Night Market Realities

In India, there are two distinct markets at least for enterprise software applications. Let me call them the Day Market and the Night Market respectively. The day market is something that I have been talking about for a while. It consists of the traditional businesses who do business with a billion plus residents of this country. The night market is a new phenomenon. This market comprises of organizations whom we fondly call BPOs. The working hours of many BPOs coincide with those of their customers in America or Western Europe which means they operate at night in India. Hence the term night market. I assume that similar markets exist in many other countries which benefit from business process outsourcing.

Why do we need to consider BPOs as a separate market itself and not a vertical segment within the whole market called India? My reasoning here is that the dynamics of this market is entirely different from any other business vertical. Besides, you could see almost all industry verticals within the BPO market. So, it makes sense to look at this as a separate market itself and come up with strategies for selling software solutions in it.

The BPOs fall largely into two categories: Captive BPOs and BPO Businesses.

Captive BPOs are BPO arms of major corporations in the West and are owned and operated by these business houses. These organizations process the business functions of their respective parent and follow their systems and process standards. The applications and IT infrastructure are normally replicated as is, however good or bad they are. If you happen to sell a product or system which is part of their global infrastructure, you might get lucky and be able to sell some licenses to these BPOs.

The BPO businesses are organizations which provides process outsourcing services to third part customers. It is a big business and there are plenty of players in the market. These organizations offer tremendous opportunities for ECM/BPM. It is not often realized because most vendors approach this segment with a traditional license selling mindset.

The most important aspect of the BPO business is that everything is transaction based. For most BPOs, the business model revolves around transactions. Pricing to their customers are based on transactions. So the BPO management always thinks about their expenses and investments based on transactions. What this means is that when making an ECM/BPM decision, they need to calculate the ROI at the transaction level. If it takes them X Rupees to process a health insurance claim now, and with an ECM/BPM solution the cost of the transaction can be reduced to Y Rupees per claim, there is a business case. The entire industry works on cost arbitrage, so it is paramount to maintain transaction level costs down. More over, their contract with a customer for a particular business process could be time bound. So, it makes an investment decision all the more difficult. As long as the vendors can approach the BPOs with a transaction based pricing for their ECM/BPM solutions there will be a good chance of success. The ECM vendors will have to change their rigid license sale mentality and come up with creative ways of working with BPO companies, it will be all the more better for the ECM/BPM industry.

If I were running a BPO organization, the factors I would lose my sleep over will be Cost, Security, and Service Levels. I can’t quite prioritize them in terms of importance, but if I absolutely have to, I will do it in the same order as listed above. Cost is the most important factor since the existence of the industry in a country like India is because of the cost arbitrage. Security of information is critical because if there is a lax on it, not only the business but the entire industry suffers from bad publicity. The West hasn’t accepted the outsourcing phenomenon quite kindly yet and security lapse will be a good stick in the hands of the critics. Service level agreements are important because the customer’s business has to run smoothly even if certain parts of the business process are carried out halfway across the globe.

Given these priorities, ECM/BPM requirements will be predominantly on plain document management, records management, and workflow management. Document management will enhance the organization’s capability to manage the content that is coming from customers, and attach the right access levels to it. Record management capabilities will be critical from a retention and destruction perspective of customer documents. I would guess, it will apply more to the destruction of records and providing reporting of the content received in BPO organizations. Workflow capabilities will enable the BPOs in ensuring SLAs and providing accurate reports to customers on SLAs.

Another aspect of ECM that could play a major role in BPOs is automated capture systems with solid forms processing capabilities. This is one of my favorite topics and I will write about it separately.

To summarize, ECM/BPM solutions could help the BPO industry significantly, but it hasn’t made its presence felt in the marketplace so far. If the vendors could understand the pulse of this market and come up with creative pricing strategies, I am sure that BPO companies will definitely see the difference such solutions can make to their businesses and ultimately the bottom lines.

ROI for ECM Implementations

ROI is the most important criteria for any enterprise project initiatives. It is all the more important for ECM/BPM projects. This is because ECM/BPM will definitely alter the way a company is carrying out their operations. So, it is essential for companies to understand ROI before deciding on an ECM/BPM course. Most organizations actually carry out an ROI calculation exercise to arrive at the feasibility of the initiative. But these calculations are seldom revisited after the implementation of the systems. There can be three potential outcomes of the decision to go ahead with the project: Success, failure, something in-between. If the project is successful, the organization do not see a need to waste time on re-looking at the ROI calculation, unless the vendor wants to come up with a case study. Even in cases where case studies are made, the ROI part of the case study is arrived at more to sustain the feel-good-factor of the vendor and customer. If the project bombs, there are no discussions on the ROI because it is evident that there are no returns at all. If the outcome is something in-between, the debates will be on how the system handles the business requirements sufficiently, how this could have been better, whose fault it is, and what are all the reasons why the system is like this and not better. In my experience, ROI is often a forgotten term post technology and vendor selection.

How do we arrive at the ROI for a potential ECM/BPM implementation? I don’t think there is a straight forward answer to this. I have been searching for years to find out whether there is a spreadsheet out there which will churn out the ROI for a FileNet implementation, and as you might have guessed, couldn’t locate one. ROI calculation is never a straightforward exercise. It depends on a lot of factors.

ROI is nothing but a quantification of the benefits the system provides the organization. The benefits are easy to enumerate, but are hard to quantify. For example, any ECM/BPM implementation will provide many of the following benefits: Cost reduction, improvement in efficiency, increase in control, ability to scale up operations seamlessly, better disaster recovery capabilities, and improved end customer satisfaction. How do we quantify benefits like improved end customer satisfaction or better disaster recovery capabilities? It becomes all the more difficult to this exercise upfront and as part of the decision making process!

One needs to start somewhere. I believe that the first step has to be prioritization of the potential benefits of the proposed system. The priorities could change significantly from one organization to another. Prioritization becomes easier if there were a goal with which the whole thinking process started. Ideally this is an exercise the organization needs to do by itself without involving the vendors. Then convert these benefits to numbers!

As an example, consider an insurance company with about 100 branches across the country considering an ECM/BPM solution. At an average, this organization processes 50,000 new life insurance policy applications per month. They have two employees per branch to process the applications at the branch level and a team of 60 employees to process the application at the central office including the underwriters.

Assume that the goal for an ECM/BPM implementation is set as increasing efficiency of operations The next level benefits are of importance are ease of scaling operations, cost reduction, and increased control of operations.

Here is a sample back-of-the-envelope type calculation.

Assumptions
Monthly volume	50,000
No of branches	100
No of processing employees per branch	2
No of application processing employees in all branches	200
No of processing employees at HO (Head Office)	60
Average time required to process one application in minutes	8
Average number of productive hours per day	7
Average number of days per month	22
% of processing which can be automated using workflow rules	25%
% of HO processing that can be pushed to the branch users	40%

Calculations
Average Daily Volume	2,273
Average Daily volume per branch	23
Average no of applications processed by branch employee	11
Average no of applications processed by HO employee	38
Average no of applications that should be processed by an employee per day	53
Average no of applications processed/employee/day	8.74
Average processing efficiency of an employee	17%
No of applications which can be processed at HO/hour manually with current staff	450
No of applications which can be processed at HO/day manually with current staff	3,150
Volume/month which can be handled	69,300
Volume that can be handled/month with automation	92,400
Volume that can be handled/month by pushing work to the branches	154,000
Increased efficiency in terms of processing volume	208%
Average no of applications that can be processed/employee/day	27
Average processing efficiency of an employee after ECM/BPM implementation	51%

Similarly, one can come up with calculations for other benefits. Take the same example above and look at it from a cost reduction perspective. Assume each policy application set consists of 20 pages at an average, and the set is photocopied 6 times during processing. Xerox charges are X per page and the total amount spent in one application processing for photocopying alone is 6 x 20 x X = 120X. The monthly average photocopying bill is about 50,000 x 120X = 6 Million X.  Once the organization implements an imaging solution, the savings will be 6 Million X – scanning cost.

Assume that the organization has decided to keep 4 months of current processing applications at the HO before sending them to archive. It amounts to about 200,000 applications which will consist of about 4 Million pages. These records are kept in a records room in the HO which is about 1000 square feet in dimensions. If the per sqft rental is Y per month, the organization will be spending a total of 12000Y in a year to keep the records for reference, before sending them to archive. With an imaging solution, this cost can be eliminated and all the physical records can be sent for archival from day one onwards.

This exercise goes on like this until the organization quantifies all the potential benefits. Once it is done, we have one side of the ROI equation. Next is to figure out the cost of the ECM/BPM solution. That is an involved exercise, and let us look at it next time.

Capture – Priorities for Emerging Markets

Traditionally, capture systems are all about large mail rooms, tons of paper documents, high speed scanners, and software applications which can handle these types of loads. Companies like Captiva (EMC now) and Kofax built or acquired products which suit such capture needs and became market leaders over the years. While majority of the capture requirements in the US and some western European countries still resemble to what is described above, the new markets offer a totally different challenge.

If you take a closer look at the leading capture applications in the US, you can easily figure out that they cashed in big on the healthcare system in that country. For example, Captiva has a bunch of offerings for healthcare claims processing alone! I guess many concepts on data capture were evolved while trying to solve health claims processing as a business problem. And these concepts might have gotten acceptance across multiple vertical segments as well.

The US and many other western countries do have good physical infrastructure for shipping paper across efficiently. So, centralized capture work in these markets reasonably well. In many emerging countries, the situation is very different. Many of the countries have reasonably good communication infrastructure, but they lack the physical infrastructure and logistics systems. So, data capture systems in these countries will need to be distributed, and document and data shipping will have to be in electronic mode. What this means is that products such as InputAccel or Ascent Capture will not be viable for these markets.

Of course, these products mentioned above do have distributed versions. Many of these products come with a lot more features than what is actually required. More features are always fine, but the price tag is not!! It is a challenge to convince a customer in a country like India to buy a distributed Kofax Document Exchange Server.

The need for these markets is a simple capture application which can scan, index and send the images and index data to a central site. It needs to handle a volume of 1000 pages to 1500 pages a day. Often 10-15 pages are scanned together which constitute a set of documents required for a single transaction. It would be great if there are features like automated document separation using position within the scan set or using barcodes or patch codes. The icing on the cake will be features like cropping of specified zones of the scanned page (Usually for signature or photo), offline/online capabilities, and integration capabilities to FileNet, Documentum, Oracle UCM or Interwoven. The pricing could be anywhere between USD 150-250 per location.

If there is a capture product out there which can meet these criteria, I bet it will be a leader in these markets.

Choosing an ECM platform

What would be the magic in choosing an ECM platform? What would be the considerations of the CIOs when choosing an ECM product platform? Based on my experience in the Indian market, I would say that the three most important factors many CIOs would look at are:

• Price
• Comfort level with the product vendor
• Brand value of the vendor

in that exact order. Anything else comes way below these criteria.

Price is the most influential selection criteria for any corporate decision. In most tender situations, it is the L1 which normally gets selected. (The least priced bid is referred to as L1) There could be an occasional exception to this rule, but then the other two factors play such an important role in the selection process. Many decisions could be based only on the initial price the company is paying out to the vendor. In many situations, the wrong platform is chosen for all the right reasons!

As a CIO if you are very comfortable in dealing with one of the vendors, first you will be approaching them for any new initiatives. The moment the management decides to bring ECM into the organization, the CIO would ring up his/her most trusted vendor. This vendor from that point onwards will start influencing the decisions of the CIO in all aspects. I must admit that this is a fantastic technique employed by many leading vendors and is a very successful sales strategy for the vendors. Will the customer benefit from this strategy? It is always a 50-50.

I have interacted with some CIOs who swear only by big names. The trust of these CIOs can be won over only if you are an IBM, HP, Infosys, Oracle, or somebody in that league!! I can’t find faults with these CIOs, because they are insuring themselves against some hard questions during and after the decision process. Will this strategy work? Again a 50-50!!

But, choosing an ECM platform is a much bigger decision. The decision should be a well informed one, and as far as possible the decision process should not be outsourced to an ECM vendor. While maintaining the criteria mentioned above are important, there could be a couple of more factors which should play an important role in making that all important decision.

Cost
Since cost is the most important consideration, one should consider the long term cost implications of the decision. Pricing will have four major components: The initial product pricing, the year on year product maintenance costs, initial implementation costs, and long term maintenance and solution improvement costs. The first 3 are easy to understand, and it is often the last one in the list that causes enough headaches to the company. What I have seen recently is that for enterprise ECM rollouts, the initial implementation costs could be between 30 to 40% of the product costs, and the year to year product maintenance costs could be between 15 to 20% of the product pricing. But the year to year maintenance and solution improvements will be anywhere between 50 to 200% of the product purchase cost. If we look at a 5 year cost structure, the solution maintenance expenses will be the most significant of the total spending. 

Solution
If you are looking at an enterprise wide ECM implementation, any one of the leading products will do the job for you. Nobody can find fault with you if you choose one of Documentum, FileNet, OpenText, Oracle UCM, Interwoven, or Microsoft SharePoint. All of these products, except SharePoint, have been around for a while and have many successful implementations. Almost all of these products in some form or the other will give you features from imaging to records management to web content management to email management. But at the same time, choosing one of these products will never assure you that you will have a world class ECM implementation. What you will find out is that it is how you architect and implement the solution that matters. Your key to success therefore is not always the product, but it is the implementation. It means you need to get the right resources to do the right job.

Support
As mentioned earlier, as a customer you will shell out more money in maintaining and upgrading the solution. So it is essential that you have access to a reliable support infrastructure. The product vendors will always talk about support that is limited to product upgrades and defect fixes. ECM implementation involves installation and configuration of the base product along with a lot of customizations and custom application development. Invariably, the product vendor will never take responsibilities for customizations and other custom applications. You need resources at your disposal for supporting and upgrading the solution locally.

What I am trying to say here is that availability of quality resources to implement and support the solution is a very important factor in the success of an ECM solution rollout. While choosing a platform product, one should look at the ecosystem around a product or technology. The big names in ECM like FileNet, Documentum, Oracle etc. have a good set of implementation partners and there are many skilled and certified professionals out there on these technologies. If you choose a smaller player, you might be tied to that company for all support needs and at some time they can hold you to ransom as well.

In India, IBM and EMC2 have built good ecosystems around FileNet and Documentum. They have partners in all parts of the country and there are growing numbers of professionals who are skilled and certified on these technologies. Oracle and Interwoven are definitely trying to get there. You can never go wrong with any of these products as long as you have the right resources to implement the solution.

Selling ECM in India

I have been convinced for a while that the ECM market in India is huge. In the previous post, I tried to put my thoughts across on that topic. But as a practitioner and vendor of ECM, the struggle has been selling the expertise and solutions in this market. My experiments with selling ECM have been going on for the past three years. Innumerable mistakes were made, many lessons have been learned, plenty of ideas were generated, and a bit of success was tasted during this period.

Selling ECM or any enterprise system in India is not an easy task. There are certain facts about the software market in India that any vendor should internalize:
• Nobody wants to pay for software (They will, if left with no other choice)
• Hardware is everything
• Priority number one for any purchase decision is save-my-back
• Customer expects every feature under the sun in what you sell
• Vendors should only listen to the customer at least till the purchase order is issued (You should continue to listen till you get paid for your own sake. But, once the money is in the bank, customer will have to listen to you)
I am exaggerating a little here, I admit. But you will experience something close to these observations in 8 out of 10 software sales cycles.

Let us get more ECM specific now. The ECM market in India can be roughly divided into 3 as observed by a vendor. The segmentation is of course based on pricing:
• Segment 1: Up to 5 Lakhs (USD 12,500)
• Segment 2: Between 5 and 25 Lakhs (USD 12,500 to 62,500)
• Segment 3: 25 Lakhs and above (USD 62500 and above)

The vendors should very clearly position themselves in these brackets. No matter which segment you are playing in, the customer expects value for the money paid. Whether they get it or not is debatable.

Segment 1 is a complex market. You can sell initially if you know somebody closely at the target prospect, if you can impress just one of the top decision makers very well, or just by harassing the hell out of somebody at the prospect with your sales calls. Once you are done with some initial sales and have a couple of customers on board, your problem starts. Selling consistently in this segment is the most difficult task. You can’t justify direct sales efforts with the kind of pricing that works here. The product has to be very easy to setup and run. You should have specific vertical scenarios well mapped into the product. Scaling up will need setting up of a good channel network. The problem with channels that work on volumes and smaller margins per sale is that they many not have any expertise in managing the customers, their requirements, or problems. Until and unless you have a great product, good support infrastructure, and good documentation, bringing in revenues in this market is almost impossible. In India, I haven’t come across any vendor who has done a great job at cracking this problem. One of my failed attempts was to get into this market with a Microsoft SharePoint Services based ECM product. I have written about that story sometime last week.

Segment 2 is the crowded space. Almost every ECM vendor in the country had at least one go at this market. NewGen has been here for a while, and they captured a good percentage of the market by being here long enough. IBM DB2 Content Manager had its own share of success in this market. FileNet, Documentum, and Interwoven have tried to get into this segment as well. This market segment is sensitive to everything that you can imagine like price, features, integration capabilities, market presence etc. in that order. This market segment includes mid-sized organizations and departments within larger companies. What you sell in this segment will include the product(s) and implementation services. Once you can minimize the implementation efforts by pre-packaging as much possible in packaged solutions, you as a vendor will be able to survive in this market. Mostly the customers don’t care too much whether the solution is open source, Microsoft, Java, proprietary, or standards based. The main factor still will be the price. The problem with the market segment is that the sales cycles can go anywhere up to 8 months or a year until you either win the deal or just get thoroughly fed up.

Segment 3 is a new evolving market segment. Of late, some organizations have realized the importance of looking ECM as an enterprise wide initiative and not at departmental level. The success stories in this segment for the vendors come from global customers who end up rolling out the globally standardized corporate ECM solution in India as well, or certain forward looking companies adopting ECM for their India operations. The main drivers for the ECM solution selection are return on investment calculations, vendor alignments, corporate global standards, and of course save-my-back considerations. Many times technology or product features have nothing to do with a product or solution selection. This is precisely why the bigger players such as IBM, Oracle, EMC2, or HP are bound to control this market segment. I am not convinced that open source or solutions from smaller vendors can make a big impact on this segment. I predict a straight fight between IBM FileNet and EMC2 Documentum in this segment.

Segment 3 provides huge opportunities for service providers as well. As stated above, the product choice has something to do with reasons other than technology. But once the selection is made, technology and expertise come to the fore. There exists a good eco-system around products such as FileNet or Documentum that makes the customers less dependent on the vendors themselves. Every customer will look out for local implementation and support availability. I sincerely hope that people like me may not starve after all!!