Business Process Optimization Providing real bottom-line benefits. Vormittag Associates, Inc. (VAI) By Joseph DeBella Director of Solutions, VAI

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1 Business Process Optimization Providing real bottom-line benefits Vormittag Associates, Inc. (VAI) By Joseph DeBella Director of Solutions, VAI

2 Today s modern enterprise is under extreme pressure to cut costs, maximize productivity and streamline operations. Certainly, many avenues exist to achieving bottom-line benefits, but the optimization of a firm s technology resources, and associated business processes, can provide significant budget savings. While current market conditions have forced revenue and margin downturns, the implementation, and subsequent optimization, of well-designed software and hardware tools, can actually provide the enterprise with the means to target cost-cutting measures thereby achieving a cost-neutral implementation. All businesses can optimize processes, procedures or applications to reduce redundancy. Examples may include a firm that maintains ten cell phone contracts, when one contract could handle all of the business needs, or five software applications that perform exactly the same function, or perhaps too much server capacity. In business, the review of resources takes into account not just the human capital resources, but the materials, equipment, technology, physical locations, and assets that manage and support the enterprise on a daily basis. That said, optimization of processes and procedures Harmonization, Consolidation and Divestiture will ultimately reduce business costs. Harmonization To bring into harmony, accord or agreement. By bringing processes, technology, even procurement-based relationships into harmony, businesses can cut costs substantially. For example, business process standardization drives incremental productivity and is easy to replicate across the enterprise, potentially lowering training costs and reducing human capital investments. Almost every type and size of business can benefit from conducting a Business Transfer Study a tool used to determine what functions are transferable across the enterprise. In other words, a Business Transfer Study will help determine how much commonality is built across the business landscape. While there are some processes or procedures that cannot be harmonized, several functions are standard. For example, in many organizations, procurement is an area that can often benefit from revised processes. Consider maverick buying impulse or non-centralized buying against a negotiated agreement versus using one, standardized method to procure products or services and the associated leverage that companies gain with suppliers. Contract buying provides long-term procurement advantage and saves money, as each buy outside of the contract is typically more costly. At the same time, and often performed in conjunction with business process improvements, technology harmonization at the application and technical architecture layer can reduce maintenance and internal and external support expenses. Constricting a firm s technology footprint, including the maintenance and associated skills involved in supporting numerous software or hardware applications, provides substantive bottomline benefits. Optimization 2

3 The key point is for companies to determine the functions that are common across the enterprise and to transfer the associated knowledge and processes thereby achieving harmonization. Largely, the IT industry has used Enterprise Application Integration (EAI) as a means to justify multiple co-joined landscapes. While EAI and cross applications can be viable solutions to harmonizing processes, one should rationalize the functional applications, processes, data and supporting infrastructure along with a comprehensive EAI strategy. Now with the emergence of Service Oriented Architecture (SOA), a new conjoined model has emerged, providing another reason for a cluttered application landscape. Each enterprise will realize different benefits in its approach to systems harmonization. The following are high-level examples of those that are most common. Reduced total cost of ownership (hardware, software, administration and maintenance) Modified business processes and structures to strengthen competitive advantage Support of mergers and divestitures Document and support process control for regulatory compliance Increased flexibility to reduce reaction time to changes in the enterprise environment Consolidation and harmonization of data to link global systems (e.g. to enable cross-border processes) Increasing benefits of the global process standardization Consolidation The act or process of consolidating, making firm, or uniting. Numerous areas within a business can benefit from consolidation practices. Manufacturing facilities, IT platforms, data centers, jobs and job processes, when appropriately consolidated, reduce costs. Additionally, consolidation and harmonization, applied concurrently, produce significant bottom-line reductions. In fact, merging a firm s ERP landscape can literally provide an immediate return on investment (ROI). For example, the operating costs to run five servers and five operating systems is substantial, and when this systems environment is reduced, in almost every instance, the operating, maintenance and human capital expenses will decrease significantly. It is not unheard of for technology consolidations to cut maintenance costs by half in the first year. That said, harmonization and consolidation practices can pay for hardware implementation costs by simplifying IT environments and definitively eliminating server sprawl. Enterprises, especially those with multi-division, multi-function environments, or those firms considering acquisition or divestiture, should standardize processes to drive best practice initiatives and realize significant expenditure reductions. An analysis of a company s current applications blueprint, and its subsequent ROI, coupled with an assessment of the business required need for new functionality, will reduce the Total Cost of Ownership (TCO) and possibly attain cost neutrality. This means that Optimization 3

4 streamlining business operations with the help of new hardware or software implementations will not incur additional costs, thus providing more benefit, for less money. Simplifying an IT infrastructure by organizing all components into a single solution that can help improve performance and increase control, results in an on-demand environment that is efficient, resilient and swift to accommodate changes in the marketplace. Additionally, consolidation unleashes the potential to reduce machine software licensing fees a considerable cost reduction and when combined with virtualization software, these may help to decrease administration and management costs via reduced staffing overhead. Finally, the centralization and automation of routine server management tasks can free up resources for more strategic tasks. GHY International, a customs broker, recently migrated to an IBM Power Systems platform and reaped numerous rewards. The firm was running 17 servers, but by consolidating this complex operating environment onto two iseries machines, GHY significantly reduced its IT infrastructure while also eliminating a planned investment in nine new servers, which would have cost $22,000. POWER Hypervisor enabled GHY to merge and run multiple operating systems simultaneously. This improved the company s flexibility, while creating a seamless, well-run IT environment. Additionally, it ensured the best IT solution for the needs of the business and opened up the number of products and applications offered to their customers gaining competitive advantage. Most importantly, GHY realized significant cost savings in the first year of the consolidation cutting its IT budget by 14 percent, or nearly $100,000. Benefit Realization, Cost Neutrality A reduction in the infrastructure layer to consolidate business processes, units or assets helps to achieve cost neutrality. These savings can be substantial and can provide the capital to pay for the consolidated or harmonized improvements. Additionally, merging common processes helps to reduce a process-based workload, and can increase productivity and reduce user costs. It also supports the adoption of new functionality, as it becomes available. Today, we see substantial functional gains achieved in the latest versions of ERP financial applications. These are provisions for trusted accounting measures that support Securities and Exchange Commission (SEC) reporting, Sarbanes Oxley, improved liquidity forecasting and credit risk management. In today s environment, scrutiny of a company s financial records is meticulous. Streamlining financial systems to improve visibility and reporting capability not only provides lower cost of ownership, but also improves processes and adds new functionality. Simply stated, a harmonized ERP and applications environment could include an upgrade to support new functionality and take advantage of new technologies. Optimization 4

5 Divestiture The sale of business holdings or part of a company. Divestiture is most widely used when selling off parts of a business. However, this discussion will focus on divesting in low value, low return processes, or purging IT products or applications that provide little value, or that incur additional costs without rationalized requirements. Re-examining operational processes can allow a business to focus on only those practices that can be performed well internally and outsourcing those that cannot. In particular, enterprises may determine that its IT infrastructure and application support are better handled as a Managed Service. In this way, employment costs can be reduced, while allowing for ample resource virtualization within a broader support-based window. Component Business Modelling can help to achieve this goal and is an exercise which defines specific business areas that bring value, those that can be outsourced and areas where costs can be cut. VAI can provide numerous examples of Harmonization, Consolidation and Divestiture, and a follow-up PDF presentation of VAI s software solutions designed to support your company s optimization efforts, by contacting Joseph DeBella at jdebella@vai.net. Optimization 5

6 Joseph DeBella, Director of Solutions Joseph DeBella oversees VAI s worldwide Independent Software Vendor (ISV) relationship with IBM, providing sales and program marketing support to both the IBM Sales force and IBM Global Business Services (GBS). Joe s extensive management, technology and sales experience in the enterprise software market is integral to VAI s goal of developing a broader footprint within IBM and among mid-market companies. A primary driver behind this expansion strategy is Joe s keen insight and ability to sell and deliver VAI s S2K ERP software suite through IBM GBS. In addition to his overall business applications, solution development, consulting and sales expertise, Joe is a well-respected authority on rapid implementation methods and application maintenance support alternatives, regularly sharing his experience and knowledge via white papers and articles both through IBM and industry analysts. Joe is a frequent speaker at Gartner s SME Bi-Annual Conference and other industry or analyst-based venues, addressing areas such as methods and solutions to deliver high impact applications in a rapid and cost efficient manner. Prior to joining VAI, Joe served in an executive role at IBM, most recently within GBS, where he spearheaded numerous innovative software and services initiatives for the small- to mid-sized markets. He holds a bachelor s degree in electrical engineering and computer science from Cornell University. He is a member of multiple professional organizations such as the Institute of Electrical and Electronics Engineers (IEEE), the Council of Logistics Management (CLM), the International Society of Logistics (SOLE) and the Warehouse Education & Research Consortium (WERC). Optimization 6

7 More Information Contact Us Name: Vormittag Associates, Inc. Address: 120 Comac Street Ronkonkoma, NY USA Contact: Joseph DeBella, Director of IBM Independent Software Vendor (ISV) Alliance for VAI Website: Tel: Fax: Website: Tel: Optimization 7