BASF IT Services
Introduction of a
centralized cost allocation
platform at BASF IT Services B.V.
Read this case study to find out which challenges were solved and which goals were achieved in the project.
Efficient IT service billing as a competitive factor for IT service providers
Never change a running system?
For the management of BASF IT Services, this rule is only a pattern with limited value.
When the operator of one of the world's largest network associations with around 1,000 servers for around 50,000 users at over 250 locations decided to comprehensively modernize its SAP® landscape in order to strengthen its competitiveness, the variety of proven IT cost allocation solutions that had grown over the years was also put to the test - and replaced by a central accounting platform.
Today, the pan-European IT service provider has a standardized, highly efficient accounting platform directly integrated into SAP® that meets return on investment expectations, creates greater efficiency and transparency in the billing procedure and - almost more importantly - gives it the strategic option of setting itself apart from the competition with process-oriented managed IT services.
Orientation towards the market and competition
In 2001, BASF Aktiengesellschaft spun off its European IT units.
One of the aims was to ensure that the new subsidiary, BASF IT Services, would also assert itself as a competitive and professional IT service provider outside the BASF Group.
With its experience from many years of cooperation with BASF as well as core competencies in IT solutions for the process industry, managed infrastructure services and business process outsourcing, BASF IT Services considers itself well positioned for the competition.
Dr Norbert Karl Falck, Director Corporate IT & Quality Management: "We have set ourselves the goal of standardizing information technology and further developing it in a customer-oriented manner."
With regard to the company's own service billing landscape, it was necessary to assess whether vertically structured individual solutions would still meet future requirements.
Each service area had its own billing system with a separate data pool and employee resources.
If customers made structural or organizational changes, these could still be mapped in the SAP® systems in accordance with the accounting periods, but could only be entered into the underlying accounting systems with increasing effort.
BASF IT Services Director Dr. Falck: "Our decentralized billing systems have set too narrow a limit for driving cost optimization and efficiency increases in cost allocation."
Resolution in principle by the management
In mid-2004, the management of BASF IT Services decided to replace the previous individual solutions with a centralized cost allocation system as part of the new SAP® implementation. The timeframe for implementing the new platform under the leadership of the Corporate IT & Quality Management unit was therefore tight: the uniform accounting platform had to be ready for use by January 1, 2005, in time for the start of the new fiscal year and in parallel with the standardized SAP® landscape going live.
Requirements for the central accounting platform
BASF IT Services first defined internally which central functions the new accounting platform should fulfill:
- Highly accurate measurement of all IT services across all services directly from the carrier systems such as Lotus Notes, Internet access, storage systems, etc.
- Exact allocation of consumption data to users and their cost centers
- Enrichment of consumption data with contract-relevant master data information
- Forwarding the data to the central SAP® system for invoicing and
- Replacement of the previous vertical billing systems and
- Immediate cost savings by replacing legacy systems and reducing costs for runtimes and data maintenance.
Basically, the collection and processing of all data by one system should ensure that the entire database is continuously up to date.
The aim was to be able to bill the services provided more accurately, quickly and transparently with a significantly lower error rate.
Challenges for the project team
Following the product decision, experts from BASF IT Services and nicetec jointly formed a project team that first had to completely synchronize the current master data. This involved organizing the historization of the data with its corresponding hierarchy levels in an audit-proof manner. Another milestone was the exact recording of the services and systems that were later to be billed according to usage. To this end, the collector systems had to be precisely linked to the carrier systems via specific interfaces and comparative values for quality assurance had to be compiled. This made it possible to check the plausibility of the services recorded in a new way.
Employee knowledge becomes system know-how
In a further step, the project team had to record all business rules in the service delivery units and implement them in the system. These business rules specifically specify to which cost center and to what extent a measured service is to be allocated. With this step, the specialist knowledge of employees in the various delivery units about exceptions and special regulations was incorporated into the rules - an important prerequisite for being able to run the billing processes with a significantly higher degree of automation.
Customer-oriented service acceptance
In the final step, the contract and cost-relevant information reported by SAP® had to be incorporated into the set of rules, invoiced and passed on to SAP® for invoicing together with the measured volumes and specified parameters. The billing runs through a defined acceptance procedure, whereby the data records recorded are sent to the responsible persons on the customer side via the intranet portal for checking.
Climate in the project team relevant to success
For the responsible project manager Marion Gropp from BASF IT Services, the professional and results-oriented cooperation in the mixed project team was an important prerequisite for success. Marion Gropp: "The responsibilities on both sides were just as clearly defined as the homework that each side had to do to reach the next milestone - there was a climate of shared responsibility for achieving the specified goals." Despite the tight timeframe, the project team achieved its goal: the introduction of the central Accountig platform at the beginning of the year.
Have the benefits expected from the central accounting platform been fulfilled?
In Dr. Falck's opinion, the expectations of the central accounting platform have been "more than fulfilled". Legacy systems have been replaced and savings in various areas ensure the return on investment. The day-to-day programming requirements are implemented internally; specialist knowledge from outside is not required. It is now relatively easy to tailor performance records precisely to customer requirements and also to fulfill special requests at short notice. Dr. Falck: "In view of future requirements, the central accounting platform strengthens our competitive position."
Requirements for IT service providers
For Dr. Falck, IT service providers need to be clearer than ever before about what it costs to provide a service. This requires the use of powerful tools to measure the individual services provided in the trades more accurately and flexibly than before. Dr. Falck: "Efficiency in service billing is becoming a competitive factor for service providers - those who have to ignore customer requirements because their accounting tools can neither record nor bill them will not be able to survive on the market. For post-calculation, it is not only necessary to measure the overall trades, but also the individual services."
Conclusion and outlook
At BASF IT Services, a classic IT cost allocation project with IT controlling elements such as the allocation of performance data to cost centers was successfully implemented in a relatively short time.
The accounting platform that has now been created offers the option of creating forecasts from the contract management and service acceptance data that predict future deviations between target and actual figures relatively reliably.
This allows countermeasures to be taken at an early stage if budget overruns are imminent.
For Dr. Falck, the actual value of IT services is determined by their contribution to the customer's value creation process: "Our customers see IT services primarily through the lens of their production processes."
What could be more obvious than underpinning his relevant business processes with IT services and billing them accordingly, without charging for each individual internal service?
Why shouldn't it be possible to show the IT services provided in an added value that is comprehensible to the customer and, for example, invoice them according to the number of delivery bills or hazardous goods transports?
A centralized accounting platform can link services in the way that is most convenient for customers.
For example, a mainframe account could be bundled with a Lotus Notes mailbox and an SAP® module to create an integrated IT service that is offered as a "booking workstation" at a fixed price.
The customer receives IT services that map their production processes without being burdened with their complexity.
Dr. Falck: "This is exactly what a customer wants to achieve by outsourcing their IT activities."
As part of the modernization of the SAP® landscape at BASF IT Services B.V., nicetec's central service recording and billing platform was successfully installed. Read in this case study which challenges were solved and which goals were achieved in the project.
