Enterprise Service Automation: Effective Management in the New Service Economy

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1 A M a r k e t A n a l y s i s Enterprise Service Automation: Effective Management in the New Service Economy Executive Summary The movement toward a service economy is evident in just about every market sector, from technology companies selling products as services, to companies of all types outsourcing business and IT functions to consultants and service providers. Even internal IT departments are taking the role of service providers to their companies business units. Increasingly, efficient value-added and cost-effective delivery of services is one of the keys to an organization s competitive advantage. To manage the challenges of today s resurgent services sector, professional and embedded service firms are increasingly turning to technology in order to outpace their competition and grow their business. One way to maximize opportunity in the new service economy is through enterprise service automation (ESA) solutions. ESA software came about through the need to offer service firms an end-to-end, service industry-specific platform in order to track, manage, automate and integrate just about every service organization function from selling to planning, delivering and billing. ESA combines the early promise provided by professional services automation (PSA) packages with back-office accounting and service-specific supply chain capabilities and also provides insightful business intelligence for targeting and delivering services more effectively. The benefits can be considerable, from freeing resources to spend more time on actual service delivery and less on non-billable administrative tasks, to enhanced competitive advantage from services delivered more efficiently, accurately and comprehensively. The survey data reported here, collected from a sample of technology decision makers in service-oriented organizations, demonstrates that awareness of ESA is significant and that satisfaction among users of ESA solutions is exceptionally high. One in two organizations claimed to understand the concept of ESA and fully 87 percent of companies with an ESA system in place said they are either very satisfied or somewhat satisfied. However, there s still a lot of room for growth. Of the respondents who said they understand the concept of ESA, only half (17 percent total) said they understand the concept well enough to really appreciate its benefits. Fewer than one in five organizations currently budget for the automation of enterprise services. Most organizations (more than 75 percent) currently manage their enterprise resources using completely separate applications, either from single or multiple vendors, which has implications in terms of their ability to easily share information. This disparate system approach is most readily the cause of key service sector challenges like revenue leakage, high day s sales outstanding (DSO), and an all around lack of visibility into operations.

2 Nevertheless, organizations see the functions offered by ESA solutions as important, particularly the ability to access key service performance indicators, to get a single view of operations and client portfolios across the enterprise, and to see which services are the most versus least profitable. Almost half consider streamlining business processes and dealing with paper-based processes as key issues to be dealt with in It s likely that as awareness of ESA solutions grows, many more service organizations will want to take advantage of the benefits ESA has to offer. Survey Rationale and Respondent Profile The results discussed here were obtained in an online survey of 1,065 qualified Ziff Davis Media subscribers who are technology decision makers in service-oriented firms. The survey was conducted in December 2005 by The Strategy Group, an independent research company based in Englewood, Florida. The respondents were from a broad cross-section of organizational sizes and industries, including manufacturing, healthcare, government, retail and finance. Survey estimates have been determined to be accurate within +/- 3.0 percent at the 95 percent level of confidence. ESA Awareness Still Developing Survey results indicate that awareness of ESA runs fairly wide but not very deep, with roughly one in two companies aware of ESA but a significant percentage not yet aware or fully understanding its benefits (see Figure 1). Almost 50 percent of respondents claimed to understand the concept of ESA. However, only 35 percent of the respondents (19 percent of the total) claiming to understand ESA said they fully understand its benefits. pie chart 1 ESA AwARENESS Figure 1 pie chart 1 pie chart 3 pie chart 3 Q: How do you respond to the term enterprise service automation? Not sure what it means 53% Understand but do not see benefits 8% Understand concept, not aware of benefits 20% Understand concept and its benefits 19% Budgets and ESA implementations seem to reflect the current level of understanding. Only 14 percent of respondents said that their IT budgets include funds for automating enterprise services (see Figure 2), though the result was higher (20 pie chart 2 percent) among respondents claiming to understand ESA. pie chart 2 pie chart 4 pie chart 4 IT Budget for Service AutomatioN Figure 2 Q: Does your IT budget include funds for software to help automate any enterprise services? Don t know 28% Yes 14% No 58%

3 Of total respondents, 25 percent indicated that they are managing enterprise resources with an end-to-end solution (see Figure 3), with 75 percent saying they are using separate applications either from a single vendor (27 percent) or from multiple vendors (48 percent). pie chart 1 Methods of Managing Enterprise ResourcES pie chart 3 Figure 3 Q: Are you currently managing pie chart 1 your enterprise resources with an end-to-end solution or with separate applications/modules? Separate applications from multiple vendors Separate applications pie chart 3 from single vendor 27% 48% End-to-end solution 25% pie chart 2 One consequence of the low level of ESA adoption has been a lack of access to business information needed to collaborate and perform more effectively. Only 26 percent of total respondents claimed that everyone has easy access to data in their organization (see Figure 4), while 27 percent said finding data is difficult, 14 percent pie chart 4 said it is a manual process, and 18 percent said that too many silos prevent data sharing. In total, almost half of respondents (47 percent) were experiencing difficulties in sharing information. pie chart 2 pie chart 4 Information Sharing Within Current IT InfrastructuRE Figure 4 Q: In terms of different business departments or processes being able to share information, how would you describe your current IT infrastructure? Workers contact other departments to ask for data 15% Too many silos prevent easy data sharing 18% Finding information is a manual process 14% Everyone has easy access to data 26% Access is there, finding data is difficult 27% Eighty-seven percent of respondents currently using an ESA system said that they are either very satisfied (19 percent) or somewhat satisfied (68 percent) with their ESA system (see Figure 5). Only 13 percent said they are not satisfied (9 percent) or not satisfied and looking for a new solution (4 percent). In addition, many organizations either have automated or plan to automate many of the individual business processes that fall under the ESA umbrella, with billing and reporting/analysis topping the list.

4 Satisfaction bar chart with 5 ESA SySTEM Figure 5 Very satisfied 19% bar chart 5 Somewhat satisfied 68% Not satisfied 9% Q: If you are currently using an enterprise service automation system, please describe your satisfaction level. Not satisfied and looking for new solution 4% Fifty-seven percent of total respondents have either automated or plan to automate their company s billing process, and 47 percent have already done so (see Figure 6). Even among the respondents that answered they don t understand ESA, 51 percent have already automated or plan to automate billing. Fewer respondents (37 percent of the total), but still a significant percentage either have already stack horiz automated chart 6 (27 percent) or plan to automate (10 percent) purchasing. Similarly, 26 percent of total respondents either already (17 percent) or plan to (9 percent) automate contract generation. 100 stack horiz chart 6 Automated Business ProcESSES Figure Billing Reporting Purchasing Contract generation % 43% 63% 74% Q: Has your organization % 47% 12% 44% automated any of the following business processes? 10% No plans 9% Plan to automate 27% 17% Automated Their reasons are fairly clear. Forty-nine percent of total respondents agreed that billing simply takes too long, while 43 percent indicated that the time between work completed and payment is too long (see Figure 7). Twenty-three percent thought the number of non-billable hours is too high. One of the key areas addressed through ESA is the removal of separate systems for collection of work-related costs and then the invoicing of those costs. Often, the administrative overhead of maintaining separate systems or requiring re-keying of information is a major cause of operational overhead, loss of productive time, and inaccurate billing, leading to customer disputes and delayed payments for service.

5 bar chart 5 bar chart 5 Biggest Challenges Related to Billing Figure 7 bar chart 9 bar chart 9 49% 43% Too much time spent on billing Time between work completed and payment is too long 23% Non-billable hours are too high Q: What are your biggest challenges related to billing? 12% Billable rates are too low stack horiz chart 6 stack horiz chart 6 Billing and data analysis topped the list of business processes that respondents felt could benefit most from automation, with billing getting 28 percent of the total (see Figure 8). Twenty-seven percent of total respondents said they think that analysis could benefit most from automation. bar chart 10 bar chart 10 Business Processes that Could Benefit Most from Automation Figure 8 28% Billing 15% 14% 17% 27% Planning Selling Delivering Analysis Q: Of these five key business processes in your organization, which could benefit most from automation? ESA Benefits Are Seen as Important Another indicator of possible growing demand for ESA solutions is that many of the benefits often attributed to ESA were considered very important to respondents. For example, 56 percent of total respondents gave access to key performance indicators an importance rating of 8, 9 or 10 on a scale of 1 to 10 (with 10 being most important). The result was the same for the a view of financials across the entire organization (see Figure 9). Fifty-three percent of total respondents gave being able to see most profitable vs. least profitable services a score between 8-10, as did 49 percent for accurate planned-to-actual comparisons, 47 percent for better decision-support tools, 46 percent for capability to change business rules to support best practices without code modification, 39 percent for automated tools to manage business processes and 33 percent for integrated resource planning system.

6 30 60 Many of the issues tackled by ESA are also concerns that respondents indicated they plan to address this year. Importance of ESA BenefiTS Figure 9 bar chart 9 56% 56% 53% 49% Access to key performance indicators View of financials across entire organization Able to see most vs. least profitable services Accurate planned-to-actual comparisons 47% Better decision-support tools bar chart 9 46% Change business rules to support best practices without code modification 39% Automated tools to manage business processes 33% Integrated resource planning system Q: How important are each of the following? Rated 8, 9 or 10 on a scale of 1-10, with 10 being most important Eighty-five percent of respondents said they planned to address at least one of the issues typically addressed with ESA (see Figure 10). Forty-eight percent plan to address streamlining business processes ; 43 percent, dealing with manual, paper based processes ; and 36 percent, automating business processes. These bar chart 10 top three concerns are indicative of the need for greater business agility in today s buoyant 0 10yet ultra-competitive services market. They are also the areas most likely to benefit from the end-to-end capabilities of modern ESA solutions that use service-oriented architecture (SOA) in order to support that need for greater business flexibility. Other goals include aligning IT initiatives with business objectives, improving project team performance, and acquiring better decision-support tools. The integral project portfolio management (PPM) capabilities of ESA are focused on addressing these needs. bar chart 10 Issues to Address in 2006 Figure % Streamline business processes 43% Dealing with manual, paper-based processes 36% 0 10 Automating 20 billing 30 processes % Aligning IT initiatives with business goals 34% Improving project-team performance 22% Acquiring/developing better decision-support tools 17% Attaining enterprise-level visibility into projects 14% Improving management of supplier relationships Q: Please check any concerns or issues that you plan to address in

7 In summary, survey results indicate that ESA is in a relatively early market stage, with potential for significant growth as corporations learn of its benefits for addressing the issues that matter to them. The ESA Solution As the professional services market grows and becomes more competitive, service organizations are looking for ways to effectively handle the dual challenges of managing the fundamentals (reducing costs, maximizing billable time, allocating resources more effectively) and managing the demands of more savvy clients for greater collaboration, visibility and value-based partnerships. Effectively balancing the two can lead to higher client satisfaction, enhanced profitability and a strong competitive advantage. Many currently use a variety of different tools for project management, accounting and human capital management, but find the lack of integration among tools a hindrance to gaining complete control of their business. Seemingly basic tasks such as capturing time and expenses accurately, managing work in progress, generating and approving invoices, and reporting on project and client status can become significant challenges, particularly in organizations with disparate systems resulting from mergers and acquisitions. Many service organizations also lack basic standard best practices for pricing and estimating based on past projects, hiring and recruiting new employees based on accurate capacity plans and sales projections, and assigning the right resources to the right projects based on skill set, client expectation and staff development goals. The result is that employees end up spending upwards of 18 percent or more of their time on non-billable functions such as those outlined above. Reducing bench time through more consistent and automated processes is one of the most obvious and effective ways to increase productivity and enhance profitability. Automating and streamlining processes also helps to drive down costs and enhance competitive advantage. Enterprise service automation software addresses these issues with a single, integrated platform for automating and optimizing tasks such as opportunity management, resource management, project engagement and delivery, billing and accounting. The best ESA solutions also harness the service firm s intellectual capital and provide a single source of business information for teams to collaborate and gain a deeper and wider understanding of their business, thus enhancing their competitive position. A market leader in the ESA space, Epicor for Service Enterprises is unique in its accommodation of service industry-specific customer relationship management (CRM), professional services automation (PSA), supplier relationship management (SRM), finance and accounting, and robust business intelligence all within a single solution. With this level of breadth, depth, and ease of use, ESA lets service organizations manage and streamline virtually every aspect of their business. Epicor for Service Enterprises is also highly flexible and has been used successfully in just about every service sector, including professional services; architecture, engineering and construction; software and computer services; audit and accountancy; marketing, advertising and communications; research and development; as well as non-profit organizations; general management consulting; and even internal IT and service groups with a fee-for aspect.

8 Agile Service-Oriented Architecture (SOA) Users of ESA solutions usually demand anytime, anywhere access to information in order to support the distributed or dispersed nature of their service organization s resources. Epicor for Service Enterprises manages this through a rich and user-friendly Web browser interface based on Microsoft.NET technology. A single Web form provides access to relevant linked information from anywhere in the system, maximizing user productivity, ability to collaborate, and screen real estate. Much of the power of Epicor for Service Enterprises comes from it inherent end-to-end service processes. For example, the software fuses CRM with project structuring to provide a seamless flow from opportunity to project planning and service quotation, reducing administrative time and effort. Resource management and graphical scheduling features make it easy to match the right people to the right tasks at the right times. Conflicts are highlighted so they can be acted on and resolved immediately. Learn More For more information about how your organization can streamline business processes, maximize IT ROI, and find success with customercentric applications, visit Comprehensive project accounting ensures strong management of cost and fee rates, WIP, revenue recognition and billing, with contract rules to support operations in any currency. Finally, built-in analytics provide strategic insight into all areas of operation, offering earned value analysis, profitability matrices, and project portfolio management. Epicor for Service Enterprises was designed to manage the fundamentals of a service firm, but also to address the new challenges facing the services sector today. Built on a 100% service-oriented architecture (SOA) it delivers muchneeded flexibility with adaptable business process management and workflow tools in support of changing business goals. With Epicor for Service Enterprises, you can build the software around your business s best practices, rather than the other way around. The professional services market is growing and maturing at a very rapid rate. To compete effectively in this market companies must get control of their processes, embrace best practices, cut costs, and drive new efficiencies into their business. Enterprise service automation solutions like Epicor for Service Enterprises offer some of the most effective tools for accomplishing these goals. To learn more about ESA and its benefits, visit

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