When I speak with IT professionals and hear about the conversations my colleagues have with IT professionals, there is a consistent theme that IT is always being asked to do more with less, for many years. From my16 years in the tech industry I believe that this in part stems from most companies not valuing IT accurately and not viewing IT as “strategic”, but rather as a cost of doing business. And we all know that companies are constantly trying to reduce costs, so if your functional area is seen as a cost of doing business, you will constantly face reductions.
There are many causes that contribute to this “conventional wisdom”, which would probably fill a book, but what I want to discuss is one method IT can use to chip away at that mindset and begin to show the true value that IT delivers to companies through B2B automation. And I happen to have a simple to use tool to get you started.
IBM has just updated its B2B Automation Savings Calculator, which is generally to show the potential annual savings you can expect if you reduce your manual processes by automating more transactions and/or trading partners. However, it can also be used to show the value that IT is currently and has already provided to your organization. By simple altering the inputs to the calculator a little, you can use it to do something else: quantify the specific contribution that using the IBM Sterling Collaboration Network (SCN) of IBM Sterling B2B Integrator has delivered in the past year.
You’ll need to input the data in a slightly different way than described in the questions. For example, in response to the question, “How many total trading partners do you have?” instead of entering the total number of partners, you would enter just the number of currently automated trading partners you have. Then, in response to “What percentage of those are you still trading with manually?” you would answer 100%.
By changing these inputs, the calculator is now computing the manual processing costs your company would incur if your trading partners were not automated. With these modified inputs, your report will show a range of your current cost savings based on a high, average, or conservative processing cost estimates. That is useful data to point to when you need to justify and communicate the value your department is currently delivering to the bottom line.
The calculator was built using industry average data compiled by leading analyst firms Aberdeen Group, AMR Research, and Forrester Consulting. Additionally, you can enter your own figures or use the third-party industry averages. When you reach the executive summary page, the calculator then generates an eight-page PDF report you can download. The potential savings based on industry averages from analyst research are a great starting point for showing the IT department’s contribution; however, using your company’s real costs are more compelling. The report has instructions to help you calculate actual costs for your organization, increasing the accuracy of your estimates.
Use the B2B Automation Savings Calculator to begin to quantify the value IT is delivering your organization. While this is not going to change a conventional mindset that has been solidified over decades, you can begin to change the perspective of the line of business executives at your company by showing the quantifiable value that IT delivers to the bottom line.
Last blog I talked about how tying B2B projects to corporate goals and objectives can raise them to become strategic. As an example, I looked at how the more partners and more transactions that are automated with B2B Integration the more information is available digitally, which opens up a lot of possibilities for using that information. As I wrote that, I didn’t expect that I would be experiencing it first hand as a consumer.
In December I was in the market for a new car, I have driven the same brand ever since I could afford to buy/lease a new car and not just purchase a hand-me-down from my parents. But my old car has served me faithfully for over a decade and it was time to retire it and find a new one. While I could write a lot about how the car buying experience has changed in the past decade, since I was last in the market as an active buyer, that is a story for another day; however, I will say that living in the “age of the empowered customer” really saved me money and the dealership that was willing to work with me as a 21st century consumer had gained brand loyalty from me and those that still operated like they always did never stood a chance of getting my business. But I digress….
I knew exactly what features I wanted, the color, specs, etc, which meant that I had to order my new vehicle from the manufacturer because there wasn’t one that met my expectations in a 5 state area. While it is great to get exactly one I wanted, I had to wait up to 8 weeks for the vehicle to be built from the date I placed the order deposit. After the excitement of the search, delaying gratification for up to two months is not the ideal outcome. But here is where the auto manufacturer surprised me. During the wait, they regularly updated me via email of the progress of my car, through the major stages, order placed, staging, production starting, assembly, painting …. all the way through delivery to my dealership. I received emails with links to a page for my car. My webpage had all the production staged listed, it told me where my car was being assembled, identified the current stage, and included pictures of the process (I would have loved to have a live webcam stream or recording of my car going through assembly instead of stock photos). Tracking my vehicle made the wait feel a lot shorter than if I had just been waiting for a call or email telling me it was at the dealer.
My point here is that because the auto manufacturer uses B2B integration to automate their processes and transactions across their supplier community and inside their organization, they had the digital information to keep me up to date on the progress of my new automobile. I loved it and I knew that it was only possible because they were using EDI transactions. Once a company has the digital information, it isn’t a lot of work to use it to improve the customer experience, but I can tell you that I was delighted by how I was kept informed of my new car’s journey to me.
Happy New Year to everyone! Now that we are all back at work and the holiday season is behind us, most of us are in the last phases of the planning process for 2014, where plans are being socialized and tweaked before they are finalized. So with that in mind I wanted to share two pieces of advice that can help you ensure your projects are funded, approved and started on the right foot. This advice applies to B2B Integration, Managed File Transfer, Commerce or any IT project.
The first piece of advice is to make a rock solid case for your budget to ensure funding. Two of my colleagues have recently written excellent pieces on making the case for funding B2B Integration projects, which you can access below.
I don’t want to cover the same ground as those insightful blogs, you can read them for yourselves, but the ideas mentioned can be applied beyond B2B Integration to any project.
The second piece of advice is to tie your project to the corporate goals. This may seem obvious and basic, but you would be surprised at how many times it is overlooked. IT projects today, unless they fall under mobile, analytics or cloud, are not very sexy and therefore risk being marginalized or pushed down the priority list. Your job is to show the strategic value of your project and one way to do that is to tie your project to a top three corporate goal. The connection may not be obvious at first, but if you work at it, you will find one.
A good place to start is by examining the benefits of the project, beyond cost savings, particularly the benefits that tie to information. The more automation in a business process the more information is available digitally. Likewise, the more partners and more transactions that are automated the more information is available digitally. When information is digital, it opens up many possibilities, which are good ways to tie into corporate goals. Digital information can be made available to customers or partners for order tracking and status. Digital information improves your decision making by giving a more complete, accurate and faster view of the supply chain. The more digital information, the more effective your data analytics initiatives will be, which is a hot topic now. Increasing digital information can be the link between your project and a top corporate goal. Look at who benefits from that additional information and how does it relate to your company’s strategic goals? If you don’t know, ask your colleagues in the lines of business how the additional information would be valuable or tie into their priorities.
In a previous blog, I discussed my long search to find out the failure rate of FTP file transfers. Without recovering the same ground twice, the failure rate is 6.47%1. And I promised to discuss the impact that has on organizations.
To understand the impact of FTP’s high failure rate, we need to answer the question “What kind of business process can endure a failure rate that high?” File transfers are made to support business processes, so the real impact of their failures to the business is their impact on the business process they support. The answer is none. Even non-critical business processes with that high a failure rate would draw the attention of the organization and be improved. And the business processes supported by file transfers are most likely at least important, if not critical.
So if FTP file transfers fail 6.47% of the time then the business processes they support are failing 6.47% of the time, which would be painful if not intolerable to organizations. So it is logical to conclude that those business process failures are being patched over, most likely, with manual intervention. In the same survey we asked “What do you estimate is the average time it takes to troubleshoot and resolve an FTP file transfer error?” and the average answer was 28 minutes. That is 28 minutes of time for a talented IT professional to resolve the error. Now we have enough information to calculate the cost to an organization.
A simple way to calculate some of the costs of using unreliable FTP is with this formula: Total File Transfers x 6.47% x 28 minutes of IT hourly salary. While this formula easily calculates a real number, it is only a starting point for the total cost of unreliable FTP to the business. We have calculated the IT cost to fix the error, but we haven’t included the damage from a minimum 28 minute delay in the business process, which may impact customers or partners.
And that 28 minute delay is very conservative estimate, since it assumes that the failure is found out and corrected as soon as it happens, not that the organization finds out about the failed FTP transfer and business process through a customer complaint. It also doesn’t include the impact of that business process delay on subsequent business processes like billing, production, ordering, etc. What if there are service level agreements tied to the file transfers, which carry penalties. Calculating the IT cost to fix is just the tip of the iceberg of total costs to an organization from FTP failures, however, it is good starting point because it is an easily understood real number. As one digs deeper the costs will only grow. So maybe it is worth spending a few minutes to calculate this for your organization and chat with the IT department about their specific use and experience with FTP, which may lead you to look for a more reliable alternative. For more information about your organization’s risk exposure to FTP, check out the FTP Risk Advisor and create a custom risk report.
1 The 2013 Vanson Bourne B2B Integration and MFT Global Study for IBM
Last year I was working on a project researching the failure rate of FTP file transfers. I was looking to find how often file transfers using FTP did not complete successfully. It seemed like a straight forward and easy task. Everyone I spoke with had an opinion on the failure rate, but couldn’t point me to a citable source. Some folks had read it somewhere, but couldn’t recall exactly where… while others heard it from someone but couldn’t remember who had said it. This was starting to feel like chasing down an urban legend.
My internet searches were not turning up anything more substantial, it was more anecdotal examples or things that were just not on point. Even my discussions with analysts didn’t provide what I needed. The analysts were certain that FTP has reliability issues, and they had educated guesses at a range of failure rates, but still nothing that was supported by citable research. In the end, I was unable to meet the legal threshold for citing any of the anecdotal rates, so we moved forward on the project without an FTP failure rate. But the question stayed in the back of my mind.
So earlier this year while my team was putting together some market research studies, I was very keen on including a few questions about FTP reliability and failures. My teammates, that I had been bugging for failure rate information previously, were as eager as I was to find out the answer. After waiting weeks for the research to be compled, we had an answer. The 2013 Vanson Bourne B2B Integration and MFT Global Study for IBM interviewed 650 Senior level IT executives from 8 countries and included the question, “In the context of transfers that use the FTP protocol, what percentage would you estimate do not complete successfully?” Without further ado, the answer was 6.47%. Almost six and a half percent of FTP file transfers fail.
That is an amazing rate that brought numerous questions to mind. Like, how do companies cope with that many failurs and what does that cost an organization, which I will discuss in a future blog.
Carrot? Stick? Both? Maybe neither when it comes to automating small partners.
Automating partners, especially small partners, is trickier than large ones. Not because of the technology hurdles involved, but because altering their behaviors is harder. If you can make it happen though, it can pay off in terms of lower costs, which translate into higher margins and a greater return on your investment in B2B Integration. Below are some proven tips for getting smaller partners to move in the direction of automation.
Traditional methods still dominate
According to IBM’s 2013 research, 23% to 32% percent of B2B transactions are still going through traditional “manual” channels (phone, fax, paper and e-mail). And typically it is the small and medium sized businesses that are more likely to use manual methods. Together this creates room for increased efficiencies through automation if you can push past the mental barriers to enabling automation that many small organizations with limited resources have.
Put yourself in their shoes
Small and medium business (SMB) partners are commonly pretty reluctant to change. But they have legitimate reasons. Many do not have sophisticated IT infrastructure and resources. They may have little or no dedicated technology staff. Changes that seem simple from a large-scale corporate perspective can appear prohibitively expensive to them. The key is to see things from the SMB perspective, and try and develop simple changes that provide benefit to them as well as you.
Incentives vs. mandates
Changing behaviors and processes is harder than changing technology. Typically, behaviors will only change when you offer something of value to encourage the change you want your trading partner to make. Though they may be small partners, they are your partners, and have the capacity to impact your business and your reputation. You shouldn’t shake the big stick of a requirement or a mandate, unless you have no alternative or at least include some incentive.
It becomes a question of what behavioral change you want your small manual partners to make, and then determining a sufficient benefit for them. The more you ask your partners to change the way they do business, the greater the associated benefit you need to provide.
Often, the first benefit that companies arrive at is the carrot — a discount, rarely thinking beyond that initial tactic. But a discount is paid out of your profits and affects your bottom line, so additional thought is warranted. Be creative and tie it to their business and circumstances.
Some companies have been successful using:
Better payment terms
Improved or guaranteed delivery/promise dates
Increased visibility into the larger order/supply chain
Small changes that are easy for your partner to implement can mean big savings and efficiencies for you. For example, asking your partners who fax orders to switch their fax number to one that goes through a fax-to-EDI conversion service is a small change—all they have to do is put a new number in their fax machine’s memory and/or change the fax form. For you, it means eliminating the costly and time-consuming manual processing on your end.
Find the smallest change to behavior/process your customer can make to meet your goals of automation.
Know what’s in it for them. Craft a compelling benefit message to answer their question of “why should I change the way I do business?”
Educate your partners. What you want to do, why and how they will benefit to set expectations.
Walk them through the process. Even small changes seem larger when you are on your own.
For any business, large or small, the biggest challenges are not technical—they are those based in process and behavior. You can ask for small changes in behavior, but not large ones. The upside is that now, technology enables small behavior changes to turn into automated processes.
I started work in the B2B and EDI industry almost a decade ago and many of the same EDI myths that were prevalent then are still common. Even in the face of a decade of evidence to the contrary, they seem to persist. In this blog, I want to address three of the most common myths about EDI.
Here are the top three EDI myths that I encounter:
EDI is on the decline. The top myth by far is that EDI will disappear in favor of Internet standards such as XML and its variants or some unknown technology to be discovered. Though this notion comes up less often than it used to; however, this myth does not go away, even after years of continued EDI traffic growth. IBM Sterling Collaboration Network, which is IBM’s value added network, has seen year over year growth in traffic during the decade since I started working there.1 Additionally, companies continue to depend on EDI. Looking at 2013 research, 46% of the companies surveyed use EDI “heavily” with an additional 31% reporting "some: EDI usage2. On its face, this is an easy myth to bust; EDI has worked for decades and is deeply entrenched in companies and supply chains. And as the old saying goes “if it ain’t broke, don’t fix it.” I don’t see companies ripping and replacing EDI anytime in the foreseeable future. Sure companies will add on to EDI and complement it with newer technologies and formats, but EDI shows no signs of going away.
The Internet will replace EDI. When the Internet and World Wide Web first came into wide usage, many industry commentators speculated that EDI could not be used with the EDI network technology. Nothing could be further from the truth. As we have seen the Internet is the communications backbone of choice for most current EDI systems. Instead of being incompatible with EDI or replacing it, the Internet has spurred growth in traffic and in EDI users, making it more accessible to more organizations.
EDI is prohibitively expensive, and ROI is hard to achieve. As with any technology, EDI has start-up costs and a learning curve as companies get ramped up. Programming interfaces, creating maps and other upfront tasks can be more than new organizations expect when they first begin down the path to implementing EDI. However, that does not mean that return on investment (ROI) is difficult to achieve. Automating transactions that were done manually provides a significant savings on each transaction. For example, on average the cost savings from automating a manually processes purchase order is $9.89, for an invoice is $11.58 and a remittance is $12.963. So you can see the savings for each document transacted and when you multiply that savings by the number of manual documents that are automated, you understand how a positive ROI can be achieved.
1 Traffic growth calculated factoring out new clients and departing clients.
2 “2013 B2B and MFT Global Study for IBM”, Vanson Bourne, March 2013.
3“B2B Integration and Collaboration: Strategies for Building a ROI Business Case” Aberdeen Group, June 2011.
Finding an area of competitive advantage is difficult for most companies. Everyone from the CEO to the rank and file employees overworked with the everyday tasks of their jobs, no one has time to even think about where to find competitive advantage, let alone spend time searching. Don’t worry, I am going to help you out by showing you one area of potential competitive advantage that is within reach, yet few companies are tapping.
IBM conducted a global research project in 2012 surveying 700 executives, including 175 C-Level executives, across a range of industries and countries. Among other things, the survey asked two related questions that provided very interesting results. To the first question, “How important is the ability to synchronize your value chain in order to support your business?” 73% answered that it was critical or extremely critical, which is not that surprising. The second question, “Does your company have the ability to synchronize its internal systems with its business community to drive business performance and success?” Only 17% stated that they have that capability.
The difference between the two percentages, 73% and 17% is an area of potential competitive advantage for your organization. As one of the 56% of companies that understands Value Chain Synchronization is critical, but hasn’t achieved it, you have the opportunity to achieve it and move into the group with the 17% who can, creating competitive advantage over the majority of organizations that have yet to synchronize their value chains. Success will not be easy, if it was, then more than 17% of companies would already be there; however, with today’s technology it is within reach.
At IBM we have identified three key components to synchronizing your value chain. The first is connecting, by securely and flexibly integrating your systems and business processes with those of your customers, suppliers and business partners. The second component is automation, seamlessly automating your internal business processes, as well as those you share with your customers, suppliers and business partners. And finally there is collaboration, where your company has visibility into actionable information for people, departments and organizations, within and outside of your enterprise. The technology exists to connect, automate and collaborate, and with an increasing number of deployment options, like software as a service models, the ability to tailor it to your business has never been easier. If you want to learn more about Value Chain Synchronization, watch this brief video http://www.youtube.com/watch?v=0V1RwzABAz0