ROI CASE STUDY IBM FILENET JM FAMILY

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1 ROI CASE STUDY IBM FILENET JM FAMILY THE BOTTOM LINE JM Family used IBM FileNet to automate its auto loan management processes and in doing so increased the productivity of collection agents while increasing loan collection rates. Nucleus found that by adopting standardized workflows, the company was able to execute repossession processes faster and more efficiently. In addition to these benefits, collections agents were able to offload administrative tasks that normally took time away from collections activity. ROI: 64% Payback: 1.6 years Average annual benefit: $785,521 THE COMPANY JM Family Enterprises is a diversified automotive corporation founded in Its businesses focus on vehicle distribution and processing, finance and warranty services, insurance, retail sales, marketing and consulting, and dealer technology products and services. Based in Deerfield Beach, Florida, JM Family is privatelyheld. Its subsidiary, World Omni, provides indirect consumer retail and lease financing, commercial dealership financing, third-party portfolio management and servicing, remarketing services, wholesale floorplan accounting and risk management systems, and field services such as inventory verification and vehicle inspection. THE CHALLENGE World Omni is a captive finance company for Southeast Toyota and also provides private label third-party full service collections, proactive servicing (contacting customers whose cars are at the end of their lease to see if they want to purchase the vehicle), and remarketing (transporting and selling the vehicle once it has been returned or repossessed). The World Omni collections agents are responsible for collecting past due accounts. If the loan or lease goes into default, repossession of the vehicle can become necessary. World Omni contracts with independent repossession agents to repossess the auto collateral. After the repossession, World Omni sells the auto at auction via its remarketing channel. The auto refinance market is very price competitive, and World Omni s business process office is constantly looking for opportunities to make the company s operations more efficient. In early 2008, as part of a complete review of current Corporate Headquarters Nucleus Research Inc. 100 State Street Boston, MA Phone: Nucleus Research Inc.

2 TOPICS Content Management & Collaboration processes, World Omni identified areas with improvement opportunities, and the repossession process was one area identified for reengineering focus: First, it had a number of manual steps in the process of repossessing an auto that it could automate to both accelerate the time to repossession and increase associate productivity. Second, World Omni used highly qualified collections agents to manage and follow up on the repossession lower-value tasks that could be easily delegated to more junior employees or clerical staff. The company decided to look into both changing processes and automating them to streamline repossessions and reduce the amount of time collections agents spent on administrative tasks. THE STRATEGY Because JM Family had already made an investment in IBM FileNet to support other projects, it understood the capabilities of the software and chose to take advantage of its existing investment to support automating repossession processes. Beginning in April 2008, an internal team of 11 employees from the business process office (BPO) and employees from IT worked with an IBM business partner to map existing business processes, plan the improved processes, build the business case that compared present and future states, and develop and deploy the application. BPO users were trained by the consultant and then developed training for general users. Because most users were already using FileNet for other tasks and were familiar with the application, only a 1-hour class of training was required for the 200 users. In the new application, activities such as issuing repossession notification letters, notifying outside contractors that they ve been assigned a repossession, and verifying the auto has been collected all activities that were handled manually before are automated in FileNet. The deployment was completed in November 2008, after which the BPO conducted a formal audit of the solution to validate that the new workflows were being successfully adopted and the expected benefits were being achieved. KEY BENEFIT AREAS Restructuring and automating processes within FileNet has enabled World Omni to more effectively execute repossession activities and refocus collections agents on their core work activities, enabling them to increase collections. Benefits of the project include: Redeployed staff. Automating a number of processes has enabled World Omni to refocus collections agents completely on collections instead of less valuable administrative tasks. Reduced delinquency and losses. Because collection agents are more dedicated to core collection activities, World Omni has increased its success rate in collecting loans and leases, and despite the economy, delinquencies at World Omni are lower than the historical average. Reduced paper. Agents now print out fewer paper files. 2

3 Improved governance and compliance. Automation of the repossession loan letter process ensures the required letter goes to the customer within the required time, reducing World Omni s risk of not being able to collect deficiency balances after repossession activities. Increased agent satisfaction. Because collections agents no longer have to spend time on administrative tasks, they can focus on being successful on higher-level activities, making them more satisfied with their work and more likely to stay with World Omni. BENEFITS Indirect 16% Direct 84% TOTAL: $2,356,563 KEY COST AREAS Key cost areas for the deployment included personnel, consulting, software, hardware, and training. Personnel was the largest cost category, because it includes both the initial and ongoing staff to support the project and the additional repossessions clerks World Omni hired to replace the more costly collections agents. COSTS Training <1% Software 5% Hardware 1% Personnel 56% Consulting 38% TOTAL: $1,428,782 BEST PRACTICES When World Omni looked at potential opportunities for automation, the business process office team considered suitability for reengineering and process conformity (how often there were exceptions) but also considered whether operational owners would support process changes. Prioritizing automation projects considering these factors enabled the team to focus on projects that would likely 3

4 have high user adoption. It also enabled them to achieve quick wins that could be promoted as World Omni considers other automation projects to further extend FileNet within the organization. CALCULATING THE ROI Nucleus calculated the costs of software, hardware, consulting, personnel, and training over a 3-year period to quantify World Omni s investment in IBM FileNet. Because World Omni had already purchased its FileNet licenses, Nucleus estimated the initial and ongoing license maintenance costs based on World Omni s total FileNet investment and the volume of transactions in the system that are driven by the repossessions processes. The direct benefits quantified were the fully loaded costs of the collections agents that were redeployed to full-time collections activities as a result of automation and paper savings. Indirect benefits quantified included savings in depreciation as cars can be sent to auction more quickly and reduced loan losses World Omni recovers by ensuring every repossession letter is legally binding. Nucleus conservatively estimated these savings based on the annual number of repossessions and the average number of such events that occurred before the system was deployed. Not quantified was the savings in working capital associated with accelerating the collections and repossession processes or the reduction in delinquencies, as they were direct impacts of increased collections efforts. 4

5 DETAILED FINANCIAL ANALYSIS JM FAMILY SUMMARY Project: IBM FileNet Annual return on investment (ROI) 64% Payback period (years) 1.56 Average annual benefit 785,521 Average annual total cost of ownership 476,261 ANNUAL BENEFITS Pre-start Year 1 Year 2 Year 3 Direct 0 662, , ,197 Indirect 0 123, , ,324 Total Benefits Per Period 0 785, , ,521 DEPRECIATED ASSETS Pre-start Year 1 Year 2 Year 3 Software 43, Hardware Total Per Period 43, DEPRECIATION SCHEDULE Pre-start Year 1 Year 2 Year 3 Software 0 8,700 8,700 8,700 Hardware Total Per Period 0 8,700 8,700 8,700 EXPENSED COSTS Pre-start Year 1 Year 2 Year 3 Software 0 7,313 7,484 7,680 Hardware 0 3,474 3,632 3,789 Consulting 538, Personnel 359, , , ,905 Training 4, Other Total Per Period 902, , , ,374 FINANCIAL ANALYSIS Pre-start Year 1 Year 2 Year 3 Net cash flow before taxes (945,696) 624, , ,147 Net cash flow after taxes (494,598) 316, , ,424 Annual ROI - direct and indirect benefits 64% 64% 64% Annual ROI - direct benefits only 52% 52% 52% Net present value (NPV) (494,598) (201,297) 70, ,324 Payback (years) 1.56 Average annual cost of ownership 945,696 1,106, , ,261 3-year IRR 41% 41% FINANCIAL ASSUMPTIONS All government taxes 50% Discount rate 8% All calculations are based on Nucleus Research's independent analysis of the expected costs and benefits associated with the solution. 5