T H E B O T T O M L I N E

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1 R O I C A S E S T U D Y P R O G R A M : C U S T O M E R R E L A T I O N S H I P M A N A G E M E N T D O C U M E N T R 8 0 MAY CONFIGIT ABB A N A L Y S T Rebecca Wettemann T H E B O T T O M L I N E ABB s Electrification Products Protection and Connection (EPPC) business unit drove the deployment of Configit as a common global sales configuration solution. The project enabled this and other business units of the Electrification Products division to accelerate the development of bills of materials (BOMS) for quotation and orders, reduce BOM errors, and capture new market opportunities by accelerating the quoting and ordering process for configured and accessorized products and solutions. ROI: 76% Payback: 2.6 years Average annual benefit: $2,388,303 T H E C O M P A N Y ABB is a technology leader in electrification products, robotics and motion, industrial automation, and power grids. The Swiss-based company operates in more than 100 countries and employs approximately 132,000 people. For more than 125 years, ABB has served customers in utilities, industry, transport, and infrastructure. The division of ABB profiled in this case study is the Electrification Products Division and primarily the Electrical Products Protection and Connection (EPPC) business unit of the Division. This business unit develops and delivers technology across the full electrical value chain from substation to the point of consumption, enabling safer and more reliable power. EPPC provides a range of digital and connected innovations for low and medium voltage, including EV infrastructure, solar inverters, modular substations, distribution automation, power protection, wiring accessories, Nucleus Research Inc. 100 State Street Boston, MA Phone:

2 switchgear, enclosures, cabling, sensing, and control industrial automation and power grids. T H E C H A L L E N G E ABB EP Division used a number of different technology platforms across its research and development, production, and sales organizations to support configuration requirements across product development, manufacturing, and sales configuration and quoting. This included multiple country-based SAP systems, PTC Creo and Windchill, and multiple local, unsynchronized sales configuration solutions. The result was an inefficient and error-prone sales quote and sales order creation process for configured products and solutions. Given the complexity of EPPC s product set, and the global nature of the business, the division needed to define a standard way of maintaining global product data and configuration rules with local pricing, product, market, and stock availability information that could all be synchronized and updated regularly. T H E S T R A T E G Y EP considered many different technology options, assembling a cross-functional team from marketing and sales, engineering, operations, and product management to create a list of current and future requirements and develop a request for proposals (RFP) which was sent to six vendors. Based on RFP responses, the team made a shortlist of three vendors and asked each of them to present a proof of concept. Configit was selected by the team for a number of reasons including: Its proof of concept, which showed that Configit extended beyond simple configure-price-quote (CPQ) capabilities to a broader end-to-end solution. Configit s advanced patented technology and SAP integration capabilities. The perceived ease of use as a single global platform across EP s many regions. The team took a phased approach to the rollout, using a combination of professional services from Configit and Infosys. The first countries to go live were the United States and Denmark, followed by Brazil, Sweden, Italy, and Germany. Today the solution is live in 20 countries with implementation in progress in 10 countries and additional countries on the roadmap for Copyright 2017 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 2

3 TYPES OF BENEFITS Direct 92% 8% Indirect K E Y B E N E F I T A R E A S Moving to Configit enabled ABB EP to establish a consistent and automated way to manage its product and pricing data with sales configuration rules for multiple sales organizations improving the quality and efficiency of the sales quoting and order processes. Key benefits of the project include: Increased productivity. EP was able to automate much of the bill of materials (BOM) creation and correction process while reducing the possibility of errors or omissions across the product lifecycle, saving time for engineers and sales people. Increased sales. An accelerated quoting process enabled EP to capture more business from its competitors. Reduced printing costs. EP was able to eliminate the costly process of printing and distributing parts catalogs on a regular basis. Increased customer self service. EP was able to reduce calls to contact centers based on the paper catalogs as customers could better navigate and utilize the online catalogs by themselves. Improved technology management. Moving to one consistent platform enabled the division to redeploy IT staff that had previously been required to support the exchange of data between different systems and applications. Cost : Benefit Ratio 1 : 1.5 K E Y C O S T A R E A S Costs of the project included software licenses and maintenance, hardware, consulting, and personnel. Consulting made up the majority of initial and ongoing costs because of the global nature of the project. Copyright 2017 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 3

4 B E S T P R A C T I C ES Assembling a cross-functional team early in the process to develop requirements, vet vendors, and review proposals and proofs of concept enabled EP to ensure that all requirements of the business would be met and that the ultimate solution was one that could be scaled and repeated across markets to benefit not only marketing and sales but other functions as well. ABB s choice of a platform that could extend beyond simple CPQ has positioned it to gain additional benefits as it extends the technology across the research and development, production, sales, billing, and marketing functions. Building an implementation team and process, including both a software service provider (Infosys) and the technology provider (Configit), helped to ensure EP would have adequate resources to support a wide implementation scope and a robust implementation process while managing implementation costs. NET CASH FLOWS 4,808,055 (515,550) (1,150,000 (788,195) ) Initial Year 1 Year 2 Year 3 C A L C U L A T I N G T H E R O I Nucleus quantified the initial and ongoing costs over a 3-year period to quantify EPPC s investment in Configit. Key direct benefits quantified included the reduction in printing costs and the redeployment of staff driven by the project, as well as the increased profits from new sales opportunities captured because of the project. Indirect benefits quantified included the increase in productivity across engineering, sales, and internal support, and were calculated using the fully-loaded cost of Copyright 2017 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 4

5 employees and the time saved, applying a productivity correction factor to account for the inefficient transfer of time between time saved and additional time worked. Not quantified in this analysis were the increasing benefits EPPC will achieve as it completes its global rollout. Because ABB has already invested in all the licenses needed to complete the rollout, and much of the original configuration work can be replicated across regions, Nucleus expects the company will experience significant additional benefits as it extends the platform both functionally and geographically with relatively limited additional costs. Copyright 2017 Nucleus Research, Inc. Reproduction in whole or in part without written permission is prohibited. 5

6 FINANCIAL ANALYSIS ABB's Configit deployment Annual ROI: 76% Payback period: 2.6 years BENEFITS Pre-start Year 1 Year 2 Year 3 Direct 0 576, ,944 5,189,184 Indirect 0 142, , ,071 Total per period 0 719,650 1,017,005 5,428,255 COSTS - CAPITALIZED ASSETS Pre-start Year 1 Year 2 Year 3 Software 640, Hardware Project consulting and personnel Total per period 640, COSTS - DEPRECIATION SCHEDULE Pre-start Year 1 Year 2 Year 3 Software 0 128, , ,000 Hardware Project consulting and personnel Total per period 0 128, , ,000 COSTS - EXPENSED Pre-start Year 1 Year 2 Year 3 Software 0 115, , ,200 Hardware 0 60,000 60,000 60,000 Consulting 460,000 1,010,000 1,580, ,000 Personnel 50,000 50,000 50,000 50,000 Training Other Total per period 510,000 1,235,200 1,805, ,200 FINANCIAL ANALYSIS Results Year 1 Year 2 Year 3 All government taxes 45% Cost of capital 7.0% Net cash flow before taxes (1,150,000) (515,550) (788,195) 4,808,055 Net cash flow after taxes (920,500) (225,952) (375,907) 2,702,030 Annual ROI - direct and indirect benefits -25% -33% 76% Annual ROI - direct benefits only -33% -42% 65% Net Present Value (NPV) (920,500) (1,131,670) (1,460,002) 745,659 Payback period 2.6 years Average Annual Cost of Ownership 1,150,000 2,385,200 2,095,200 1,603,533 3-Year IRR 27% 27% All calculations are based on Nucleus Research's independent analysis of the expected costs and benefits associated with the solution. Copyright 2017 Nucleus Research, Inc. Reproduction in whole or part without written permission is prohibited. Page 6