Tuesday’s Tip: Drive Cost Savings By Optimizing Commoditized Business Processes

Published on June 16, 2009 by R "Ray" Wang

Enterprises continue to transform themselves from the functional fiefdoms of the past and move towards a business process orientation.  As organizations begin that process of documenting business processes, they must differentiate among the 3 major types of business processes.  In key flows such as order to cash, hire to retire, incident to resolution, procure to pay, etc, remember to categorize key processes into three buckets:

  • Mission critical business processes. Core to the identity and mission of the business, these processes represent trade secrets.  No one in their right mind would let someone else manage mission critical processes.  To be clear, email is not a mission critical process unless you have top secret content.  For example, payroll is not a mission critical process.  This is something that could be done by someone else without much market differentiation.  However, revenue cycle management with complex risk algorithms would be a mission critical process that would not necessarily be outsourced.
  • Commoditized business processes. Often the “best practices” of the 1990’s that vendors profess to bring to an engagement, these processes represent well-defined, common industry practices.   Lack of unique intellectual property forces organizations to take the time to optimize these processes to achieve operational efficiencies.  Payroll is an example of a commoditized process.  Financial close is another one where there should not be too much variation among competitors.
  • Innovative business processes.  Processes focused on solving a unique challenge or provide a competitive advantage fall in this category.  In addition, processes that deliver a unique customer experience or provides differentiators in the market place represent innovative business processes.  Often, these processes have not yet been defined as they will be created.

The bottom line – optimize commoditized processes to fund mission critical and innovative business processes

If an organization can identify their commoditized business processes, they can generate cost savings through a variety of technology and business strategies.  Top of mind technology strategies will follow the business process and include, shared services, data center consolidation, business process outsourcing, third party maintenance, and instance consolidation.  With those savings in hand, enterprises can shift the two-thirds of their budget keeping the lights on to the one-third of their budget focused on new projects.  After each project, this business process approach will shift the spending towards new projects and fund the innovation required to meet today’s business challenges.

For more details, read the 9 part Forrester series on Long Term Apps Strategy starting with:

  1. Why You Need A Long-Term Apps Strategy
  2. Forrester’s Long-Term Packaged Applications Strategy Framework
  3. Does Your Apps Strategy Support Your Corporate Business Drivers?
  4. Packaged Apps Strategies Take A Back Seat At Most Enterprises
  5. The ROI Of Packaged Apps Instance Consolidation
  6. Five Steps To Building A Recession Proof Packaged Apps Strategy
  7. Shape Your Apps Strategy To Reflect New SaaS Licensing And Pricing Trends
  8. Third Party Apps Maintenance Rebounds
  9. Craft Your Negotiations Strategy To Reflect New Packaged Apps Licensing And Pricing Trends

Your POV.

Have you thought through your core business processes or are you still functionally oriented? Can you identify the commoditized business process? Have you seen any cost savings based on business process transformation Please post here or send me a private email to rwang0 at gmail dot com.

Copyright © 2009 R Wang. All rights reserved.

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