Global Shared Support Service: Leveraging expertise, sharing costs andderiving value Chandra Shekar Kakal Shared service in any field comes with an implicit assumption of reduced cost and improved efficiency. The fundamental principle behind the value derivative being elimination of redundancies, apportionment of the infrastructure costs and leveraging the expertise in offering that particular service to improve efficiency and thereby reduce costs. The concept has been exploited sufficiently, all over the globe, to launch new business models, from offering document management services to processing pay rolls. Reduced total cost and improved overall service levels have been the most fundamental measurements with the other measures rolled up to help achieve these benefits. Shared service, when applied to the production support and maintenance of packaged products like ERP (Enterprise Resource Planning) suites can help achieve the much needed cost reduction and efficiency gains. As most large organizations have moved over to standard, leading packaged products such as SAP, Oracle, Siebel, i2 system etc., the commonality of the base product features and the experience gained in supporting them can be leveraged by the shared service concept. This paper attempts to bring out the viability of such a service, the potential benefits, possible concerns and the key success factors for such a concept to work. May 2005
Executive Summary More than 60% of the Fortune 1000 organizations have implemented Enterprise Resource Planning (ERP) systems to streamline and automate business support processes 1. Many of them have currently reached a steady state and are looking for production support and maintenance, roll-out into new divisions or upgrade. Surveys have also revealed that maintenance accounts for 36% of an application s cost 2. Organizations have already considered the benefits of outsourcing and offshoring the production support and maintenance activities. As these are recurring expenses, new models are required to reduce the expenses further. Shared support service can bring in additional cost savings to the organizations beyond the benefits of outsourcing and offshoring. Through Optimal usage of resources, efficiency improvements using matured processes, leveraging the experience gained in supporting same package across multiple instances it should be possible to achieve 20-30% savings in the long run. The combination of some dedicated resources and a large shared team can yield higher value to an organization through this service. Support and Maintenance of packaged products As most of the large corporations have already implemented one or the other leading ERP packages, the current focus is now towards supporting and maintaining the applications. The support of packaged products comes in two parts. a. Support of base product from the product vendors which is normally the annual maintenance contract and is charged as a percentage of the license fee. This provides for the product level defect fixes, upgrade patches and clarifications. b. Support and maintenance of the installed application to cover user clarifications on business process configuration, suggesting work around, supporting customizations, additional enhancements etc., This is provided either by the in-house IT staff or an outsourced partner. While production support of applications and maintenance are two different sets of activities,organizations normally handle both, using one set of resources. The distinction is explained in the table below: The production support issues are generally categorized into different levels based on the criticality. These are used to provide different levels of service based on the nature of impact on the business. Level 0 and Level 1 issues refer to the basic user clarifications, business transaction hold up, critical data error etc., which require real time support and need continuous attention till resolved. Categories beyond level 2 refer to the issues wherein business transactions can proceed, but need to be fixed for future use. Some of these issues could be nice-to-have features or additional enhancements as well. Outsourcing and Off-shoring models License fee for packaged products and the professional charges towards implementation are one time expenditure. However, annual maintenance contract with the product vendor and the production support and maintenance charges are recurring in nature. Most organization have resorted to outsourcing and off-shoring of production support activities to bring down the expenses. Part of the application support which can be rendered with a time lag of 24 hours or more and fixing those issues 1 Darwinmag.com 2 The Standish Group 2 Infosys White Paper
which do not require direct user interaction can be done from a remote location which offers cost advantages. The off-shore centers managed either by the organization s IT department or by an outsourced partner offer the advantages of cost arbitrage already. However, due to the unpredictable nature of the support service requirements a constant team size is maintained throughout the year, which, in a way turns out, be the fixed cost of application support and maintenance. It is also important that organizations distinguish between the following: 1. Production support issues which are in the nature of bugs or defects in software that hinder the smooth flow of business transaction processing. A product defect or configuration error which results in non-generation of Goods Receipt Notes and supplies lined up, or an erroneous shipment advice stopping shipments are examples of this nature. Also, supporting batch job processing, data corrections, user clarifications fall under this category. 2. Enhancement requests which can be handled off-line and are taken up to improve the business processes such as additional queries and reports, additional features on customized applications, development of new add-on modules belong to this class. Traditionally, when both production support and maintenance were done by the in-house IT departments of the organizations there used to be a constant team size which attends to both types of issues and thereby a fixed cost was incurred. When outsourcing concept picked up, similar tendency continued to have a constant team size managed by the outsourced partner. When off-shoring was done to get the low cost advantage, the tem size remained similar, but for minor reductions based on productivity gains. Having committed for a constant team size the tendency is to utilize the resources and recover the fixed cost and get the enhancements done by the same team. Search for new models What after outsourcing and off-shoring, to reduce the recurring expenses? How to make the fixed team size and the fixed cost into a variable one and pay for the real service rendered..? These are some of the questions that come up with the current service models. The need for a new model is driven by both macro and micro factors: Increasing globalization of corporations and their customers, inorganic growth through mergers and acquisitions necessitates the integration of different systems and sites. Both the approaches of living with disparate ERP/CRM systems and integrate them for a global view or convert some of them and standardize/consolidate on one set of packages have been followed depending upon the corporate strategy. In either of these cases the applications have to be supported and maintained for global operations. The micro factors are driven mainly from the corporate strategy to combat continuing pressures on margins and the need for enhanced service performance. The shared support service model also enables growing corporations to manage growth while minimizing staff costs. When the organization has just implemented the package, a dedicated team may be required which takes care of production support as well as enhancements. However, when the system is stabilized, enhancement requirements will be few and production support requests wouldn t be many to optimally utilize all the full time resources. Any new support service offering should be holistic in nature and have the following characteristics. Offer different pricing models based on service levels, per issue resolved rather than based on number of people and obliterate the need for supporting a fixed team size and a fixed cost. Global in nature Should be able to support business units across the world from different cultural and language background. 24 X &7 Availability Should leverage Internet s speed and accessibility to provide support to the business needs, anytime anywhere. Fast and efficient - By leveraging the accumulated expertise, should be able to offer the support service faster and efficiently by expending lesser effort. Global Knowledge Repository Should have a globally accessible knowledge repository of best practices, offered solutions to assure enhanced business productivity and minimize business disruption. Proactive Should be able to take preventive action by identifying the issues proactively and fix them. Should be able to support different packaged products leveraging the underlying business process knowledge, although the package may be different. Infosys White Paper 3
Leveraging Shared Service Concept While each configured instance of a packaged application is unique and different, there are some base product features which are common for a given package. About 60-70% of the based product features would have been used during any package implementation and there is a common thread that runs across the installations which makes the shared support service concept especially amenable for packaged products. Added to this, the teams can share the domain knowledge in a vertical industry. The third dimension comes from the functional stream such as Finance & Accounting and Human resources. From the experiences gained in supporting and maintaining the applications in an industry vertical or a function, additional benefits can be exploited. By leveraging these common threads, a shared support service for multiple customers is possible in different packages even if the uniqueness of each configured instance of a package in every organization is respected.. Product vendors have maintained common teams to support the base product, as well as the customer specific issues of multiple customers through help desks or web based support tools. However, such a concept of common team across multiple customers is not common when it comes to supporting the configured applications, clarifying process related user queries, resolving integration issues with other applications etc., Organizations continue to have the dedicated teams either as in-house IT staff or through an outsourced vendor for this purpose. Using a shared support service customers can actually pay for the number of service and level of service they receive rather than paying for number of people they have to carry. At the same time the vendor can deploy the consultants to work on more than one customer, leverage the knowledge accumulated, fixing the defects in the packages faster and pass on the benefits to the customer. Through shared service concept, applied to production support and maintenance of packaged products, following can be accomplished. 1. Reduction or elimination of constant team size maintained for supporting production issues by having a clear service level management structure defined. Through a shared service team multiple customers can be supported, thereby spreading the costs and making it variable. 2. Maintenance issues such as enhancements can be taken up by a shared service team and can be paid for based on the value obtained or effort spent on such enhancements thereby again avoiding the fixed cost on carrying a constant team size. 4 Infosys White Paper
The outsourcing partner offering the shared service will have to take the requests from multiple customer and accommodate the variability and ensure that the workload gets smoothened out on a overall basis. It is also important to have the support mechanism to receive requests, allocate them based on the skill sets required, monitor the progress, analyze performance and ensure optimal utilization of the resources for this to succeed. Global Shared Support Service Model The benefits of sharing can be explained with the following illustrations: Infosys White Paper 5
Sharing the Resources When the system has stabilized and the various modules of a package suite are in steady state, the requests received vary from month to month. If the organization resorts to a fixed team size, the resources are either under utilized or provided with filler jobs which may or may not be essential. By sharing the resources across multiple customers, the load on the consultant can be evened out. By increasing the average number of issues fixed per person through proper work allocation mechanisms and metrics based monitoring advantages of sharing could be realized by 20-30%. To retain the core knowledge a combination of a fixed team and a variable resource pool can be adopted to absorb the variations in the load. This can be translated into a nominal fixed cost and a variable issue based pricing which should bring down the total cost of production support and maintenance. The support model In its simplest form, a Global shared support service offering can be depicted as below: Using the web based support tools the support model can encompass the virtual teams operating across different time zones. With the shared support service center operating as a central hub, shift operation in the center can provide real time support for end users in different time zones. Potential benefits The obvious benefits of a shared support service are cost reduction and improved performance.however, the potential benefits extend beyond these. Turn around time can be faster due to specialization. If follow-the-sun approach is used, round the clock attention can be possible for critical issues. Mining the knowledge base avoids reinventing the wheel for known issues, which might have been encountered with some other customer also. Shared support service centers can become centers of excellence, increasing effectiveness through the pooling of expertise and establishment of best practices. The expertise gained can be used not just for support and maintenance of a particular ERP or CRM package, but also to upgrade the modules, re-implement them or implement the additional modules to bring in more business processes. Absorption of new technology can be faster and the benefits of learning from a different customer can be passed on. Benefits of re-using time-tested solutions can accrue 6 Infosys White Paper
Best practice sharing across the industry as well as cross learning and bench markings from different industries will be possible. Lower unit costs per transaction through (a) standardization of common practices (b) automated workflow processes and (c) operational efficiency gains. Possible concerns At the outset, shared support service offered by an outsourced business partner servicing several customers raises concerns, which are besides the concerns of outsourcing itself. If not addressed and managed properly by the outsourced partner, success and benefits are unlikely to accrue. The possible concerns and the mitigations are as below: Table: Possible concerns and mitigations of a shared support service offering: Key Success Factors The success of any shared service depends on how well it is executed, as there is a fundamental value proposition any way and the success or failure can only depend on the ability to execute excellently. The most important factors for success in shared support service could be broadly classified as management, infrastructure, process and people factors. Management Factors Strong management is the most important factor. Committed senior management, which understands the intricacies of production support and maintenance issues of global clients supported by the strongly managed teams to handle the customers in a vertical industry or in a particular suite of packaged products, is essential. The team should be constantly looking for possible cost reduction avenues. A strong customer focus is vital. The value being provided by a shared support service, besides the normal value from outsourcing and off -shoring needs to be demonstrated. Service Level agreements (SLAs) and the management s ability to constantly challenge the internal operational efficiency and improve it is required.. Innovating pricing models offered to customers which depend on the kind of service and level of service rather than the low risk, constant team, fixed price or Time and Material pricing models are important. Infosys White Paper 7
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Infrastructure Factors Both physical infrastructure and network communication infrastructure play a vital role. It is important that the physical infrastructure of a shared support service center and the network infrastructure connecting the support team across the globe and the customers enable value creation. Physical infrastructure for the support team to work from the support center with transportation, boarding and recreation facilities, especially if shift working is called for will be a major enabler for smooth operations. Network connectivity and network performance for the end users spread across the globe to register their problems, view the progress and to experience the resolution is important. The end user experience may be communicated to the support center through any of the channels such as telephone, email, web interface, mobile or fax. The network and communication infrastructure should be able to take inputs from all these channels and provide resolution. Connectivity to the customers development or test or production instances to debug, test and fix the issues is a major network infrastructure backbone issue, which determines the success. Building redundancies and back up routes for connectivity will play a major role in assuring uninterrupted performance. Process Factors A successful shared support service offering should be process led rather than technology or people led. Clearly defined processes with accompanying documentation are an important feature. The shared support may be offered by a single physical support center or may be through a virtual team operating across the globe with a followthe-sun approach. Appropriate hand shake mechanisms and defined roles and responsibilities form part of a robust process A robust engine acting as a backbone, consisting of a web based support service tool, well-defined work flows, documented process flows, service level agreements, capability baselines are vital to determine the success of the offering. Service level management The management of service levels entails much more than the traditional view of service level agreements. In a shared support service, the requirements of a heterogeneous customer base must be met. Service level management involves a dual-path approach, where standard service offerings are being defined at the same time as the customer s specific expectations for those services are also being determined. Benchmarking against the best of service levels in the industry in order to objectively measure the performance and improve is essential. The real value from a shared support service offering comes from managing the processes well. Sharing the pains as well as gains is the key in determining the success. Hence, a shared support service offering should be viewed as a continuous process improvement, supported by a long-term vision and strategy, rather than one-off, short-term experiment. People Factors Being a knowledge intensive service offering, both creation of the knowledge base and leveraging the knowledge base for performance gains depends on the quality of human resources deployed. Motivating the people to carry out the production support and maintenance kind of work plays an important role. To address the problems of staff turnover ways and means of keeping the valuable staff motivated and provide on going training should be considered which include Job rotation, learning new package skills, providing opportunities for higher responsibilities and even releasing people from the center after a specified time to work in other areas are key people factors to be considered. Aspirations of people to work directly with the clients and having a chance for face-to-face interaction with the end users vis-à-vis managing client issues remotely from an off-shore based shared support service center is a challenge and needs to be managed for success. Infosys White Paper 9
Conclusion Packaged applications in ERP, SCM and CRM space such as SAP, Oracle Apps, Peoplesoft, i2 and Siebel are very well suited for the shared support service offering as there would be 60-70% common functionalities implemented as per the base product. The additional customization done or the add-on modules developed also have high level of integration with the base features. Leveraging the knowledge gained in the process of production support and by optimally utilizing the resources to work on multiple customers, the cost can be apportioned and efficiency gains can be shared. The domain knowledge gained by supporting the applications of different customers in similar industries will also help building the competency and increases effectiveness. Large global corporations with multiple business units can embrace this model to share resources within their group easily, without worrying too much about the security issues or knowledge sharing. Others can follow suit after addressing the concerns on sharing, if any. Customers can actually pay for the kind of service and the level of service they receive rather than paying for a constant team size and thereby convert the fixed cost into a variable one, in line with the business demands. About the Author: Chandra Shekar Kakal has over 20 years of experience in manufacturing industries, IT industry and ERP solutions. He is currently the Global Head of Enterprise Solutions practice at Infosys. Write to him at Kakalc@infosys.com