Digital transformation in Automotive leasing is accelerating. New digital departments are founded, and new business- and IT concepts are discovered. The quest for the car driver and data has begun.
Most of the leasing companies originate from traditional, vehicle focused fleet customers. Recently, this has shifted towards a customer focused orientation where the customers’ needs are served in a customer centric fashion. This requires an un-paralleled Digital eXperience (DX) and a tailored proposition for all customers (mass customization).
The challenge now, is to capture this new customer (driver) and his/her data in a self-service digital way. This all needs to be combined with the increase in efficiency and cost reduction. It therefore all boils down to strongly self-serviced and highly unified service offerings over all countries and channels to gain the economics of scale advantages.
Large leasing companies are challenged to optimize their business while transforming towards mass customization. The heart of this challenge lies in the performance of the quotation engine.
To empower a world class DX, a quotation engine needs to satisfy the following properties:
The most important consequence is that the traditional lease price calculator, usually embedded in the system of records (SoR) in the back office, needs to be migrated to the systems of engagement (SoE). The reason for this is that the traditional core calculator was designed to do the quotations of complete configured cars only (i.e., quotation, norm calculation and re-calculation). It was used by customer service employees only, instead of by the internet end-user. Its performance is not sufficient if we move forward to an excellent DX.
An excellent DX requires a thin and agile presentation layer (web-site and mobile App). Agility is gained by excluding the front-and from all complex activities. Complex questions including car search, car configuration and lease calculations are asked by the thin DX layer to an Application Program Interface or API. The DX expects the related answers to be given instantly by the API. Figure 1. Shows the change in the IT architecture of the core quotation engine (Q) (search, car configuration, price calculation).
Figure 1. The location of the high-performance leasing calculation service (API).
Another consequence is a change in data streams. Due to the migration of the quotation engine (Q) to the SoE, the related dataflows need to be migrated as well. An example is vehicle data (VD). Typically, vehicle data contains over 3000 different properties of cars and options as well as optionruling. Large part of this information is used to enhance the DX in the quotation process. Consequently, vehicle data streams re-route from the SoR to the SoE, where the SoR only receives the relevant filtered part of the data.
The implementation of the single unified internet quotation engine can be done in two different ways: by a centralized or a de-centralized approach.
The centralized approach uses a generic international calculation. This base calculation consists of standardized leasing components such as for example a Residual Value (RV) component and a Repair Maintenance and Tire (MRT) component. This standardized core calculation covers about 80% off all local leasing calculation components. The other 20% of the calculation is country specific due to local (e.g. tax) regulations.
The de-centralized approach enables individual countries still to create and maintain their own local lease calculation, holded in the unified internet quotation engine. Usually a library of default calculation components is centrally available.
Sometimes, the migration is executed in two steps. For a period of time an exact replica of the original SoR calculation is copied in the high-performance calculation service in the SoE to secure business continuity and to facilitate the organization with a smooth transfer of data and calculation management processes.
Next to the management of the calculation (formula), the related and required data needs to be re-routed. This includes management of e.g.,vehicle data, RV data and RMT data etc. Although a modern API facilitates the setup of new web-based data management workflows to be created, sometimes existing processes are maintained to reduce the organizational impact of the changes made.
Gaining speed in the digital transformation requires two major technical changes. First the quotation engine, including the leasing calculator needs to be prepared to serve all calculations that need to be executed in the entire leasing company: all business channels, re-calculations and all calculations underlying future mobility products. Second the quotation engine needs to be web scale in terms of performance and the capacity of real time calculations.
These changes result in the migration of the lease calculation from the SoR towards the SoE into a single unified leasing calculator. The demanding DX implies re-routing some of the data flows such as the vehicle data flow.
Organizational changes may be necessary to optimize data management processes.