“Digital” disrupts business and IT. Therefore, digital business composability is the only scalable way to provide future mobility solutions at competitive cost levels. Fast transformation in a gradual and controlled fashion is required. We describe a proven two-step approach that meets the balance between speed of change and business continuity. It is important to start. The first that succeeds, harvests the market.
As most of the industries, the mobility market prepares itself for the fourth industrial revolution. With the scaling challenges driven by the megatrend “from ownership to usership”, the car leasing companies consider digital technology as a key component to achieve this scaling. Moreover, digital technology delivers innovation, business agility and digital cost levels as additional business drivers.
This paper describes the evolution of IT landscapes within car leasing companies during their digital transformation. We describe the different steps of digitization from a business perspective. We elaborate on implementation scenarios and include a gradual and controlled migration of the existing IT infrastructures and back-offices towards an agile digital landscape. We illustrate these implementations with some real-life integration use-cases. The central theme is to scale today’s business and to compose the new business tomorrow.
The Car as a Service market (CaaS) grows exponentially. Car manufacturers and car leasing companies prepare themselves to tap into this market. The first step towards usership is to deliver cars in a Full Operational Leasing (FOL) business model. The FOL model takes over large parts of the traditional Retail- and Financial Leasing businesses. Next to FOL, new more real-time flexible subscription models emerge as steps towards a full Mobility as a Service (MaaS) market.
To scale fast enough, the FOL business transforms into a digital business that caters for a strong self-service customer-oriented approach that empowers the individual mobility needs of the consumer with a tailored mobility solution, also referred to as mass customization.
To attract, capture and convert all these (new) customers, a top-notch Digital Users eXperience (DUX) needs to be provided. Massive amounts of data need to be captured and processed.
The foundation for this new digital business cannot be delivered by the existing IT-infrastructures.
The only way to conquer the challenges is to setup an agile loosely coupled global IT-landscape of modern ‘best of breed’ components that execute the required capabilities and provide business composability. This Whitepaper describes such a new landscape and the route to get there.
Digital transformation is driven by the business of the company. Some examples are:
The foundation of the digital transformation is a modern and agile IT landscape. The car leasing companies are on a journey to get such a foundation. Today, most of today’s car leasing companies run a monolithic back-office (or ERP) system that executes most of the business processes and capabilities in the company. This ERP system can be a market standard product such as Miles, LeaseWise, Calms/Solifi or Accipiens, but can also be a bespoke self-built company-specific system. These ERPs cover a broad range of business capabilities in an integrated fashion (see Figure 1. for a schematic representation).
With the need to scale and interact with the (new) individual customers combined with the need for business agility, the business requirements, and therefore the requirements of these IT systems change.
The first steps
The first steps in the digital journey were to empower the (fleet)-customers with online self-service capabilities by extending the ERP system itself with a web front-end. This extension however caters to a limited set of capabilities at low performance. A back-office system is simply not built for web-scale richness (see Figure 2A).
Another possibility is to build dedicated web front ends designed for performance to execute tasks such as car configuration to relieve the ERP system. These dedicated web applications swiftly became rigid front-ends that could not deliver the agility needed for search engine positioning and conversion optimization (See Figure 2B).
Steps to accelerate digital growth
So, the natural next step in the digital journey is to introduce a middle performance layer that takes care of all complex and calculation-intensive tasks in a single unified way (cf. Figure 3). This middle layer is often referred to as the Systems of Engagement or SoE (cf., Accenture, and Gartner IT- frameworks). This middle layer is what we call the Leasing Core from here on. The Leasing Core exists between two other layers: the Systems of Records or SoR (the static ERP system) and the Digital User eXperience layer or DUX (the very thin and agile front-ends). The Leasing Core typically covers the leasing capacities, including car configuration, lease calculation, search and customer policies, in an integrated way.
The last step towards an agile digital IT landscape is the integrated use of best-of-breed and open applications such as e.g., SalesForce for CRM. These applications are connected via their Application Programming Interfaces or APIs to provide the required integration and to empower business composability and fast innovation.
Figure 4 shows a schematically the evolution of a traditional IT landscape to an agile digital architecture.
Starting with an existing IT landscape, the replacement of back-office capabilities by the Leasing Core can be done in 2 ways.
First, the complex core capabilities such as leasing calculation/configuration can be duplicated into the web-scale calculation engine in the Leasing Core. All the existing back-office processes remain intact, only an exact copy of the leasing products in the back-office is replicated in the Leasing Core.
The advantage of this approach is that the existing landscape remains untouched, and web-scale performance becomes available to execute the online strategy. The challenge is that the company runs and therefore has to maintain 2 calculation services.
The second way is to carve the complex core capabilities out of the existing back office and fully replace them with the Leasing Core. The web-scale Leasing Core is then responsible for all calculations (including the re-calculation). The advantage of this approach is that it ends up with a clean single calculation engine. The engine is also prepared to serve all existing channels such as Fleet, SME, Indirect (white label and dealer channels) and B2C but also all-new non-existing subscription models and products.
An additional challenge in both of the scenarios is that all the data that is needed for the calculation should be available for the Leasing Core.
A unified Leasing Core makes it possible to centralize leasing products over different countries (e.g., for large international fleet customers or for new global mobility products). Note that the technical consolidation requires aspects such as vehicle data abstraction, but this is not considered the biggest challenge. Usually, federally organized leasing companies need to execute an organizational transformation towards central digital control.
Most of the time we observe that the calculation (i.e., the formalized definition of the leasing products) is not explicitly described and defined but lives in legacy systems with unknown properties. This can be an extra argument to start redefining the business. What we have learned is that the business and the business value initiate and lead the transformation. IT is challenged to support that change.
Next to integration, migration may come in scope. Especially, if the core lease capabilities are carved out of the back office into the Leasing Core. Since the migration of existing contracts and data is qualified as ‘high risk’ and lots of work, BetterBe generally advises executing in a phase-in phase-out scenario. This results in a full phase-out of the removed capabilities (and the underlying leasing contracts) in around 48 months.
We briefly describe two use cases to illustrate different successful implementations.
First case: the integration with existing bespoke company legacy systems.
The implementation in an existing landscape is done in a running business setting and business continuity needs to be guaranteed, at all times. Typically, there are two phases. The first phase is to streamline the data flows. In practice, the vehicle data flows are rerouted to the SoE layer since this layer requires the rich and raw data in order to facilitate the highest possible user experience to the DUX. A relevant subset of the data is pushed to the back office. Calculation-related data such as residual values and Repair Maintenance and Tire data is made available to be used outside the existing back-office to be used in the Leasing Core.
In the second phase, the business channels are activated. Therefore, the lease product needs to be configurated into the SoE (to make it available at web-scale). This can be an exact copy of the existing product or a new version of the existing product. It can even be an entirely new product created with the new real-time properties of the web-scale Leasing Core. Also, the applicable web front-ends need to be developed and connected to the SoE APIs.
BetterBe performed (vehicle)data integration with wholly owned self-built ERP systems and the BLS platform for e.g., Athlon, LeasePlan and Arval.
Second case: For industry-standard back-office systems a similar route is recommended. There is one difference: the leasing company itself does not control the back-office software. Therefore, implementation is dependent on the openness of the back-office solution. This integration can be done via an API or more likely via the export facilities to export tables of data. Note that some back-office systems require performing their own internal calculation to remain in operation. Others can transform to the Contract Management and Fleet-operations capabilities only.
BetterBe performed integration with industry-standard systems such as Miles.
Optimizing today’s business and shaping the business of tomorrow share digital as a common enabler. Therefore, the mobility and leasing industries execute their digital transformation. The core of the digital transformation is the Leasing Core. BetterBe delivers a platform that is the Leasing Core. This platform, the BetterBe Lease Services (BLS) is mature, widely used, and engineered to connect you’re (future) customers with existing and future mobility services. BLS: your digital business composer and accelerator.