Is Automation the Deciding Factor?

A consistently applied IT strategy, derived from an organization’s business strategy, can, with the help of automation, significantly increase corporate effectiveness and efficiency. Agility, flexibility and better quality at less cost result.

The Role of IT Strategy

"IT strategy" as a term encompasses all information technological and system technological decisions which support the realization of a business strategy. As such, the link between IT and business strategy is becoming more and more important. IT is no longer seen simply as an "executing function," providing lower cost processes; rather, it operates according to its own strategy and is expected to add competitive value to the business by supporting product innovation and profitability. An intelligent IT strategy aligned with business goals significantly contributes to organizational success. A missing connection between IT strategy and business strategy, on the other hand, can lead to discrepancies between business demands and the solutions provided by IT. As processes can face changing requirements, even while being implemented, IT has taken on the role of "business enabler."

Process Integration in Support of Business Agility

In its role of strategy integrator, IT provides agility by offering flexible, adaptable, interfaces. Agility represents a decisive competitive advantage in today’s markets, allowing an organization to respond to changing requirements by re-aligning business processes and strategies accordingly. More specifically: integration is a requirement for cross-departmental processes. A well-integrated company, with homogenous processes, is more efficient as process changes can be implemented easily, and across functions. Shared services is an excellent example of homogenized processes whereby similar business processes for all business units are taken over and standardized. However, a successful IT shared services platform is based on process integration and flexibility in choosing internal or external providers. The IT platform needs to support the execution of business processes at two locations – the business unit and the SSC itself. In this context, the IT platform is not perceived in its traditional meaning (namely, technical integration platform) but as a business process platform.

The dynamic requirements of a continuously changing business environment can’t easily be met by one, albeit integrated, application. As a result, applications based on an Enterprise-Service-oriented-Architecture (ESoA) have been developed. These enable allocating processes according to services provided. Deciding which process steps to allocate to shared services is not primarily determined by technical restrictions, but according to organizational or process-related flow. IT therefore becomes an enabler for rapid changes of processes or organizational structures, and process automation becomes a value driver.

Efficiency Through Process Automation

Global competition and increasing cost pressure, as well as increased quality demands, require more flexibility and agility from today’s corporations. Automation has a significant impact on cost structure, primarily as a result of lower labor cost. Automation also lowers the risk of errors resulting from manual intervention, improves reliable quality, and realizes cost savings.

Analysis of Today’s Shared Services

In late 2007, a survey sponsored by SAP AG, Germany, and undertaken by Steinbeis-University Berlin (Institute of Business Administration, Convergence- and Media Management, Hamburg, Germany) analyzed current automation in SSOs, and the relationship between shared services and business strategy. Regional representation of respondents broke down as follows:

European companies came out in first place in terms of implementing shared services, both as far as locations (52%) and customers (48%) were concerned. According to the survey, most American companies prefer BPO as a model, though the survey did not question motives. For the two leading SSO functions – F&A and HR – providing global services was still of secondary importance: only 14% of F&A shared services and 10% of HR shared services are provided for worldwide customers. Most services are still provided mainly in-country, with finance showing a tendency towards regional services. (see Figures 1 & 2)

Figure 1: Regional SSOs

Figure 2: Geographical Scope of Different SSO Functions

Most companies surveyed plan to develop global services by the year 2010. According to survey respondents, companies plan to decrease the number of nationally oriented SSOs, whereas regional services will remain virtually unchanged.

Figure 3: Anticipated Development of SSOs by 2010

As expected, F&A services still lead ahead of other functions: 55% of respondents stated that 60% of their F&A processes were executed from a SSO. HR services were a close second, whereas there appears still to be growth potential in IT, purchasing, real estate and logistics.

Most SSOs (77%) run as cost centers, with only 13% operating as a profit center. This supports the notion of SSOs having no natural interest in their own economic success, but rather in the success of the customers serviced.

In terms of ERP software used, SAP emerged at first place (56%), followed by Oracle (18%). Other ERP platforms (11%) play a minor role. Fifteen percent of companies surveyed develop their own systems.

A main part of the survey focused on analyzing automation trends.

Within F&A workflows, mainly ERP-systems and EDI were used. Also mentioned were OCR, self service and interaction center technologies. For HR, shared services mostly invested in payroll, e-learning and self services. The survey showed that self-services are more established in HR and IT than in F&A, logistics, purchasing and real estate functions. HR functions displayed the highest degree of automation: 19% of the organizations surveyed indicated automation of over 60% for HR services. The overall degree of automation across all functions was found to be 46% in this survey.

Figure 4: Degree of SSC Automation Across Functions

The question of whether companies viewed technology as a success or not was not straightforward. Concerning costs and quality, most companies claimed improvements. Many SSOs felt unable to demonstrate improvements to their customers on a regular basis. The main reason cited was an incompletely developed customer-provider relationship, and not properly defined shared services objectives.

Automation in SSCs as an example for realizing IT strategy

Automation has been identified as a trend in shared services and shows a high potential which has not yet been fulfilled. Two approaches appear to demonstrate IT-supported automation within SSOs:

• automation of process flows between businesses or business units and SSO
• automation of internal and external communication of business and SSO

Automation of process flows

Automating process flows enables more efficient processes, reduces cost and errors, and increases quality. Transactional processes are especially suited for automation due to repetition and high volume. Automation leads to shorter process flows and thus fewer errors, higher cost savings and quality improvements.

Automation of communication

Communication is time-consuming but unavoidable. For customers and providers, it is very important that communication is effective, which means that relevant information should be delivered at first contact. Multiple contacts due to a lack of information result in high costs. A successful IT strategy should offer the mechanisms and infrastructure to provide effective communication, i. e. by the usage of automation via Interaction–Center-Technologies. Communication automation can be realized through the implementation of self services. In addition to self services, an Interaction-Center (IC) helps to automate communication. Incoming questions can be distributed to the right source via telephone, e-mail, fax or letter. Easy questions can be answered by generalists, difficult questions by specialists or experts. Another important aspect is the single point of contact.

Incoming questions are initially distributed to the first level of support. If necessary, questions can, according to workflow, be escalated to relevant specialists.

Figure 5: Automation of Communication via Interaction-Center-Technologies

This article is a summary of "Next Generation Shared Services – Automation as a Trend", by Marcell Vollmer, Bernhard Fisher, and Stefan R÷der, published in Strategic IT-Management – Management of IT and IT-enabled Management, Wiesbaden 2008, pp. 279–316 (Frank Keuper, Marc Schomann, Robert Grimm (Eds.).