencing engines have outboard rules capability, Sinur explained, but not all outboard rules engines have inferencing capability.

According to Gartner, rules engines vendors with inferencing capability include Computer Associates International Inc., Elity Systems Inc., Entreon Corp., Expert Solutions International (ESI), The Haley Enterprise, HNC Software, Ilog, MindBox, Pegasystems and Sybase. Many BRE vendors, both with and without inferencing capabilities, offer the BRE as one piece of a business process management solution.

Business rules creation, automation and management have a natural symmetry with other types of software solutions, particularly ERP, EAI and workflow software. Gartner predicts that BRE solutions providers will partner with vertical business sectors and EAI vendors. By 2006, projects Gartner, 80% of all integration software will include either direct or indirect business-friendly rules capability.

Some partnering has already taken place (see associated story, AMS turns to Versata ). Santa Clara, Calif.-based Savvion, for example, sells BizPulse -- a rules engine based on Java J2EE and XML technologies -- directly to corporate IT and OEMs it to independent software vendors like i2 and BroadVision, according to M.A. Ketabchi, the company's CEO, president and chairman. Ilog also partners with i2 Technologies Inc., Dallas, and enterprise software vendor HNC Software acquired Blaze Advisor with its acquisition of Blaze Software.

BREs may not be a discrete market in the future, but they are meeting critical business needs today, and the market is positioned for growth. Gartner's Sinur said the BRE market is at about $300 million, but he expects to see ''at least a 15% compound annual growth rate over the next three years.''

BREs are particularly appropriate for companies with complex business processes and rules, companies that want to improve customer service, or for those that want to ''differentiate vs. the competition. Anybody can do a loan, but [a BRE] product allows companies to differentiate. You might create a unique type of loan,'' using a business rules solution, said AMR Research's Urban.

For STW Fixed Income Management, Santa Barbara, Calif., which manages fixed-income investments for its clients, the rules are quite complex. The company must not only comply with each individual client's investment guidelines, but with regulatory guidelines as well, according to Tony Plasil, principal and CIO.

A problem in the industry, said Plasil, is that compliance checking, which may take days, is typically done independently of trading activity. In the meantime, he said, the market may change or some non-compliance identified may force the trader to back out of the trade. In that case, the fixed-income management company would assume any loss, not the client.

To address that issue at STW, Plasil said they began looking at rules engines. They evaluated some packaged trading applications with rules capability, but Plasil said they were too simplistic and not flexible enough for the way STW wanted to define and maintain rules.

Plasil decided to go with the Corticon Decision Management Software. The trading application has been in production for about six months. ''It took about a year in development, with extensive testing,'' said Plasil. ''The implementation is using Java EJB technology sitting on WebLogic. We're on the frontier of everything; it's riskier but satisfying,'' he added.

Both technical and business advantages are already apparent, he added. ''There's a huge flexibility advantage; we can add or change rules fast, so we have reduced costs by not changing code.'' And on the business side, ''one of our clients' biggest concerns is how to maintain their guidelines. Now the portfolio managers have that information at their fingertips. Client service is the bottom line.''

While STW can point to improved customer service as a benefit of using a BRE, the Westfield Group, a leading regional insurer located in Westfield Center, Ohio, has already reaped the benefits of increased business without increasing staff.

When the Westfield Group set out to develop a new policy processing system, dubbed WesCom, in 1999, the IT team began building rules in Computer Associates' Aion inference engine, which was mainframe-based. While the project was underway, the company made the decision to move to a Java-centric enterprise architecture. ''Aion didn't work well in a Java environment,'' said Paul Armborst, application analyst. ''You couldn't see the data in Java classes; we would've had to ship the data in and out in XML, and we were concerned about performance.'' (Now called CleverPath Aion Business Rules Expert, CA's BRE today embeds business rules in Web-based applications by enabling an Aion knowledge base to be called from a Java client.)

A consultant working with the Westfield Group recommended HNC Software's Blaze Advisor, which fit the company's requirements; the project was then moved to Blaze. The Westfield Group started with the Business Owners Policy (BOP) line, creating edits and eligibility rules.

''Edits check for completeness in the data and any inconsistencies in data entered. Eligibility checks to see if the risk proposed is eligible,'' said Armborst. ''We execute database lookups with JDBC calls. The enterprise architecture includes a reference data manager; it's a service-based architecture. The security service is LDAP. The workflow service is iFlow from Fujitsu, although workflow within the rules is handled using the rulesflow product provided by Blaze.''

The new policy processing system enables the outside agents to handle most of the insurance processing on their own, without requiring Westfield Group staff to get involved. ''Before, we had the edits in the legacy system on the mainframe, but no agent could interact with it directly. The underwriting rating was automated somewhat for BOP, but not for other policies,'' said Armborst. ''We've gone from a situation where it took two weeks to issue a policy to overnight. Agents are running 65% to 95% of the quotes, depending on the state. Previously, all quote activity would have involved Westfield Group staff. Issued policy volume has also increased, although it differs greatly by state.''

While volume has increased, the Westfield Group has not had to add any staff. ''The point was not to get rid of staff, but to grow our volume without adding staff,'' said Armborst.

Because their business rules are complicated, neither the Westfield Group nor STW Fixed Income Management is looking to business users to do the heavy lifting yet. However, both companies say the creation and management of rules is much easier than traditional programming.

Because of the complexity of STW's rules, ''deciding on all the data needed to satisfy rules is beyond the user's ability,'' said the firm's Plasil. ''We have rules defined in different levels. First is all the data required, then any summarization, which requires a bunch of aggregations and is too complicated for the user. The first levels are like the infrastructure, then the rules themselves the users can define. Most business rules aren't complicated; all you need to do is understand business -- the data itself -- and Corticon Studio checks for ambiguities.''

At the Westfield Group, ''we are having developers create and change rules; heavy-duty rules are more than your average end user wants to get involved with,'' said Armborst. ''Even if they could write the rule, will they understand how to test it? The specs were defined by the end users, but the coding is done by IT people. There is a development environment with Blaze that you can create rules in, which is point-and-click, but it needs to mature more; it's a little slow and has quirks, so a lot of us do our coding with a different editor rather than the development environment. You write in a structured rules language for Advisor.''

Blaze Advisor does make it easier to keep up with changing business rules, which is a plus, said Armborst. ''It's not only easier than in a traditional environment to change rules, but it's easier to write new rules. The value of the inference engine is that it matches rules up with data it wants to process against it. If you write the rule and don't make it dependent on another rule, you can write it and put it in with minimum testing and know you haven't impacted anything else. This is different from a typical IT environment, in which usually the slightest change causes problems.''

Web services
While Armborst and others are getting their arms around BRE technology, the BRE vendors are positioning themselves for a role in the emerging Web services arena, and industry observers agree that makes sense. ''Web services is all about rules and flows, which is why these engines will come in handy,'' said Gartner's Sinur. ''Pegasystems, for example, has both rules and workflow, which is a good combination; Versata [Inc., Oakland, Calif.,] has a workflow engine and a rules engine.''

AMR Research's Urban said AMR recommended a Web services approach to MindBox, Greenbrae, Calif. ''You build a powerful engine, you might want to sell that service; say it's an engine for loans. You could create a Web service that would allow people to enter information and send that information in an XML message to the engine via a SOAP call. The engine runs through the calculations and then sends back an XML message. With Web services, you're making a call to another database; there are no people involved.''

According to Savvion's Ketabchi, ''Our rules engine itself is a Web service; to embed it into a product, you don't need an API.'' In addition, support for Web services has been built into the latest versions of the Savvion BusinessManager business process management system and the new BizIntegrator B2B process integration component. According to representatives at the company, Savvion customers will be able to add automated Web service processes, such as order and quotation services, to their existing business process applications as well as publish their own business processes as services in the UDDI directory.

HNC Software, too, is among the vendors positioning in this area. ''The 4.1 release [of Blaze Advisor] has significant additions in the area of Web services,'' said the firm's Molay. For example, ''you can create a decision process as a published Web service itself,'' he added. Blaze Advisor can be used in both the Java environment and Microsoft's .NET environment.

Users are also following the market trends and looking ahead to Web services. At STW Fixed Income Management, for example, Plasil said they are working on a second application, this time an accounting system, using Corticon. ''The advantage is that we can talk across platforms. We don't have to be hooked onto WebLogic; we can have remote users working on it. Corticon doesn't have to operate as a session bean; it's very flexible -- you can plug other things to it, or break it down into components and put them on different machines, all talking to one another through a bus structure, all through Web services. It's clearly the direction the industry is going.''

Leveille at Providence Washington Insurance categorizes what he is doing with Ilog as a Web service, albeit a rudimentary one. ''I will be enhancing our product as I broaden Web services, not only for what services I offer, but for what services I have appetite for. In my vision, we will be doing the entire insurance process electronically. Ilog will help to automate the process by taking humans out of it; it's a big component in my drive to Web services.''


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