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September 25, 2008

Ten Rules for Wall Street

Ten Rules for Wall Street

What are the rules? Did people break the rules, bend the rules, or ignore the rules?

Confidence in Wall Street went down the drain last week. The credit crisis gave business a bad name, and it gave government a bad name for not doing anything about it. Trust disappeared. 

It's time to rebuild trust in business and government.

Here are ten rules for restoring trust in business and government. These rules apply to everything from the global financial system, to Wall Street; from federal governments to local jurisdictions; from global corporations, to organizations and small businesses.

Companies that learn to define transparent rules that are sensible, consistent, easy to understand, and easy to follow will be easy trust. On the other hand, companies that rely on opaque rules that are complicated, confusing, illogical, inconsistent, or deceptive will be hard to trust. They will go out of business.

Rule 10 - Have guiding principles. Act on principles, independent of influence by greed or friends.

Rule 9 - Follow policies and guidelines about what is permissible and what will not be tolerated.

Rule 8 - Establish rules of behavior concerning what is right and wrong. Success in business depends on understanding the rules. The rules of the business are the way the business really operates. Design transparent rules that are logical, sensible, easy to understand, and easy to follow.

Rule 7 - Leverage knowledge and judgment. Know what you know, and know what you don't know. Document and retain what your experts know and how they think so their knowledge can be shared with those who need to know. Use wise judgment. Know when to follow the rules, when to bend them, and when to forget them.

Rule 6 - Make smart decisions informed by facts, rules, knowledge, principles, and judgment. Decide using clear, logical, and unbiased rules that explain each decision clearly. Use sound reasoning to make rules-based, principles-based, and knowledge-based decisions.

Rule 5 - Create enterprise architecture to deal with change and complexity. Use architecture to simplify complexity, and to understand how the whole business and the whole system works; Understand who, what, when, where, why, and how. Design the architecture to ensure that all the parts fit (interoperability), connect (integration), work (quality), work as intended (alignment), last (reliability), and can be shared (reusability). Design the architecture so the business can handle increases in complexity and increases in the rate of change (flexibility). Design the architecture to reduce time-to-market and reduce operating costs. Design the architecture to support rules-based and principles-based compliance.

Rule 4 - Do the engineering, to design systems that work, change, and last. Apply architecture and engineering design principles to ensure alignment, flexibility, quality, interoperability, integration, reusability, reliability, compliance, reduced time-to-market, and reduced costs. Build in risk management safety factors so the business and the systems can handle extreme stresses and excessive loads.

Rule 3 - Have a clear vision. Stand for brand.

Rule 2 - Instill confidence. Improve the quality, consistency, and accuracy of decisions and actions.

Rule 1 - Build trust. Align actions, decisions, and transactions with management's intentions. Align execution to goals, strategy, and mission. Align systems to business. Align implementation to intention.

Sept. 25, 2008   Rolando Hernandez   BIZRULES

Principles are Coming

Principles are Coming

More judgment and knowledge needed

While the finance industry is moving toward more rules and exceptions, and rules-based regulation, financial accounting and reporting is moving in the opposite direction, towards fewer rules and exceptions. Accounting and tax is moving towards more principles-based regulation.

The US is moving away from GAAP (Generally Accepted Accounting Principles) and towards IFRS (International Financial Reporting Standards). IFRS is the reporting framework used by most of the world today, and it has growing support in the US. IFRS relies on professional judgment rather than detailed rules. Under this principle-based approach, management will have a mandate and obligation to exercise its own best judgment when making decisions.

Companies will need to implement systems that use knowledge and judgment to make principle-based decisions.

It is time to adopt knowledgebase technology and knowledge management. It's time to build knowledge bases and embed knowledgebased technology into operations and existing systems.

Knowledgebased systems that are engineered and architected properly can

  • follow principles and guidelines
  • automate management's best judgment
  • ensure compliance
  • and deliver trust. These expert systems can be trusted because they use expert judgment to make the same decisions top experts would make, thus improving the quality, accuracy, and consistency of decision-making.

I don't believe there is any other practical or proven way of automating human judgment, other than building intelligent, knowledge-based systems.

Knowledgebased systems are the solution for principle-based compliance.

Rules are Coming

Rules are Coming 

More rules and regulations are coming

To restore trust in the financial system, the government is moving towards more rules and exceptions, and more rules-based regulation. The trend towards de-regulation is over. Regulatory reform is coming back. That means more rules and regulations than ever before.
 
Management will have an obligation to follow the rules and laws when making decisions. These decisions better be consistent, correct, complete, and compliant if you really want to stay in business. 

Companies will need to implement systems that follow the rules and make rule-based decisions.

It's time to adopt the business rules approach and business rules management. It's time to build rulebases and embed rulebase technology into operations and existing systems.

Rulebased systems that are engineered and architected properly:

  • follow the rules
  • automate management's decisions
  • ensure compliance
  • and deliver trust. Rule engines can be trusted because they implement the decisions management intended.

Rulebased systems and business rules management are the solution for rule-based-compliance.

Sept. 2008 credit crisis

On Sept. 10, the world's largest particle collider and atom smasher was turned on for the first time. Skeptics warned that the Large Hadron Collider, a 17-mile circular tunnel under the Swiss-French border designed to smash protons so they shatter and recreate the Big Bang, would create a black hole inside the Earth. 

In a world where homes could go down the drain and disappear into a black hole, the mortgage mess and global credit crisis seemed trivial in comparison.

Four days later, on Monday Sept. 15, the credit collider smashed Lehman Brothers to bits. Lehman filed for bankruptcy and instantly disappeared into the credit black hole. 

By Thursday Sept. 18, the black hole threatened to collide and smash U.S. financial markets and the entire global financial system. Then the federal government stepped in and turned off the collider with a $700 billion proposal for the largest bailout plan in U.S. history. 

One week later, on Thursday Sept. 25, the plan is still up in the air. Congress is debating the plan. President Bush just met with Sen. McCain and Sen. Obama. The world is rapidly losing trust in the U.S. German Finance Minister Peer Steinbrueck said "The United States will lose its superpower status in the world financial system. The world financial system will become more multipolar," he said.

Thursday night, Washington Mutual disappeared into the black hole, becoming the biggest bank failure in U.S. history. The government seized WaMu, took it over, and sold Wamu's $307 billion of assets to J.P. Morgan Chase for $1.9 billion.

"A crisis of confidence without precedent is shaking the global economy," French President Nicolas Sarkozy said in a speech in Toulon, France.

Toulon is close to the Large Hedron Collider, where this whole thing started. Could someone forward this message to President Sarkozy: Please shut down the collider!

 

Here are some photos inside the LHC tunnel, and in the control room on LHC First Beam Day:

LHC mission control  LHC atom smasher

LHC operators  LHC monitors

Images by Maximilien Brice    copyright CERN

 

September 12, 2008

Bosch drives into the rule engine market

Bosch has joined the club. On September 8, 2008 The Bosch Group acquired Innovations Software Technology. Both companies are based in Germany. This move heats up the BRE/BRMS market consolidation that was already sizzling:

Sep. 2008 –The Bosch Group acquired Innovations Software Technology
Jul. 2008 - IBM announced their intent to buy ILOG
Nov. 2007 – RuleBurst acquired Haley Rules
Oct. 2007 – SAP acquired Yasu
Aug. 2007 – Trilogy acquired Gensym
Oct. 2006 – Planet Group acquired ACI Worldwide
Jan. 2006 – Trilogy acquired Versata
Jan. 2006 – MDA acquired Mindbox
Sep. 2005 – Fair Isaac acquired RulesPower

(click to see the new BRE Family Tree

Oracle and Microsoft entered the business rule engine (BRE) market by building their own rule engine technology. Competitors, however, took a different approach. Global technology leaders IBM and SAP acquired BRE vendors ILOG and Yasu. Insurance software vendor MDA acquired BRE vendor Mindbox. And rule engine vendors Fair Isaac and Trilogy acquired smaller BRE vendors RulesPower, Versata, and Gensym.

I asked David S. Kim, Managing Director and CEO of Innovations Software Technology, to share his thoughts and tell us what this means to customers, end-users, and to the rules market. Here’s what he had to say in our email discussion.

How does the Bosch acquisition of Innovations compare to the other acquisitions and consolidation in the rules industry?

“The big difference is that we were not acquired to have our product line integrated into a stack of other software. We were acquired to be the core of a new software and systems company within The Bosch Group. We will be creating new technologies and value chains within Bosch and open the door to new lines of business,” Kim said.

Why did Bosch decide to buy the company, Innovations Technology, instead of simply licensing the Visual Rules business rules management software?

“The Bosch Group purchased Innovations as the core of a new software company. Rather than create their own, they decided to purchase Innovations Software Technology, an already profitable and successful company. Visual Rules, our market-leading BRMS, is our most well-known product and is in use world-wide. 

However, we also have industry leading solutions for the financial industry, such as our Basel II credit risk rating platform, anti-money laundering and private banking CRM. All of these solutions have been deployed successfully throughout the European Union, Switzerland and the U.S. In addition, our company provides software and technology development work for corporations.

Buying Innovations gave Bosch the ability to not only have a profitable subsidiary, but also a software and technology development group that can immediately deliver results. We’ll immediately start developing software and technology solutions for Bosch customers and partners worldwide, along with assisting The Bosch Group with creating additional fields of business.”

Everybody knows I like engines, especially rule engines. I also like cars. To me, Bosch means cars and quality.  Are we going to see embedded rule engines “driving” cruise control systems and “steering” future automobiles? Or rulebased systems controlling intelligent sensors and industrial machinery?

“Bosch provides ‘technology’ to most of the major automotive companies throughout the world, but it’s also important to know that Bosch is in a variety of other industries including medical, energy management, appliances, electronic sensors, etc

I’ve attached a [diagram below] that shows how the Visual Rules Enterprise Platform is already in use throughout various industries and also embedded in systems such as mobile phones, train engines, and postal routing systems. We have a tremendous amount of expertise in embedding rules into machinery, and the possibilities are endless.”

How does this acquisition shake up the business rules market?

“Innovations Software Technology, or Innovations Softwaretechnologie, as we are known in Germany, has been known in the U.S. as a ‘small company’ based in Europe. In reality, we have over 125 employees world-wide, and were aggressively expanding in the North and Latin American markets, as well as APAC (Asia Pacific) before the acquisition. We have always been self-funded and never needed any venture capital or private equity placement.

What the market will see is the same Innovations Software Technology, but with the resources and ability to deliver our software and solutions much more effectively. We will also be able to provide services and support internationally, along with seeing accelerated product development lifecycles.

Our Visual Rules Modeler already provides an incredible set of robust functionality that allows for the creation of the most complex rule sets, but in an intuitive graphical manner. Look for us to continue to improve our product line, and also the addition of other products that compliment the use of Visual Rules in Enterprise environments.”

How will this affect Visual Rules customers?

“Our customers have consistently given us praise on the level of support we provide to them, even in the pre-sales environment. This will not change, except that we will have even more resources to deliver this same level of support. We’ll also look at different ways we can streamline our operations internationally.

In regards to our BRMS product, Visual Rules, our customers know that we provide robust new features and functionality in our point releases, and we’ll continue to constantly improve our product’s features and functionality. If you take a look at what we offered in our 4.0 platform, which was released on April 15th, 2008 and most recently our 4.2 release, you’ll see that we added features such as rule dependency graphs,  rule documentation in PDF format, hot swap Java API, ability to graphically compare test results and much more.

Therefore, our Visual Rules customers should expect the same continued product innovation, services and support and the addition of complimentary products to our Visual Rules Enterprise Platform.”

What makes Visual Rules unique or different than other rule engines?

“Here are a few of our unique selling points:

  • Fully graphical approach for modeling, documenting, testing, debugging and monitoring of complex decision logic
  • Covers full Java functionality concerning data models and algorithms that can be modeled, including iterations, exception handling, maps, lists, and sets
  • No need for any programming or for defining a domain-specific business language
  • Model-driven approach ensures synchrony of model, executable code and documentation
  • Decisions are easy traceable in detail within the graphical representation via execution statistics and highlighted execution paths
  • Rule execution order always complies to the rules' business context
  • Highest performance due to generation of executable Java code that does not require any inference or interpretation at runtime
  • Top-notch graphical authoring for the best possible user guidance
  • Extraordinarily affordable licensing and pricing models, leading to the lowest TCO and highest cost/benefit ratio in the BRM market”

What advantages does your rulebased product offer companies, users and developers who are still building procedural hard-wired programs?

“I think that the market in general has grasped the idea that externalizing your rules from the application allows for true agility and empowers the business to manage the rules that govern their decisions and policies. What our product offers is the most intuitive, easy-to-learn graphical interface that empowers the user to manage end to end rule lifecycle management, including extensive testing capability, technical integration and rule documentation in PDF or HTML format. The rules can also be integrated into or accessible by the application in several flexible ways, allowing for faster transitions to externalized rules. Our product is available for a free 30 day trial, where you can see and use all of features and functionality of Visual Rules.”

Can you share examples or metrics of benefits your customers have actually have achieved using rulebased technology and the business rules approach vs. traditional imperative (hard-coded) languages?

“We have a white paper that clearly outlines the advantages of the business rules approach.  It’s available at:  http://www.innovations-software.com/fileadmin/pdf-en/white-paper/visual-rules-benefits.pdf

Rulebased systems help companies comply with rules. And they help employees follow the rules.  How does Visual Rules or rulebased technology make a difference?

“Every company has rules, decisions and policies. It’s hard to find any department within an enterprise that can’t take advantage of using Visual Rules, from automating processes, managing risk, monitoring financial transactions for fraud, etc.”

David, Thank you for sharing your thoughts on the business of rules and the state of the rules market!

Rolando, thank you for the opportunity to tell you about the acquisition and about our product. -- David

 

NOTE 1: As I was writing this blog I thought of a few more questions for David: What does he think of the Rete algorithm? And how does their Visual Rules Modeler fit in a world where visual modeling for processes (BPMN) and object-oriented software modeling (UML) is growing in importance? 

Microsoft announcemed two days ago that they joined OMG to help advance process modeling standards and develop new software modeling technologies.  Is Innovations following or setting standards for rule modeling? I'd like to know. I'll post his comments here so check back in a few days.

NOTE 2: Innovations is the gold sponsor of October Rules Fest, the conference on rulesbased and knowledgebased systems. The conference will be in Dallas, TX on Oct. 22-24.

September 03, 2008

October Rules Fest (Oct. 22-24) is moving to a larger hotel in Dallas

October Rules Fest, the conference on rulebased and knowledgebased systems, is moving to a larger hotel, the Sheraton Dallas Hotel on October 22-24.

ORF is a three day gathering of the best and brightest speakers in the rules engine and knowledge base industry.  This conference on business rules technology features the inventors and scientists behind rules and knowledge management technologies, systems, and methodologies.

See the conference flyer for more information about the agenda, sessions, sponsors, and speakers. Cost is $150 and you can register here. So far people have signed up from Germany, Australia, UK, Singapore, Canada and the US.

Speakers include:

Dr. Charles Forgy, Inventor of the Rete algorithm
David Butler, Countrywide
Chris Collard, Dell
Dr. Jacob Feldman, Open Rules
Dr. Gopal Gupta, University of Texas at Dallas
Rolando Hernandez, BIZRULES
Dr. Richard Hicks, EZ-Xpert
Dr. Leon A. Kappelman, University of North Texas
Dr. Dan Levine, University of Texas at Arlington
Carole-Ann Matignon, Fair Isaac
John McQuary, Fluor Corporation
Jason Morris, Morris Technical Solutions
Michael Neale, Drools / Red Hat
James Owen, Knowledge-Based Systems Corporation
Mark Proctor, Co-author of Drools, Drools / Red Hat
Gary Riley, creator of CLIPS
Daniel Selman, ILOG JRules Rule Studio Team Lead
Carlos Seranno-Morales, Fair Isaac
Lawrence Terrill, EBDX.com
Edson Tirelli, Drools / Red Hat
Art Tortolero, Enterprise Rules Architect

What others are saying about ORF:

 

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