Welcome to today’s Webinar. It’s called B2B Managed Services Business Value and Adoption Trends. GXS collaborated with Stanford University’s Global Supply Chain Management Forum on the development of this new exciting study on B2B managed services just as we did on an earlier research report back in 2007.
And we’re sponsoring these studies because more and more companies are exploring B2B managed services as an alternative to the traditional software model for B2B integration. And considering this managed services option, they’re really looking for some quantifiable benefits analysis.
So last year in 2012 we asked Stanford to conduct another review of the benefits of B2B managed services to provide businesses with the benchmark data that would help them make a more informed decision about their B2B strategy. During today’s 30 minute session Dr. Barchi Gillai who was the primary researcher and author of the new study will be sharing some of the key findings and her insights from the analysis. And you can see here she has a lot of impressive credentials with deep experience and lots of knowledge in supply chain management.
Dr. Barchi Gillai:
Thank you. And thank you again to all of those that have joined us today. I’d like to share with you the highlights of the study we’ve completed recently which examined the business value and adoption trends of B2B managed services.
But before that I’d like to give you a brief introduction to the Stanford Global Supply Chain Management Forum which is the research organisation that was in charge of conducting this study.
The Forum is the leading research institute that resides within the graduate school of Business at Stanford University. It works in partnership with corporate and non-profit organizations as well as with other academic institutions to identify research, develop and disseminate supply chain best practices within a dynamic and global business environment. The Forum advises companies that share its interest in advancing the state of the art in global supply chain management to become Forum members.
As for this study, the entire study examined the latest trends and business value associated with general B2B integration programs as well as with B2B managed services and was based on a survey distributed to client users of these technologies and services.
The results of the study are summarised in two separate reports. The first of these reports, which has already been released, will be the focus of today’s webinar and focuses on the business value and adoption plans of B2B managed services. The second report will outline the findings related to general B2B integration and will be available in the coming weeks.
Before we move on to discuss the actual study and these results I thought it would be helpful to provide a definition of B2B managed services just to make sure that we’re all on the same page. So B2B managed services are defined as services that provide technical B2B infrastructure, including the people and processes, necessary to manage B2B operations and trading partner connections.
After this introduction I would like to move on to talk about the B2B managed services study. This will include a brief overview of the methodology we used followed by information about the companies that participated in the study by completing the online survey.
The majority of the presentation will cover the information provided to us by the study participants about their B2B managed services program, the main drivers for taking on this initiative, the benefits services brought to their organisation and their plans for future use of e-commerce.
And we’ll start with the methodology. In this study we wanted to learn about the adoption trends and value of the B2B integration technologies and B2B managed services through the actual experience of companies and individuals who have been using them. We therefore based the study on the survey that was distributed to client users of B2B integration technology and managed services.
Our main goal with the managed services portion of the study was to identify and provide companies with benchmark information regarding the main drivers for using B2B managed services, the level of adoption being achieved and the financial and other business benefits associated with such programs. And the survey questionnaire was designed with these goals in mind.
We had a total of 92 people from 75 companies that completed the entire survey or a portion of it and that included 81 people who shared with us their experience with B2B managed services. All of the participants represented companies that have integrated B2B commerce into their operations for more than a year since we believe that companies have started using such solutions more recently. We know that they’ve had enough time to realise some of their associated benefits.
When analysing the data collected through the survey we looked not only at all of the responses combined, but also we looked at the breakdown on the responses based on a variety of factors such as the company size, the geographic base, the number of years of using B2B managed services and the percent of the companies B2B integration programs supported these such services.
This analysis helped us to gain better insights as to those factors that may have had an impact on the company’s decisions and the realised benefits. The following is some information about the profile of the participating companies.
About half of the participants were manufacturers from such industries such as high tech, automotive, healthcare, agriculture and other industries. Other participants included retailers, CPGs, financial organisations, logistics companies, service and software organisations.
As for the size, while participating companies vary in their size with annual revenues ranging from under 100 million US dollars to more than 5 billion dollars, most of them are relatively large organisations with annual revenue of more than 1 billion dollars. More than 5 billion dollars, most of them are large organisations with annual revenue of more than 1 billion dollars.
When looking at the participants managed services programs we can see that many of these programs have reached a certain level of maturity as can be seen in the top diagram. 49% of the participants have been using the services for five years or more. Another finding was the 58% of companies had more than 40% of the B2B integration program supported by managed services provider.
As for the geographic reach of this program, we see that many companies have extended their managed services program to multiple geographic regions. And that includes 45% of companies that had such a program in place in more than a single region and 28% of companies with a managed services program in all three geographic regions.
Another finding that I wanted to mention here, even though it’s not shown in the slide, is that those companies that have been using managed services for a longer period of time were more likely to have such a program in place in more geographic regions. Companies can use B2B managed services for integration with multiple types of business partners. And so one of those things we wanted to find out in the study was which type of trading partners companies integrate with most frequently through B2B managed services.
And it turned out that among the study participants that the most popular way of using B2B managed services was for integration with customers, a result that was reported by 87% of the participants.
Other trading partners in decreasing order were: vendors, logistics service providers and financial institutions. Overall 70% of the participating companies use managed services for integration with more than a single type of business partner and that includes 27% of them who use managed services for integration with four or more types of business partners.
Managed services are used for integration with multiple types of trading partners; this may provide an indication to the expanded use of managed services across different parts of the organization.
We also wanted to know the primary business drivers behind the companies’ original decision to start using B2B managed services. To do that we provided participants with a list of potential business drivers and we then asked them to select the top three drivers that were the most relevant for their organisation and to rank them in order of importance.
Based on that information we calculated for each business driver a score that was based on the number of times it was selected, as well as its ranking. And what we found out was that the most important drivers which received the highest score were improved customer experience, improved business process efficiency in areas such as supply chain management and payment processing and reduced IT costs.
These results indicate that B2B managed services were received as bringing a variety of business benefits. Even though the most popular business driver among the participants was to improve customer experience, it’s not surprising as I showed in the previous slide 87% of them were using managed services for integration with their customers.
And one more thing that I wanted to point out is that while support global expansion into new markets was not selected by a large portion of the participants as one of the companies’ top three business drivers, it was selected most frequently together with reduced IT costs as the number one in importance.
And this may indicate that for those companies that were expanding into new markets support for that expansion was likely to be the most important business driver for using managed services approach.
The next few slides talk about the benefits participating companies realised with B2B managed services. When considering the overall value of B2B managed services we can see that these services were of value to the vast majority of participants.
In particular we can see here the 96% of them indicated that managed services increased their value of their B2B integration programs. For 47% of the participants, the increased value was combined with a reduction in cost.
When considering more specifically the financial benefits of B2B managed services, then most companies value the ability of streamline expenses and to improve budget planning benefits that are associated with replacing capital expenditure with an ongoing monthly subscription scheme.
In particular 74% of companies found the ability to replace capital expenditure with an ongoing fee of value and 63% of companies were able to improve planning for B2B budget and resources.
The risk cost reduction was also experience for many of the participants even though the portion of companies that realise these benefits were somewhat lower or compared with a number of companies that value in streamlining their expenses in improving budget planning.
More specifically 59% of companies were able to reduce the cost of developing maps and providing technical support and 46% of companies were able to re-deploy some IT staff to other projects or roles.
In addition to financial benefits we also looked at benefits related to improving trading community management and support. And the three questions that are presented on this slide focused on benefits related to integration with customers. What we found is that 68% of companies improved the efficiency of onboarding new customers.
60% of companies were able to better meet and respond to changes in customer requirements. And 52% of companies believe that managed services made it easier for their customers to do business with them. So overall we can see that a majority of participants found managed services helpful in improving collaboration with customers.
Another question related to improved trading community management and support looked at whether managed services improved the level of local languages, standards and regulation support for business partners located in other countries.
This question was applicable only to 78% of the participants and when looking only at this group of participants then 49% of them found managed services helpful in improving the level of local support to trading partners in other countries.
The results that they have achieved are based on the aggregated responses of all the participating companies. As I mentioned earlier in the presentation, in addition to these types of analyses we also examined whether various factors had an impact on the likelihood of companies to realise the different potential benefits.
And one of the main findings was that the number one factor that had the most impact on the financial and other benefits was the number of years of using B2B managed services.
In particular for 7 out of the 9 potential benefits listed in the survey, which is close to 80% of those benefits, those companies that have been using managed services for 5 years or longer were more likely to realise these benefits. And this result indicates that it is likely to take time for companies to fully realise the benefits associated with B2B managed services.
Looking more specifically at the financial benefits, what we find – and it’s listed here on the left – is that companies that have been using B2B managed services for five years or longer were more likely to realise most of the listed benefits.
Companies with the higher portion of their B2B integration programs supported by a managed service provider were more likely to re-deploy some other IT staff to other projects or roles and they were also more likely to value the ability to replace capital expenditure with a monthly fee. And smaller companies were more likely to experience a reduction in the cost to perform such tasks as developing maps and onboarding business partners.
As for the benefits related to trading community management and support our findings are listed here on the right and what we found is that companies that have been using B2B managed services for five years or longer were more likely to realise all of the listed benefits and larger companies were more likely to realise most of this potential benefit.
In addition, a higher portion of European-based companies improved the local support for partners in other countries. These findings may be valuable for companies that are in the process of evaluating a managed services approach to help them figure out where their goals are and what the best solution is.
At the end of the survey we asked participants to share with us their plans for future use of B2B e-commerce by letting us know whether they plan to increase the number of customers they trade with electronically, increase the number of suppliers they trade with electronically and/or increase the number of business processes they support.
And as can be seen from the chart on the right almost all the participants plan to expand their users B2B e-commerce in at least one of these categories. Out of them, 82% of participants plan such an expansion in more than a single category and 57% of them plan to expand their use of e-commerce in all three categories. And this result seems to provide another indication to the value that the companies see in B2B e-commerce.
In summary some of the key takeaways that emerge from the study include the following: B2B managed services have reached a certain level of maturity as we can see, based on the number of years companies have been using B2B managed services, the geographic region of this program, the portion of companies B2B integration program supported by a managed services and the different types of trading partners managed services are used for.
Another key takeaway is that B2B managed services are perceived as having the potential to benefit a variety of business partners. This is based on the business drivers that drove companies to start using these services which are quite diverse and include the following: Improved customers experience, improved process efficiency and reduced IT costs.
The third key takeaway is that participating companies have indeed seen value in B2B managed services and the following are some examples of the realised benefits reported by the participating companies.
96% of the participants increased the overall value of their B2B integration program. Most companies value the ability to streamline expenses and were able to improve budget planning.
Most companies improve the services provided to customers and most companies plan to further expand their use of e-commerce.
However, and this is the last key takeaway, is that it may take time for companies to fully realise the benefits associated with B2B managed services.
And we can see since we’re close to 80% of the potential benefits listed in the survey, those companies that have been using B2B managed services for 5 years or longer were more likely to realise these benefits.
For each of the items that you see on this page you’ll see that there are links that are provided so when you get your copy of the presentation you’ll be able to just click on the links.
Starting at the top left if you’re interested in getting some more information about just the fundamentals, the basics of B2B managed services, what is it and why should you consider it, we have a Webinar that’s been recorded and you can click on that link and get a quick overview of what managed services is all about.
On the top right you’ll see there’s a link to the B2B outsourcing basics micro-site and that’s another way to get you information about the fundamental concepts of managed services, you’ll learn about the benefits and how they’re typically applied.
That site also includes a link to a managed services vendor selection checklist which might be useful to you if you’re considering a managed services solution because it’s a tool that you can use to compare in detail the technology, infrastructure and personnel services capabilities that different managed services providers offer.
On the bottom on the left side you’ll see the link to the full Stanford report that Barchi was discussing today as well as a link to a library of case studies about companies that are using managed services today and the kinds of benefits they have achieved.
And then on the bottom right there’s a link to the GXS blog site and that site includes posts on lots of different managed services-related subjects that might interest you.