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Technology
Growing Technology ROI
In this current economic environment everyone is looking at the big technology payoff. Herešs how to boost e-business profitability by using winning strategies.
— Business Intelligence
— Customer Relationship Management
— Total Supply Chain Management
What is an intelligent business? An enterprise that operates with a single brain—a repository of all it knows about itself, its customers, and its partners. It is an organization that thinks and reacts at Mach speed. It can analyze its wellspring of data to make informed decisions. And it works well with others, giving customers what they want and cooperating effectively with partners.
Intelligent business is made possible by e-business solutions. Everything from business intelligence tools, including data warehouses and advanced analytics, to customer relationship management (CRM) and supply chain management (SCM) solutions can give companies a competitive advantage.
But where is the return on investment (ROI)? That's the million dollar question. Before and during the economic downturn, companies heard the siren call of lower costs and higher revenues from solution providers. But they feared the ROI wasn't there.
It turns out the ROI may be there after all—if companies know how to find it. For one thing, the only way to know if an e-business solution delivers ROI is to measure the company's performance before the technology was adopted. But few companies bother to perform this kind of baseline analysis. Experts at Boston-based Aberdeen Group, an IT consulting firm, say more than half the companies they talk to never do that analysis.
Moreover, companies must understand that software alone won't do the trick. An e-business solution can't deliver value unless it's combined with new business processes and companywide adoption. Then the results can be dramatic.
Underlying CRM and SCM are technologies that begin to make a company smarter. Business intelligence (BI) solutions help aggregate, analyze, and disseminate torrents of data in order to improve product, sales, and customer analysis. According to a recent Aberdeen Group survey of CEOs and CIOs at more than 150 companies, BI software remains high on their shopping lists. Six of the ten software applications most cited for deployment this year fall
under business intelligence and analytics initiatives.
Strategies to boost business intelligence vary. Many companies have consolidated existing databases into sophisticated data warehouses from vendors like SAP, Sybase, and Teradata. These centralized storage facilities, coupled with advanced analytical software, help knock down departmental silos of information that make enterprisewide decision-making difficult.
Other companies are taking a different tack, employing integration tools and standards like the extensible markup language (XML) to forge connections among systems already in place. In their minds, the quickest way to bring disparate data systems together and realize ROI is to build economical bridges between what already exists.
Regardless of their approach to aggregating data, companies that operate with a single brain achieve their other e-business goal. Soon they're running intelligent businesses.
CRM: Great Expectations
Not long ago, customer relationship management was going to boost sales, slash costs, and change the way companies dealt with consumers. But the bursting Internet bubble and economic downturn coincided with a rash of botched CRM experiments. People complained that CRM was expensive, hard to set up, and slow to return value. But it could be companies were looking in the wrong place for ROI.
Aberdeen Group recently identified an "expectations gap" when it comes to CRM adoption. Aberdeen surveyed prospective CRM buyers and those that have already deployed CRM solutions. When asked what they expected to gain from CRM, prospective buyers ranked "enhanced revenue/market share" at the top of their list. However, when Aberdeen asked current CRM users what benefits they'd actually seen, first was "productivity improvements," with "enhanced revenue/market share" a distant fourth.
No wonder companies have struggled to see a return on their CRM investment and have grown frustrated. Productivity is difficult to quantify. It is considered a "soft" benefit that doesn't lead directly to lower costs or higher revenues. If it did, calculating ROI would be easier.
"But with better productivity and analysis capabilities, businesses can drive better cost controls, build better margins, and do the right things for their customers," says Denis Pombriant, Aberdeen's vice president and managing director for CRM research. "Then they can build revenue and market share."
Brother International Corp., a $1 billion manufacturer of consumer-electronics products for the small- and home-office market and a longtime client of SAP, is a good example of how that can be done. After years of using R/3, SAP's market-leading back-office solution, Brother also asked SAP to address its front-office customer-service issues. Brother's goal: a lifetime view of each customer.
Brother International Corp., a $1 billion manufacturer of consumer-electronics products for the small- and home-office market and a longtime client of SAP, is a good example of how that can be done. After years of using R/3, SAP's market-leading back-office solution, Brother also asked SAP to address its front-office customer-service issues. Brother's goal: a lifetime view of each customer.
"We wanted a CRM solution that we could use to improve our relationship with customers," says Dennis Upton, CIO of Brother. "The ability to tie mySAP CRM into our existing back-office systems was key to our choice, because the less variety and more consistency we have in our systems, the lower our total cost of ownership."
"With mySAP CRM, we now answer more phone calls than ever before with the same number of staff members," says Upton. "We have cut out a lot of manual tasks that occurred prior to CRMIt is a wonderful savings internally, and it is very good for the consumer too." In fact, a recent review by the ROI Report, published by Hill Holiday in Boston, projected that Brother's SAP solution would generate an internal ROI of $1.7 million, or 129%.
Expectation-setting is one step toward ROI. Smart shopping is another. The modularization of CRM has been an important evolution. Today companies don't have to buy an entire CRM suite when all they want is help in a few areas. And they can purchase modules that have the greatest chance of showing results.
"The call center is one place where companies can deliver hard ROI metrics," says Joe Davis, vice president and general manager of PeopleSoft Customer Relationship Management. "Service, telesales, and marketing-
automation solutions can all yield hard returns in this environment. With a call-center CRM service module, for instance, a company can actually see if it has improved first-call resolution rates or achieved shorter call times. By adopting CRM in a more piecemeal fashion, IT can prove ROI to the CIO and build its CRM solution from there."
In addition to breaking CRM suites into horizontal modules, vendors have built solutions around vertical industries such as financial services and health care. This is important because industry-specific modules incorporate industry-standard language, processes, and conventions, thereby minimizing the amount of customization that goes into a CRM deployment. Less customization means easier and faster implementation.
Finally, hosted CRM solutions have become a viable way to see rapid ROI. Several years ago, hosted solution providers, also known as application service providers (ASPs), were going to change the way companies bought software by renting out applications that ran on the providers' servers. It didn't catch on. Now, with budgets tighter than ever, businesses are revisiting the hosted model in search of lower costs and faster deployments.
Companies interested in hosted CRM solutions sign up online and subscribe to the applications they need. The total cost of using hosted CRM software is a fraction of the cost of a traditional CRM solution. According to Aberdeen, the total cost of ownership for Salesforce.com, one of the top hosted solutions, is 13% of traditional CRM.
ProactiveNet, a provider of performance-management solutions for online applications based in Santa Clara, Calif., was frustrated with its client/server CRM system and switched to Salesforce.com. The company estimates that it saw a positive ROI on Salesforce.com within weeks and saved $744,000 through decreased costs and marketing expenditures in the first six months. At the same time, its sales productivity soared by 7.5%.
Hosted CRM solutions do not mean the end of traditional CRM software. The two can coexist. Many companies will always want to maintain control over their software, while others—often small and medium-sized companies—will seek out the benefits of hosted solutions.
SCM: Finding Value at the Source
Early supply-chain-management software focused on lowering transaction costs through electronic procurement. Reverse auctions, in which suppliers bid for a company's business, were among the many technologies that promised to drive down the cost of acquiring materials.
The fact is that getting good deals can provide a short-term boost to the bottom line. But if companies can't count on their suppliers, measure compliance, and entice them to become partners, they will lose the edge they gain through cost cutting.
"Short-term ROI can hurt myopic companies if they don't concentrate on grooming supplier relationships and driving continuous improvement over the long term," says Tim Minahan, Aberdeen Group's vice president of supply-chain research.
As a result, e-procurement has begotten e-sourcing, also known as strategic sourcing. While e-procurement is a tactical, transactional solution, e-sourcing is more strategic. As part of the larger universe of supplier relationship management (SRM) solutions, e-sourcing is less about getting the best price and more about finding the best supplier at the best price.
"If nothing else, tactical solutions like competitive bidding run the risk of disenchanting suppliers and creating an antagonistic relationship when the economy turns around," says Minahan. "Reducing the cost structure is not enough. Companies need e-sourcing solutions that capture the innovation and efficiency inherent in the supply chain in order to gain a competitive advantage."
E-sourcing describes a set of Internet-based tools that help companies identify, evaluate, negotiate, and execute purchases and supplier relationships that support supply-chain and other business operations. Solution providers like Ariba, Emptoris, and FreeMarkets have been on the leading edge of e-sourcing, but big-name players like Oracle, PeopleSoft, SAP, and SAS also offer e-sourcing products.
Last year, Aberdeen Group surveyed e-sourcing users worldwide. Among the business benefits that users described were: double-digit-percentage reductions in costs, shorter sourcing cycles, and faster time-to-market. Overall, 84% of early adopters said e-sourcing had paid off as anticipated or better than expected.
"But you can't do strategic sourcing in a vacuum," says Patrick Quirk, general manager of PeopleSoft Supply Chain Management. "You need to know where you've been from the perspective of overall pricing, delivery, contract compliance, and more. You need to bring supplier ratings into the equation."
Gwinnett County Public Schools, in Lawrenceville, Ga., has a $1.2 billion annual budget and recently installed several PeopleSoft applications, including its SRM solution. "We'll be able to track orders in real time and measure our vendors' performance," explains Jeff Weiler, the school system's CFO. "That will help us negotiate volume discounts and track quality issues."
In fact, a supplier-rating system has become an important part of SRM. Companies can build their own supplier report cards. On a single screen, a purchasing professional can see key performance indicators from how well the supplier hits delivery targets to whether it has a record of incorrect invoices. After all, what good is a low-ball price if the product arrives two weeks late?
Fortunately, the right e-business solutions can help companies avoid costly, misguided decisions that negatively affect sales and marketing, as well as the supply chain. There's also a fallout benefit: When implemented with the right business goals in mind, the technology can yield bottom-line results that would make any CFO proud.
— Brad Grimes and Michael Desmond
The Implementation Challenge
You've decided to buy e-business software in hopes of a positive return on investment. But before your solution can yield results, you need to get it installed and working with your current business systems. A rocky implementation can actually reduce your ROI.
"Before the Ūrst steps are taken to implement enterprise software, all organizational levels—from top management to end users—need to understand the strategic business goals and how the implementation of the enterprise software aims to accomplish those goals," says Mike Gregoire, PeopleSoft's executive vice president for global services.
PeopleSoft Consulting, a division of PeopleSoft Global Services, uses its own project-management methodology for implementing PeopleSoft solutions. The PeopleSoft Compass Methodology includes six distinct phases with measurable deliverables and milestone checkpoints to guide the project through implementation. In addition, PeopleSoft Consulting offers packaged services such as strategy workshops and training courses that help mitigate risks, lower implementation costs, and shorten deployment timelines.
Once a solution is up and running, PeopleSoft recommends periodic performance-tuning in order to avoid system slowdowns, minimize costly disruptions, increase system availability, and boost employee productivity. It's all part of a comprehensive implementation strategy that ensures companies derive ROI from their solutions.
One of the largest healthcare companies in the U.S., WellPoint, based in Thousand Oaks, Calif., called on PeopleSoft Consulting to help implement PeopleSoft 8 in its human-resources department. In the strategy phase, PeopleSoft Consulting helped WellPoint define business-process objectives that could benefit from PeopleSoft applications. Within five months, WellPoint was running PeopleSoft 8 and saving the equivalent of more than $650,000 per year.
Learn more at www.peoplesoft.com
CRM Really Delivers
Over the past few years there have been urban myths surrounding customer relationship management software," explains Denis Pombriant, vice president and managing director for CRM research at the Aberdeen Group. "People have been saying that CRM doesn't show any ROI. They say implementations are always late and over budget. But that's not entirely accurate."
As proof, Aberdeen Group recently published the first large-scale satisfaction survey of CRM users. The research firm collected information from 325 users of a major vendor's CRM solution. On average, respondents reported:
17% increase in sales productivity
16% increase in service contact-center productivity
14% increase in customer satisfaction
10% increase in customer retention
Aberdeen estimates the higher customer-retention rate and resultant lower sales expense can lead to a 50% increase in earnings before interest and taxes—enough to pay for a CRM system several times over. Or, with respondents reporting a median revenue increase of 10%, Aberdeen predicts, companies could pay for the CRM system in one or two years. By either measure, that's real ROI.
About Aberdeen Group
Aberdeen Group has been an IT-consulting leader since 1988. Its vigorous primary research program is based on surveys of targeted IT buyers in more than 25 market segments, providing real-time insights into buying patterns, growth rates, and trends. Aberdeen works with a wide range of information-technology suppliers to assist with the successful launch of new products and services and improve marketing and sales effectiveness.
Aberdeen's online Access sites are focused on several end-user communities, giving buyers and suppliers access to qualified survey research that helps them identify opportunities and better understand the needs of customers. Because its communities include sales, marketing, financial planning, and supply-chain professionals, in addition to IT planners, Aberdeen's web traffic is among the highest of any
major IT research firm.
Headquartered in Boston, Aberdeen has research and consulting divisions in Palo Alto and Fort Collins, Colo. Learn more at aberdeen.com.
Getting to the "bottom line" with Teradata
Business isn't just about making decisions. It's about executing better, faster, proactive decisions based on actionable information. It's about having a vision and strategy driven throughout the entire organization.
Teradata, a division of NCR, lets companies like yours to have immediate access to all of your data so you obtain a single, integrated view of your business to drive strategic and tactical analysis and identify business opportunities.
Teradata puts the unbridled power of the world's leading enterprise data warehouse solution into our customers' hands so they can understand such things as which customers really create value. Teradata solutions define the "bottom line," highlighting ways to redirect, streamline, or reduce costs, enhance revenue, or accelerate cash flow across your entire enterprise.
From delivering faster and higher return from each of your customers and supply-chain contacts to closing your books faster and managing expenses tighter, Teradata has the expertise to solve the most complex business problems from across your entire enterprise.
Teradata provides a complete analytic solution that frees its customers to do things otherwise not possible, like optimizing and discovering new opportunities for business growth and improving customer relationships—right now. At the same time, Teradata solutions provide the greatest value to business executives, helping them make the decisions to grow your business. With our proven expertise in enterprise data warehousing and best-in-class technology, it's no wonder that our customers include some of the largest, most successful companies in the world from every major industry. Let Teradata help you see your business like never before.
To learn more about Teradata and how we can help drive ROI, go to Teradata.com
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