Nof S.Y. Springer Handbook of Automation

Подождите немного. Документ загружается.

Business Process Automation 90.1 Deﬁnitions and Background 1605

embedded in ERP for changing management pro-

cesses such as performance reporting and monitoring,

stakeholder communications, and managing customer

relations, for instance.

ERP systems left management with a transaction

repository ﬁlled with terabytes of important business

information and data, but there were two problems.

First, executives needed something to ﬁlter the data and

weed out all that was not relevant to their problem at

hand. Second, they needed a way to organize, analyze,

and interpret the data and then to focus the resulting

information on speciﬁc actions [90.29]. This realiza-

tion led enterprise software developers to implement

a packaged software strategy and attack higher-level

thought processes such as decision making and knowl-

edge management. Indeed, much effort has gone into

understanding how the human knowledge creating pro-

cess works [90.30]. That is, ERP by itself does not

provide a competitive advantage but instead it has be-

come a competitive imperative. It provides an effective

means to bring order to the back ofﬁce. Post-ERP com-

panies strive to most effectively leverage their analytic

Suppliers and partners

Customers and partners

Portals

Business intelligence &

strategic management

Supply chain management

Customer relationship management

Back office (ERP)

Logistics

Distribution

Manufacturing

Marketing

Sales

Service

Front office (CRM)

Middleware & EA

Fig. 90.4 Enterprise application framework (after [90.28])

prowess not just to enhance operations but often as

their lead competitive differentiator. The extensive use

of data, statistical and quantitative analysis, explanatory

and predictive modeling, and fact-based management

are reportedly being used to drive company decisions

and actions [90.31].

ERP software vendors, of course, anticipating this

trend, leveraged this packaged software hype and their

packaged software competencies, and delivered to the

market the concept of the e-Business suite, illustrated in

Fig.90.4 [90.28]. The basic concepts used to develop

ERP (e.g., packaged software, based on best busi-

ness practices) were used to develop decision-oriented

and knowledge-management-type applications such as

customer relationship management (CRM), supplier

relationship management (SRM), supply chainmanage-

ment (SCM), strategic enterprise management (SEM),

business intelligence (BI), and portals. The products

initially delivered to the market had relatively lim-

ited functionality and robustness, but over time these

products have evolved into quite comprehensive and

sophisticated tools for the organization.

Part I 90.1

1606 Part I Home, Ofﬁce, and Enterprise Automation

Ongoing evolution of ERP requires a mechanism

to enable, and perhaps promote, continuous improve-

ments as well as disruptive innovations [90.32]. ERP

vendors have, to some degree, become the mecha-

nism for improvement and innovation through their

version upgrade process. Organizations now struggle

to keep current with the latest and greatest develop-

ments from ERP vendors. In fact, ERP vendors have

developed a sophisticated innovation engine to enable

them to lead in the development and delivery of new

business models and practices. Being able to leverage

the economies of serving multiple businesses within

a single industry and across virtually all industries

gives vendors this unique perspective and position-

ing. ERP vendors boast of their very sophisticated

innovation processes as they leverage their resources

and relationships to deliver to the market product and

process innovations frequently. Product and process in-

novations can originate through various channels as

follows:

1. The internal research and development organiza-

tions typically include business architects, product

developers, software developers, IT professionals,

and consultants. These groups assess market and

technology trends and determine how best to lever-

age or evolve the organization’s resources.

2. The consulting organization brings years of experi-

ence working with their customers to conﬁgure the

ERP software.

3. The sales organization is closest to the customer on

the front end of a sale. They have the best idea of

what the customer really wants.

4. Competitor information also provides an important

input into the innovation process.

5. Third-party software companies are often acquired

to secure recent innovations or in anticipation that

the smaller, entrepreneurial ﬁrm will help energize

the larger, older software vendor.

The Fortune 500 market for ERP has been virtu-

ally saturated, so ERP majors are focusing on small-

to mid-sized enterprises (SMEs). ERP vendors typ-

ically segment their customers based on size (e.g.,

large accounts greater than US$2 billion, local ac-

counts greater than US$1 billion, mid-market accounts

less than US$ 1billion and small accounts less then

US$50 million in annual revenue) and based on chan-

nel (i.e., direct and indirect). Different offerings may

be available for these different segments.

90.2 Enterprise Systems Application Frameworks

This Section introduces two popular enterprise applica-

tions referred to as customer relationship management

(CRM) and supply chain management (SCM). Al-

though the actual application may be deﬁned differently

by different vendors, relatively generic application

frameworks are presented below to facilitate this intro-

duction.

90.2.1 Customer Relationship Management

Customer relationship management (CRM) is a broad

term that refers to the way an organization manages all

aspects of its interactions with customers. The term is

widely used to describe software packages that enable

and support the management of customer interactions,

including such areas as sales, marketing, and service.

Such packages are often integrated with ERP systems

or other enterprise-wide applications. The popularity

of CRM applications reﬂects a shift in focus to the

customer and the importance placed on creating, main-

taining, and enhancing customer relationships.

CRM functionality is often divided into three

categories: operational, analytical, and collaborative

(Fig.90.5). The operational aspects of CRM include

those that support front-ofﬁce processes involving the

customer. This can include order processing systems,

marketing initiatives, customer service departments,

and call centers. Analytical CRM refers to the func-

tionality involved with analyzing and predicting cus-

tomer behavior. This can involve sales forecasting

as well as the use of data warehouses, where large

amounts of customer data are mined to discover trends

and other important interactions. Finally, collaborative

CRM functions are those that actively involve the cus-

tomer to increase their satisfaction and better meet their

needs. This category usually refers to various types

of interactions with customers that are not driven by

customer service representatives, such as interactive

websites.

Current CRM software is much more comprehen-

sive than a simple sales system. The application must

support the entire customer process, which spans vari-

Part I 90.2

Business Process Automation 90.2 Enterprise Systems Application Frameworks 1607

ous departments and functional areas: marketing bases

campaigns on customer input and generates customer

leads; sales uses these leads to generate customers;

manufacturing, distribution, and accounting are in-

volved in processing customer orders; customer service

handles complaints and questions; and research and

product development are inﬂuenced by customer pref-

erences [90.28]. A CRM application strives to integrate

the ﬂow of information across these various areas in or-

der to improve decision making. For example, when

a customer places an order, the CRM system is up-

dated with this information. When the same customer

calls with a problem about the order, the CRM system

can recognize the customer and route the problem to

an appropriate sales representative (operational CRM).

The system generates sales suggestions based on past

purchases that can be pitched to the customer through

e-Mails or websites (collaborative CRM). Customer

service calls can also be analyzed to correct com-

mon problems and anticipate new issues (analytical

CRM) [90.33].

The evolution of the CRM market from simple sales

force software to large, integrated applications has led

to the prediction of several trends that should begin to

inﬂuence the growth of this market, according to studies

by Forrester [90.34,35]:

•

Signiﬁcant growthwill comefrom mid-market com-

panies and from hosted applications (Sect.90.2.3).

•

CRM vendors will broaden solutions, with order

management as one of the top areas.

•

Increased focus will be placed on making systems

proactive (i.e., predicting customer needs, prefer-

ences, and problems before they arise).

While the growth of the CRM application market may

only prove modest, there is substantial expected growth

in the adoption of CRM practices as part of business

strategy.

90.2.2 Supply Chain Management

A supply chain refers to an organization’s network

of suppliers, manufacturers, wholesalers, distributers,

retailers, customers, and partners. Supply chain man-

agement (SCM) can be described as the management

and coordination of processes – particularly informa-

tion, material, and ﬁnancial ﬂows – across a supply

chain (Fig.90.5). Thus, there is both an internal and

external focus inherent to SCM. The term also refers

to the category of software applications that aim to

control and optimize these processes for organiza-

Collaborative CRM

Operational CRM

Back

office

ERP

Order Mgmt.

SCM

Availability

Legacy

systems

Data

warehouse

Service Marketing Sales Lead

Mgmt.

Phone E-mail Letter Direct

interaction

Campaign

Mgmt.

Front

office

Customer

interaction

Analytical CRM

Fig. 90.5 CRM capabilities (after Microsoft Corporation 2000)

tions. While ERP products focus on the coordination

and integration of activities within a particular orga-

nization, SCM products extend this scope to include

interorganizational activities [90.36]. Ideally, these ap-

plications will allow communication and integration

across the multiple organizations involved in a sup-

ply chain to produce responsive, synchronized, and

efﬁcient processes. Some of the activities typically in-

cluded in SCM software include procurement, order

fulﬁllment, demand management, inventory manage-

ment, warehousing, transportation, manufacturing, and

requirements planning. The arrows in Fig.90.6 repre-

sent the mainstream ﬂow for materials, information and

money, but it is important to note that, in practice, these

arrows are bidirectional as there is signiﬁcant interac-

tion between each stage when dealing with material,

information or money.

SCM functionality can be described as involv-

ing planning, execution, coordination, and networking

(also referred to as collaboration) [90.37]. Planning

includes the design of the supply chain as well as plan-

ning supply and demand across the entire chain. This

involves forecasting and planning for production, or-

dering, and distribution. Execution is the automation of

the ordering, production, replenishment, and distribu-

tion processes and generally focuses on the distribution

and manufacturing facilities [90.28, 38]. Coordination

involves managing the interaction of processes to in-

crease customer satisfaction. Examples of coordination

functions are monitoring and assessing performance.

Finally, networking in SCM refers to communication

across the supply chain through information sharing.

One of the goals of SCM is to match supply and

demand across the supply chain. Demand generated

by the end customer travels upstream throughout the

Part I 90.2

1608 Part I Home, Ofﬁce, and Enterprise Automation

Supplier

Financial flows

Material

flows

Information

flow

Manufacturer Distribution Retailer Consumer

Fig. 90.6 Supply chain ﬂows (after [90.28,37])

supply chain (i.e., customer demand drives retailer de-

mand, which drives wholesaler demand, etc.). Many

supply chains experience what is known as the bullwhip

effect, where small ﬂuctuations in customer demand

are magniﬁed along the supply chain, causing larger

demand ﬂuctuations as one moves backward along

the chain [90.36]. SCM aims to reduce this effect.

By providing interenterprise integration that coordi-

nates processes and shares information, organizations

should see reduced demand ﬂuctuations and increased

service.

The evolution of the supply chain itself (i.e., in

the form of just-in-time and continuous replenishment

methods) have changed requirements for supply chains,

and therefore SCM solutions [90.28]. The uses of

new technologies, such as radiofrequency identiﬁcation

(RFID) tags, are continually integrated into SCM appli-

cations to provide greater and greater functionality. The

SCM solutions market is expected to experience an in-

creased focus by major vendors to provide supply chain

solutions toservice organizations andalso to experience

growthin thecustomization of solutions by independent

software vendors [90.39].

From asoftware solutionperspective, thereare three

major categories of supply chain solution providers:

major ERP vendors, specialty supply chain vendors,

and systems integrators. As can be expected, major

ERP vendors (such as SAP, Oracle, and to some degree

Microsoft for the small- and medium-sized enterprise

– SME – market) have acquired or built, and deliver

to market, competitive supply chain management soft-

ware packages. Their competitive advantage includes:

size (deep pockets), customer install base (via ERP

solutions), best practices (developed over the years,

a signiﬁcant amount of supply chain activity involves

ERP functionality and transactions), research and de-

velopment resources, partners ecosystem, and packaged

software experience. The specialty supply chain ven-

dors, i2 and JDA, for instance, will typically have deep

knowledge in one or more industries and also share

some of the advantages of the major ERP vendors

(listed above)perhaps to a lesser degree, and varying be-

tween vendors. The systems integrators, IBM and BEA,

are effective at customizing and piecing together supply

chain solutions to address speciﬁc customer concerns.

90.2.3 e-Business

It is important to point out that EwIS applications have

been designed to operate within a greater e-Business

framework. That is, these applications may be deliv-

ered across the Internet in formats such as application

service provision (ASP). In fact, the leading CRM

vendor today offers their solution only in this for-

mat. A study conducted by Forrester in 2005 [90.40]

identiﬁed three types of CRM vendors: hosted CRM

specialists (i.e., vendors focused on providing on-

demand CRM), hosted all-in-one vendors (i.e., vendors

dedicated to the on-demand delivery model but who

have chosen to expand beyond CRM to provide built-

in support for back-ofﬁce systems such as ERP and

order management), and licensed CRM vendors. One

can expect these sorts of offerings for other enterprise

applications such as SCM and SEM.

Part I 90.2

Business Process Automation 90.3 Emerging Standards and Technology 1609

90.3 Emerging Standards and Technology

One of the most signiﬁcant movements that have

emerged since 2000 in the enterprise systems market

is one towards building business processes from ser-

vices. Based on service-oriented architecture (SOA)

and its associated standards (e.g., web service deﬁni-

tion language (WSDL), simple object access protocol

(SOAP), and universal description discovery and inte-

gration (UDDI)), this represents a step in the evolution

towards developing and implementing ﬂexible enter-

prise software. It is important to point out that SOA is an

architectural approach and not a competitor to packaged

software. That is, packaged software is a codiﬁcation of

a company’s business processes. Packaged software is

delivered to the market with varying degrees of conﬁg-

urability, so it will have varying degrees of ﬂexibility

since it uses, in its traditional form, proprietary ﬁle

formats and interfaces. The SOA movement provides

a more open platform that allows a company to rede-

ﬁne packaged applications as loosely coupled business

services combined with processes. Packaged software

applications can adopt SOA for interoperability and ex-

tensibility. In fact, the major packaged software vendors

such as SAP and Oracle have made bet-the-company

decisions based on delivering solutions on an SOA

foundation. On the other hand, platform vendors such

as Microsoft and IBM have reconﬁgured their product

line around SOA-based solutions. The concept of pack-

aging business processes asservices and thecompetitive

landscape that is emerging to support this movement are

discussed below.

90.3.1 Services Concept

SOA is based on the concept of stringing together

many loosely coupled, message-based building blocks

of processes, called services, to create a customized ap-

plication [90.41]. With regard to enterprisesystems, this

marks a move from having one integrated application

that runs all or most of an organization’s processes to

a method of combining multiple services from many

sources to form customized business processes; for

example, an organization can combine a service that

checks inventory availability with one that processes

customer payment into part ofa customer order process.

SOA promotes code reuse, as services can be reused to

form many applications, and ﬂexibility, as services can

be combined and recombined in inﬁnite ways to match

the changing business logic of an organization. Web

services connect via the Internet and are published in

a standard format with standard interfaces, so that each

service can communicate with other services without

regard to the underlying technical details (i. e., which

programming language was used) [90.41]. Two of the

goals of enterprise systems based on SOA are to reduce

customization costs and to allow a focus on modeling

and remodeling business processes instead of focusing

on technical details.

90.3.2 Competitive Landscape

The SOA approach to automating business processes

requires ERP vendors to shift focus from providing

integrated solutions to providing a platform for combin-

ing and running services. Vendors are now developing

amoreopen interoperable platform where SOA appli-

cations can be developed and accessed and where the

software can be easily integrated or interfaced with ser-

vices and products of other vendors [90.42]. One of the

key components in each of these platforms is the enter-

prise service bus (ESB) that handles the communication

between services. Many of the current offerings of

SOA-enabled infrastructures, in various states of their

roll-out, have come from well-established names in the

enterprise systems andmiddleware domains: SAP, IBM,

Oracle, and Microsoft. Some of these platforms include

preconﬁgured services based on functionality contained

in the vendor’s previous products, while others simply

providethe platform fordeveloping custom servicesand

for deploying third-party vendor services. These offer-

ings are brieﬂy discussed below and are summarized in

Table 90.1.

SAP markets enterprise SOA through its NetWeaver

platform. Functionality from SAP’s other applica-

tions are being divided into thousands of prepackaged

but changeable sets, described by SAP as bundles.

NetWeaver’s key component is the enterprise services

repository (ESR) that serves as a metadata directory for

the available services and provides a UDDI-compliant

registry for publishing, classifying, and discovering

services. SAP also intends to leverage their industry

experience by providing industry-speciﬁc business pro-

cesses for over 25 industries [90.43].

Oracle’s SOA Suite is a package of several Ora-

cle Fusion Middleware products designed to provide

a comprehensive SOA infrastructure in one installa-

tion [90.44]. The suite is intended to serve as a way to

integrate the various technologies acquired by Oracle.

Functionality conﬁgured as services will be delivered

Part I 90.3

1610 Part I Home, Ofﬁce, and Enterprise Automation

Table 90.1 Comparison of selected SOA bendors (

Provided through Fusion Applications;

UDDI compliant)

Vendor SOA initiative Platform Example modeling Prepackaged Service registry

anddevelopment tools services

SAP ESOA NetWeaver WebDynpro, NetWeaver Yes Enterprise services

Visual composer repository

Oracle SOA suite Fusion JDeveloper, BPEL Yes

Oracle service

Middleware Process manager registry

IBM SOA Websphere Websphere business No Websphere service

foundation Modeler, Websphere registry and

integration developer repository

Microsoft Microsoft .Net, BizTalk .NET framework No Enterprise UDDI

application services

plattform

through Fusion Applications (due for full release in

2008) and will run on the Fusion Middleware infra-

structure [90.45].

IBM markets IBM SOA Foundation as a set of mod-

ular software that can be adopted one component at

a time [90.46]. Most of these components, including the

Websphere Business Modeler and the Websphere ESB,

are identiﬁed with the Websphere name. The Websphere

Service Registry & Repository is based on emerging

standards rather than UDDI but will be able to integrate

with UDDI-based registries.

Microsoft’s more limited SOA offering, based on

the Microsoft application platform, is directed towards

the mid-market. The foundation of the Microsoft appli-

cation platform is the .NET framework, which allows

the development of services and connection of sys-

tems [90.47]. Most ESB capabilities reside in their

BizTalk Server.

90.4 Future Trends

Enterprise systems vendors continue to strengthen their

products. One recent study [90.48] points to a num-

ber of ERP trends that mark the maturity of this

market: companies are standardizing on a single ERP

vendor, companies are moving toward fewer software

instances, comprehensive ERP offerings reduce the

need for best-of-breed bolt-ons, industry-speciﬁc func-

tionality is getting deeper, and integration capabilities

are improving.

Recognizing the trend that enterprise systems pow-

erful applications are being made available to virtually

all types of employees and consumers, instead of

just sophisticated users, enterprise systems vendors

are very keen to better understand the needs of the

emerging enterprise knowledge workers [90.49]. Work-

ers who come from all industries and all levels of

the organization are expected to leverage the power

of enterprise systems to be more effective in their

jobs. Vendors will be challenged to further help de-

velop simpliﬁed work processes for companies to

implement, simpliﬁed IT infrastructures that users do

not even know exist, and simpliﬁed user interfaces

that allow end-users to leverage the power of the

systems without knowing that they are using a sys-

tem.

As the global market place does indeed become

ﬂatter and as these sophisticatedsoftware systems do in-

deed become more simpliﬁed and commoditized, more

emphasis will be placed on service-oriented architec-

tures and business process modeling to create nimble,

agile, dynamic structures that evolve as quickly as the

business models that employ them.

Part I 90.4

Business Process Automation References 1611

90.5 Conclusion

The enterprise systems market was rooted in the devel-

opment of ERP and has since leveraged ERP concepts

to effectively deliver sophisticated business applica-

tions such as CRM and SCM. Enterprise systems have

become theenabler of continuous improvement anddis-

ruptive innovation for organizations around the world.

ES vendors play a signiﬁcant role as thought lead-

ers and change agents. In a short period of time,

the corporate computing landscape has been radically

transformed as companies have endless opportuni-

ties to leverage information and networks like never

before.

References

90.1 D.E. O’Leary: Enterprise Resource Planning Systems:

Systems, Life Cycle, Electronic Commerce, and Risk

(Cambridge Univ. Press, Cambridge 2000)

90.2 T.H. Davenport: Putting the Enterprise into the

Enterprise System, Harv. Bus. Rev. (Harvard Busi-

ness School Press, Boston 1998), product num-

ber 3574

90.3 M.S.S. Morton (Ed.): The Corporation of the 1990s

(Oxford Univ. Press, New York 1991)

90.4 T. Peters, R.H. Waterman Jr.: In Search of Excellence

– Lessons from America’s Best-Run Companies

(Harper Row, New York 1982)

90.5 S.P. Bradley, R.L. Nolan (Eds.): Capturing Value in

the Network Era in Sense and Respond (Harvard

Business School Press, Boston 1998)

90.6 H.J. Harrington: Business Process Improvement:

The Breakthrough Stragey for Total Quality, Pro-

ductivity, and Competitiveness (McGraw-Hill, New

York 1991)

90.7 P. Senge: The Fifth Discipline: The Art and Practice

of the Learning Organization (Currency Doubleday,

New York 1990)

90.8 M. Hammer, J. Champy: Reengineering the Corpo-

ration: A Manifesto for Business Revolution (Harper

Business, New York 1993)

90.9 T.H. Davenport: Process Innovation – Reengi-

neering Work through Information Technology

(Harvard Business School Press, Boston 1993)

90.10 B.P. Hammer: Beyond Reengineering: How the

Process-Centered Organization is Changing our

Work and Our Lives (Harper Business, New York

1996)

90.11 B.P. Shapiro, V.K. Rangan, J.J. Sviokla: Staple your-

self to an order, Harv. Bus. Rev. 70(4), 113–122

(1992)

90.12 P.B. Seybold, R.T. Marshak: Customers.com: How

to Create a Proﬁtable Business Strategy for the

Internet and Beyond (Crown Business, New York

1998)

90.13 L. Downes, C. Mui: Unleashing the Killer App:

Digital Strategies for Market Dominance (Harvard

Business School Press, Boston 1998)

90.14 R. Buck-Emden, J. Galimow: SAP R/3 System:

A Client/Server Technology (Addison-Wesley, Har-

low 1996)

90.15 M. Kirchmer: Business Process Oriented Imple-

mentation of Standard Software: How to Achieve

Competitive Advantage Quickly and Efﬁciently

(Springer, Berlin Heidelberg 1998)

90.16 E. Bendoly, F.R. Jacobs: Strategic ERP Extension and

Use (Stanford Univ. Press, Stanford 2005)

90.17 G. Keller, T. Teufel: SAP R/3 Process Orientation

Implementation (Addison-Wesley, Harlow 1998)

90.18 A.W. Scheer, F. Abolhassan, W. Jost, M. Kirchmer

(Eds.): Business Process Excellence: ARIS in Practice

(Springer, Berlin Heidelberg 2002)

90.19 R. Miranda: The rise of ERP technology in the public

sector, Gov. Fin. Rev. 15, 9–18 (1999)

90.20 T. Peters: The Project 50 – Reinventing Work (Knopf,

New York 1999)

90.21 Managing the SAP lifecycle: Riding the waves of

implementation. Seminar notes presented on May

12th in Dallas (1999)

90.22 N.H. Bancroft, H. Seip, A. Sprengel: Implementing

SAP R/3, 2nd edn. (Manning, Greenwich 1998)

90.23 E. Brown: VF corp. changes its underware, Fortune

138(11), 115–118 (1998)

90.24 T.H. Davenport, J.G. Harris, J. Cantrell: The Return

of Enterprise Solutions – The Director’s Cuts (Ac-

centure, Cambridge 2002), Accenture Institute for

Strategy Change Report 2452927

90.25 S. Shang, P.B. Seddon: A comprehensive frame-

work for assessing and managing the beneﬁts

of enterprise systems: the business manager’s

perspective. In: Second-Wave Enterprise Resource

Planning Systems, ed. by G. Shanks, P.B. Seddon,

L.P. Willcocks (Cambridge Univ. Press, Cambridge

2003)

90.26 Benchmarking Partners: ERP’s Second Wave –

Maximizing the Value of ERP-Enabled Processes,

Deloitte Consulting report (Deloitte Consulting, At-

lanta 1998)

90.27 T.H. Davenport: Mission Critical – Realizing the

Promise of Enterprise Systems (Harvard Business

School Press, Boston 2000)

90.28 R. Kalakota, M. Robinson: e-Business 2.0:

Roadmap for Success (Addison-Wesley, Boston

2001)

90.29 P.F. Drucker: Management Challenges for the 21st

Century (Harper Business, New York 1999)

Part I 90

1612 Part I Home, Ofﬁce, and Enterprise Automation

90.30 I. Nonaka, H. Takeuchi: The Knowledge-Creating

Company (Oxford Univ. Press, New York 1995)

90.31 T.H. Davenport, J.G. Harris: Competing on Analytics

– The New Science of Winning (Harvard Business

School Press, Boston 2006)

90.32 C. Christensen: The Innovator’s Dilemma: The Rev-

olutionary Book that Will Change the Way You Do

Business (Harper Collins, New York 2003)

90.33 J. Caulﬁeld: Facing up to CRM, Business 2.0

Aug./Sept., 149–150 (2001)

90.34 E. Kinikin, J. Ragsdale, L. Herbert: Five Major Gaps

in CRM Apps (Forrester Res., Cambridge 2004), Tech-

nical Report 35016

90.35 E. Kinikin, J. Ragsdale, L. Herbert: Trends 2005: Cus-

tomer Relationship Management (Forrester Res.,

Cambridge 2006), Technical Report 35520

90.36 G. Knolmayer, P. Mertens, A. Zeier: Supply Chain

Management Based on SAP Systems (Springer,

Berlin Heidelberg 2002)

90.37 A Business View of my SAP SCM: Driving Business

Excellence through Supply Chain Management, in-

ternal company document (2005)

90.38 B. Gerald, N. King, D. Natchek: Oracle e-Business

Suite Manufacturing and Supply Chain Manage-

ment (McGraw-Hill, New York 2002)

90.39 N. Radjou, N. Tohamy, J. Harrington: Trends 2005:

SCM Market Outlook (Forrester Res., Cambridge

2004), Technical Report 35393

90.40 L. Herbert: The Forrester Wave: Hosted Sales Force

Automation, Q1 2005 (Forrester Res., Cambridge

2005), Technical Report 36614

90.41 R. Tews: Beyond IT: the business value of SOA, AIIM

e-Doc 21(5), 14–17 (2007)

90.42 A.F. Farmoohand: SAP’s Platform Strategy in 2006

(Asia Case Research Center, 2006)

90.43 P. Malinverno: How to get value now (and in the

future) from SAP’s Enterprise SOA (2007) Gartner

Technical Report G00150358

90.44 Oracle SOA Suite http://www.oracle.com/technol-

ogies/soa/soa-suite.html (2007)

90.45 A. Mohamed: Oracle moves a step closer to fusion,

Computer Weekly, 22 (2007)

90.46 IBM Service-Oriented Architecture http://www-

306.ibm.com/software/solutions/soa/index.html,

accessed on December 18 (2007)

90.47 Microsoft SOA Products: The .NET Framework,

http://www.microsoft.com/soa/products/

dotnetframework.aspx(2007)

90.48 P. Hamerman, B. Miller: ERP Applications – Market

Maturity, Consolidation, and the Next Generation

(Forrester Res., Cambridge 2004), Technical report

33957

90.49

Economist Intelligence Unit: Enterprise knowledge

workers: understanding risks and opportunities,

an economist intelligence unit report sponsored

by SAP, Economist (2007 )

Part I 90

1613

Automation i

91. Automation in Financial Services

William Richmond

This chapter addresses automation in the ﬁnan-

cial services industry with a focus on small banks

and credit unions. The ﬁnancial services industry

includes all organizations that engage in or facili-

tate ﬁnancial transactions. Automation is essential

for these ﬁrms to both lower cost and differentiate

their services. Small banks and credit unions are

an important subset of this industry, with unique

automation needs to enable them to compete with

large, international ﬁrms.

The chapter begins with a description of the ﬁ-

nancial services industry in general, then moves on

to describe community banks and credit unions,

how they operate, and the role of automation.

The chapter then addresses two key automation

areas for these institutions: their core systems

that support basic account processing, and a key

customer-facing system – Internet banking. Fac-

tors that drive success and recommendations for

how to approach each of these automation areas

is discussed. For these small ﬁnancial institu-

tions, successful automation of back-end systems

depends on how they source the system, with

outsourcing both raising costs and the number of

channels through which they distribute their prod-

ucts. Successful automation of customer-facing

systems, such as Internet banking, depends on

91.1 Overview of the Financial Service Industry1614

91.2 Community Banks and Credit Unions ......1616

91.2.1 How a Retail Bank/Credit Union

Works .........................................1616

91.3 Role of Automation in Community Banks

and Credit Unions.................................1619

91.3.1 Deﬁnition of Success.....................1619

91.3.2 Core Processing

and the Role of Sourcing...............1620

91.3.3 Internet Banking

and the Role of Adoption ..............1622

91.4 Emerging Trends and Issues ..................1625

91.4.1 Role of Integration .......................1625

91.4.2 Regulation ..................................1625

91.4.3 Shift From Paper

to Electronic Payments..................1625

91.4.4 Emerging Technologies – Web 2.0 ..1626

91.5 Conclusions..........................................1626

References ..................................................1626

getting their customers to use the system. Because

of this, success is more of a management than

a technical issue. The chapter concludes with

a discussion of emerging trends, technologies, and

issues.

According to the North American Industry Classiﬁca-

tion System (NAICS) [91.1], there are approximately

500000 ﬁnancial services ﬁrms. This includes insur-

ance agencies, commercial banks, securities broker-

ages, securities exchanges, and the Federal Reserve

banks. These companies range in size from Citigroup,

with almost US$1.5trillion is assets [91.2], to the

Wanda Michalenko Memorial credit union with around

US$30 k inassets [91.3].All ofthe ﬁrms in the ﬁnancial

services industry are information-based businesses, and

the intangible nature of the products and services drives

the automation projects required to enable these busi-

nesses to exist and thrive. Automation of the capture or

transmission of information improves productivity, and

delivering new products and services typically requires

new or modiﬁed systems.

Given the size and breadth of the ﬁnancial ser-

vices industry, this chapter focuses on small banks and

credit unions. These institutions have unique automa-

tion needs. They compete against giant companies, such

as Citigroup and Bank of America. They need to offer

comparable services at competitive prices, but they do

Part I 91

1614 Part I Home, Ofﬁce, and Enterprise Automation

not have the deep pockets to fund automation projects

and innovation. At the simplest level, these organiza-

tions provide a place for people to store cash and from

which to make payments. They also support the lend-

ing process. Processing deposits, payments, and loans

is complicated, and supporting these processes usually

entails automation providedand supportedby numerous

parties.

For these institutions, two areas of automation are

critical, and are addressed in more detail throughout

this chapter. First is their automation of their core sys-

tems. These systems support the bank or credit unions

back-ofﬁce operations. Second is their customer-facing

systems, such as Internet banking. A small bank or

credit union’s automation is successful if it lowers their

cost structureor enables them to differentiate their prod-

ucts or services.

For their core processing (deposit and loan process-

ing), how they source their core processing affects their

cost structure, the number of products they offer, the

number of channels through which those products are

available, and to a lesser degree what they pay for de-

posits. Thus how small banks and credit unions source

their core systems is linked with key strategic decisions,

such as their product and service offerings, their distri-

bution channels, and their pricing.

For customer-facing systems, the key to success

is user adoption. Improved proﬁts initially result from

increased revenues despite increased costs. To obtain

these proﬁts requires attaining a certain level of cus-

tomer adoption. If enough customers adopt, the bank

or credit union will start to see decreased costs as

well. Unfortunately, for the majority of small banks

and credit unions, reaching the Internet banking user

adoption level breakpoints constitutes a major under-

taking – one that they should be wary of taking without

a good understanding of both the economics and their

customers.

91.1 Overview of the Financial Service Industry

The ﬁnancial services industry includes all organiza-

tions that engagein creatingand tradingﬁnancial assets;

act as ﬁnancial intermediaries by raising funds from

lenders and providing funds to borrowers; pool risk

to protect entities from speciﬁc losses in exchange for

a periodic payment (insurance); and facilitate these

ﬁnancial transactions [91.4]. Firms engaging in cre-

ating and trading ﬁnancial assets include securities

brokers, who act as agents between buyers and sellers

of securities; stock exchanges, which furnish physical

or electronic marketplaces; and portfolio management

ﬁrms that manage others’ assets for a fee or commis-

sion. These include institutions with which everyone is

familiar, such as Goldman Sachs, the New York Stock

Exchange, and T.Rowe Price. It also includes less well-

know businesses, such as the Arizona Stock Exchange,

Dwight Investment Counsel, and LiebauAsset Manage-

ment Company.

Firms that act as ﬁnancial intermediaries include

commercial banks, credit unions, andsavings and loans.

The lines between these institutions are blurring, and all

of them accept deposits and make commercial, indus-

trial, and consumer loans. Linked with these institutions

are credit-card processors and loan brokers. Credit-card

processors provide retailers with a merchant account

and enable them to process credit-card transactions.

Loan brokers, including mortgage brokers, help cus-

tomers ﬁnd the best loans. They act as an intermediary

between lending institutions and the customer. Insti-

tutions which, perhaps, should be linked with these

ﬁrms are other loan originators and processors, such as

the ﬁnancing arms of the automobile industry. Finan-

cial intermediaries include well-known ﬁrms such as

Bank of America, and Citigroup as well as the Wanda

Michalenko Memorial credit union.

Risk pooling ﬁrms include insurance carriers and

their agents. Insurance carriers analyze risk and then

assign an appropriate premium for assuming that risk.

Agents, like securities brokers, act for the carriers and

sell the insurance policies to individual and companies.

These include ﬁrms form Aﬂac and Geico to the Wayah

Insurance Group.

All of the ﬁrms in the ﬁnancial services industry are

information-based businesses. Their products and ser-

vices are (or can be) intangible, and the processes for

delivering these productsand services entail the capture,

aggregation, transmission, and dissemination of infor-

mation and knowledge. The intangible nature of the

products and services drives the creation and delivery

of products and services, the structure of the business,

and the nature of competition, as well as the automation

projects required to enable the businesses to exist and

thrive.

Because ﬁnancial service ﬁrms are information

based, new products require only creativity to deﬁne.

A new mutual fund groups a set of existing stocks.

Part I 91.1