ERP Integration: A Foundation For Workflow Revenue
By integrating workflow and imaging with ERP (enterprise resource planning), software developer Image Integration Systems, Inc. is building its client base with service billing solutions for the $846 billion construction market.
Is the market for technology you're selling expected to grow 700% in the next several years? According to analyst firm Ovum, worldwide sales revenue for BPM (business process management), a cross-application approach for implementing automated workflow, will increase from $1 billion in 2002 to $8 billion by 2007. Specializing in integrating its DocuSphere imaging and workflow software suite with ERP (enterprise resource planning) applications, Image Integration Systems, Inc. (IIS) (Perrysburg, OH) is poised to claim a piece of that lucrative market. "We've experienced more interest and demand in the last two months than all last year," says Brad White, president of IIS. "The economy is picking up, and end users are realizing the value to be gained by tweaking the ERP investment that's already in place." Though IIS targets virtually any organization running ERP applications, such as those from J.D. Edwards or SAP, the construction industry has been a key vertical market for growing its business.
Workflow Addresses ERP Shortcomings
"Take a look at ENR.com's [the online version of the Engineering News-Record] top 400," advises White. "Throw a dart at any one of them, and you have identified a good prospect for ERP workflow integration. What makes them a good target is the ability to use workflow to expedite the process of pass-through billing." Pass-through or service billing is the process by which supplier costs are passed on to construction customers. For example, when a company builds a home, it may contract the plumbing out to one contractor and the custom brickwork to another. In addition, it purchases materials from numerous suppliers for everything from the cement in the foundation to the roofing shingles. All of these costs (and an appropriate margin) are passed down to the customer, generally in a single bill with supporting documentation.
To manage the pass-through process, simply imaging the paper documents isn't enough. The construction industry needs workflow to match the bills to the purchase orders, ensure approval by the appropriate personnel, and pass that cost on to the customer in a timely manner to maintain cash flow. "ERP takes a swipe at that process," comments White. "But the workflow that is part of an ERP system is often hard to implement, especially across various applications." A vendor invoice has to be matched to a purchase order, but a processor must verify that the entire order was received before paying the bill. So the project manager in the field is called to confirm, but if the processor doesn't hear back, that invoice may sit in a drawer for a couple of weeks. Without a cleared invoice, the construction company can't begin to bill the customer, which can significantly impact cash flow when a contractor is working on a multimillion-dollar stadium or other big project. Using workflow, the image of the invoice can be matched to the purchase order and routed electronically to the project manager, who probably doesn't access the ERP system. With all the information readily available, the project manager can review the documents, amend or approve the invoice, and route it for payment at the central location.
Integrating workflow with an ERP system can also reduce labor associated with the billing process. To supplement a billing draft generated in a J.D. Edwards application, a file of all associated transactions can be created. IIS often uses workflow to find and attach all billing documents and create a CD with the invoice and all supporting documentation. The construction company can then give this CD to the customer instead of a stack of paper. Some IIS customers also make these documents available via the Web. A process that once took days is now reduced to a matter of hours. "One of our construction customers, Turner Industries, has reduced cycle time to the point where they often get paid before they even have to pay their vendors," says White. "That company could cost-justify the system before it even looked at hard ROI numbers."
So Many Invoices, So Few Document Management Systems
Failing to implement workflow can be an expensive proposition for end users. "Penetration of document management technologies isn't very deep in the construction industry, and it's mainly imaging, not workflow," says White. "Customers are in danger of losing control of their AP [accounts payable]. Documents go to the field for approval and are never seen again. That makes it tough to get a handle on commitments and expenses." For example, one IIS customer was losing millions of dollars worth of invoices every year. This is not unusual, finds analyst firm Gartner Group, which estimates that 25% of all enterprise documents are misplaced. The analyst firm believes document mismanagement costs companies 60% of office workers' time, 45% of labor costs, and as much as 15% of corporate revenue.
By implementing imaging and workflow, IIS customers are often able to reduce processing labor by 25% to 50% in an industry where the average hourly wage is $18.87, according to the Bureau of Labor and Statistics. "One of our customers calculated that pass-through billing costs were cut by 50%," reports Bob Kearney, VP of marketing at IIS. For most customers, the payback period for an ERP/workflow integration project is 12 to 18 months. VARs can also help end users find additional ways to drive ongoing value from this investment. Once customers have eliminated the backlog of documents, they can use workflow to track the process and get metrics on productivity. At that point, IIS can offer consultation, based on its ERP experience, to recommend process improvements. Additional integration opportunities exist to share data with other financial systems in the enterprise.
Focus On Business Problems To Sell Imaging, Workflow
When it comes to pitching a BPM solution to a prospective construction customer, there are two choices, says White. "Find a department manager fairly high up who has a problem, or a C-level executive," he advises. "Stay away from the IT guy. Business has opportunity; IT has constraints. The man who believes you can solve his business problem will make the IT guy talk to you." The approach will be different for each of these groups. The department head will be focused on a specific pain point that is affecting his ability to get his job done. Contact with a C-level executive gives a VAR access to a financial decision maker who understands the larger enterprise picture. "For example, a CFO, CIO, or controller understands how AP will affect billing," says White.
White also advises VARs to expect a fairly long and intensive sales cycle when selling to construction customers. He estimates that a six to twelve month sales cycle is typical. "Construction companies know what they need to do; the question often becomes whom they want to do it with," White comments. "Most narrow the field down to two reasonably quickly. After that, there will be site visits, reference calls, and endless demos." At that point in the process, IIS usually has a C-level champion within a committee that includes IT and department heads. "This solution changes their entire business process," White points out. "They want to talk about it, poke it, and see what happens. The risk is that the project will blow up." Constructions customers' other concern, he says, is whether a VAR will deliver on time and on budget. Because the construction business is project-oriented, these customers tend to expect the same of their integrators.
The total value of all construction projects in the United States was more than $846 billion in 2002, according to U.S. Census Bureau statistics. The countless resulting invoices, purchase orders, and inefficient processes are a virtually untapped opportunity for VARs with the right tools.