Data Management

How HBO reeled in expense costs

When HBO decided to implement expense automation technology, the CIO projected extra time for integration complexities. The technology didn't actually premiere for two years, but the expected benefits have finally been realized.


When entertainment company HBO sought better control over employee-initiated expenses—which account for 30 to 60 percent of a company’s total expenditures, according to Aberdeen Group—it turned to Extensity, a leading product vendor in employee expense management automation.

Extensity automates paper-based processes for expense planning, reporting, review, and payout. In choosing Extensity, HBO hoped to improve the efficiency, control, and effectiveness of its paper-based expense report process, and to gain new insights into vendor expenses through analytics, according to Michael Gabriel, CIO of HBO.

HBO embarked on its automation effort and chose its product in 1999. In a year, the company had completed its initial implementation with final implementation in August 2002. In that time, HBO has realized expected timesavings and efficiencies.

Choosing the right solution
HBO selected Extensity over competitors Concur and Captura, which Concur acquired in July. HBO also examined IBM Expense Reporting Solution (ERS), now sold through American Express.

In making the tool decision, HBO looked for ease of use, Mac and PC support, robust system administration tools, and the capability to modify and customize business rules.

While HBO declined to state costs, Extensity runs approximately $300,000 for a large enterprise customer, according to the vendor.

The product is sold as a stand-alone software license running on a server class NT, Windows 2000, or Solaris machine. In addition, customers need a database server running Oracle, Microsoft SQL, or IBM's DB2. Extensity is also available as a hosted solution. The product supports global deployment with support in local languages (English, German, French, Italian, and Spanish) and currency support.

"The nature of expense reporting is that policies change," said Vicky LoGuercio an HBO finance executive. "It was important to us to be able to modify business rules ourselves rather than pay a consultant every time the IRS changed the mileage reimbursement rate, or we wanted to change a business policy."

How automation saves money
The shift from paper to automated expense reporting is an appealing move for companies; it helps streamline processes and cut costs. In using the product, HBO cut expense cycle time and data entry, is now able to monitor expense policy violations, and can easily access reports on how much employees are spending at various vendors.

The vendor-spend data is significant because it also gives HBO more robust spend data for trend analysis and vendor negotiations.

While HBO declined to share their ROI on the Extensity installation, analysts report that better management of indirect expenses, such as employee travel, can save companies big bucks.

An Aberdeen study last spring of 50 companies using EMA products revealed that a paper system costs companies an average of $48 per report. The figure drops to $18 per report under automation (see Figure A).

Figure A


With automation, soft costs such as staff time spent filing and reviewing reports also drops. According to Aberdeen’s study, paper-based reports took an average of 35 minutes to file and 22 minutes to review. Under EMA, those figures drop to 18 minutes to file reports online and five minutes to review them.

Installing EMA also keeps employees happier because they get quicker reimbursement. "They can file expense reports in a timelier manner, so you don't have outlaying expenses for 30 to 60 days," said Christa M. Degnan, an Aberdeen senior analyst.

A soft implementation
For the installation, HBO worked with an Extensity implementation manager, along with consultants on an as-needed basis. HBO also committed four tech staffers to the project: an expense reports manager, an expense report analyst, a senior software engineer, and a project manager. HBO pulled in resources from office systems and database administrators when needed.

While Extensity said companies can install the product in 90 days, HBO planned for a longer rollout, in part, due to a complex integration with other systems, including a daily data feed from HBO's credit card provider, a chart of accounts from the general ledger system, and an HBO organizational chart with the reporting hierarchy and employee cost center information from the HR system.

Following the initial pilot and test phases, which hit schedule, HBO altered its production schedule to accommodate two major challenges.

First was the fact that Extensity's performance on Macintosh machines didn't meet HBO's performance standards. This caused what HBO characterized as a significant delay to product rollout among its Mac users. Extensity engineers and HBO ultimately worked through performance issues. (Since HBO's implementation, Extensity released Extensity 6, which uses Java 2 for increased performance on all platforms. Apple's OS X platform provides better support for Java applications as well, further improving Extensity's performance on Macs, according to Extensity.)

Turnover on Extensity's technical project team created some additional project delays. HBO also took a very flexible approach to training, scheduling training around the critical activities of business units and working around other company-wide IT initiatives.

Training key to adoption success
The objective of the product implementation was project success, not speed, says HBO. So to drive product adoption once Extensity finally went live, Gabriel instituted a strong internal communication plan and end user training, both of which HBO developed internally. By conducting the training in-house, HBO hoped to address any policy-related questions that might come up.

The communication plan clearly outlined the benefits of moving from a paper-based expense reporting system to an automated system so users could understand the need for the new system. The company also developed a detailed training manual and quick-start guide. Troubleshooting tips and FAQs appear as Web links within the application.

HBO's expense reporting manager conducted both classroom style and stand-up training with users. To reinforce the training, HBO created a separate environment—or “sand box”—where end users could play with the program.

Lastly, HBO implemented a call tracking system to monitor the volume and nature of problems as well as the timeliness of problem resolutions.

The extensive end user training has proven to be a key element to both end user buy-in and benefits from the software application, according to Gabriel; HBO has seen a 90 percent adoption rate.

 

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