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Integration steps towards a fully digital landscape

Digital

“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.

Abstract

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.

Context

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.

Business Drivers

The digital transformation is driven by the business of the company. Some examples are:

  • Enhanced User Experience: is needed to attract the new digital native customer population. It requires flawless digital interaction. The upside of digital interaction is that it reveals the true needs of these customers. This helps to improve and customize the unindividual value propositions;
  • Self-Service: to increase scalability the business starts to shift to self-service business processes, thereby empowering and using the collective power of the customer base;
  • Conversion optimization: once moved to self-service models, the focus changes towards search engine positioning to enlarge the funnel and to conversion optimization to increase the deal rate. Note that, this requires ultra-light and agile front-ends;
  • Operational Excellence: The high volume of the automated (digitized) deal stream is routed through Straight Through Processing, such as automated credit checks and ordering processes. A high-quality first-time right product definition is required throughout the process;
  • Knowledge formalization: formalization business knowledge makes business scalable and less independent of human capital. Examples are digitizing vehicle properties or residual value models;
  • Business composability: The market requires new innovative products with a short time to market (e.g., subscription models). Modern mobility and MaaS solutions include shorter and more flexible subscription models. This requires real time contract re-calculation with a high performance and real-time lease calculator;
  • Burning platforms: Many leasing companies run their business on dated IT platforms, sometimes build in programming languages from the past. The dependency on software engineers that master these ancient languages results burning platforms to be replaced;
  • Unification and centralization: the challenge to digitize the global business is big. Therefore, this is a corporate challenge. This means that companies choose to consolidate the federal landscapes into a unified landscape on corporate level. Thereby unifying the product portfolio and reducing the diversity in local products and IT-applications;
  • Cloud first strategies and the use off the shelf solutions. The complex process of digital transformation reduces the appetite to invest in self build applications (with the related maintenance) in favor of off the shelf mature market platforms. 

The digital journey

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-build company specific system. These ERP’s 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 on-line self-service capabilities by extending the ERP system itself with a web front-end. This extension however caters a limited set of capabilities at a 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 relief 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 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.

Maturity

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 API’s 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.

Integration scenarios for the Leasing Core

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 by 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 scenario’s is that all the data that is needed for the calculation should be available for the Leasing Core. 

Advantages of unified 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, federal 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) are not explicitly described and defined but live in legacy systems with unknown properties. This can be an extra argument to start re-defining 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.

Migration

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 to execute in a phase-in phase-out scenario. This results a full phase out of the removed capabilities (and the underlying leasing contracts) in around 48 months.

It has been done before

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 is 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 entire 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 API’s. 

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 does not control the back-office software themselves. 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 to perform 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.

Concluding Remarks

Optimizing today’s business and shaping the business of tomorrow share digital as 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.