Enhancing service productivity with customer integration – A viable connection Ute Reuter Stuttgart University, Germany Customer integration in the development and management of services (namely: the service lifecycle) is an important prerequisite for improving service productivity, even more so if adequate controlling instruments are put to practice. To research this hypothesis, the specifics of customer integration and measuring service productivity are discussed as well as the potential of IT and the customer as resources leading to a sustainable competitive advantage. As a result, a dynamic management of service productivity is proposed and underlined by case study evidence showing that the improvement of service productivity strongly depends on the interlinking of customer integration and IT-based customer controlling.

1.

The importance of customer integration and service productivity – Problem definition and research questions

The increase of research output to improve productivity of information technology (IT) services is of great importance for Germany as an industrial location. In light of the expected shortage of skilled labour, this holds especially true for the increase in labour productivity. At the same time, a significant conceptual, empirical and instrumental research deficit on service productivity is evident. An increase in service productivity can be achieved through a greater integration of the customer into service development and service delivery. This integration should not be carried out merely based on calculations, shifting the workload from the service provider’s employees to the customer company’s employees in the process of service co-creation. Instead, the integration ought to be consolidated by learning and optimization processes in the company, processes initiated by the customers during service development and service delivery. In this context, the customer and his/her integration into the whole service life-cycle is “the key to service productivity increase” (Lasshof, 2006, 160). Customer integration leads to special challenges for the planning, control and monitoring of in-house processes, thus creating the necessity for using customer controlling measures (Kleinaltenkamp; Schweikart, 2006). From a controlling perspective, customer integration is therefore often perceived as a cost accounting problem (as in Kleinaltemkamp; Schweikart, 2006) and as a result has negative connotations. Therefore, it is important to create the awareness that customer integration supported by customer controlling leads to an increase in service productivity. 1

This article is a first step in this direction. Based on the specifics of service productivity, my approach dynamically integrates the individual phases of the service life-cycle. Thus, it identifies customer integration and customer controlling instruments as important prerequisites for the enhancement of service productivity during the entire service life-cycle. The special importance of customer integration for the IT service sector is underlined by a quantitative-empirical study and the developed approach is successfully verified within the scope of a qualitative-empirical case study. Asking for an enhancement of service productivity in the face of customer integration adds up to two important research questions: (1) How can the influences of customer integration on service productivity be adequately measured? (2) Which IT-based customer controlling instruments facilitate the integration of customers in the service lifecycle? These research questions are tackled as follows: The importance of customer integration for IT services and the specifics of measuring service productivity are explained in chapter 2. Then, the significance of IT-based customer integration in gaining a sustainable competitive advantage is explained in chapter 3. Chapter 4 puts the main assumptions together and introduces the notion of dynamic customer integration management as an approach to increase service productivity. The relevance of this approach is shown through an in-depth case study in a medium-sized German IT service company in chapter 5. Chapter 6 sums up the main findings and implications of the paper and provides an overview over future research necessities.

2.

Customer integration in IT services and the specifics of service productivity

The IT service sector is one of Germany’s leading growth industries, attributed with a significant value creation and employment effect (Prognos, 2009). Approximately 50% or 33 bn. EUR of the total IT market value creation are allotted to a total of 500.000 employees who work in the IT service sector in Germany (Bitkom, 2007). And what is more, German IT services companies have successfully competed internationally in the past and promise to do even better in future. Scientific studies attest an enormous export surplus. (Stiehler, Böhmann, 2009) This allows the assumption that service productivity already is an important factor for German IT service companies, even if some of the respective service companies are not actively aware of the importance of the necessary requirements to improve service productivity themselves. However, the success factors of German IT service companies are confirmed by a vast number of case studies. Most important in this respect is that most of the IT service companies always try to get to the bottom of the as-is service development and service delivery processes in order to find new and promising solutions (Stiehler, Böhmann, 2009). This implies that the management teams at IT service companies are especially apt to try new ways of enhancing service productivity.

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What is more, IT services in general are characterized by a high degree of interaction and individualization. This is the reason why customer-related model components in IT services (Corsten; Gössinger, 2007) assume higher significance than in other service industries. As a result, German IT services provide an ideal setting for the research on service productivity in general and on the effects of customer integration on service productivity in particular. Viable customer integration instruments are customer monitoring, surveys, complaint management, newsgroups, customer focus groups, workshops, customer clubs, advisory boards, innovation circles and lead users (Kunz; Mangold, 2004). The effect of customer integration depends to a large extent on the degree of interaction these customer integration instruments induce. It therefore begs the question, to what extent is the customer involved in the service life-cycle, and how important is the particular customer integration instrument for the company concerned. Each tiered level of integration can be assigned to the different customer integration instruments. Customer observation, for example, is characterized by a low level of integration whereas integration as co-innovator or as lead user has a high level of customer integration (Burr; Stephan, 2006). When Kunz and Mangold drew their customer segmentation model in 2004, the usage of the internet in customer integration was not widely practised. Therefore, the above-cited customer segmentation model lacks internet-based instruments, e.g. webinars and online communities. This leads to the need to upgrade the basic customer segmentation model. The new internet- and IT-based instruments have to be integrated. This is especially important as online systems are able to establish relationships with a large number of potential and existing customers. (Schmidt, 2001) In some empirical studies, customer integration via the internet results in a deepening customer-provider-relationship (e. g. Fassott, 2004). 70% 60% 50% 40% 30% 20% 10%

always applicable (4)

Fig. 1:

mostly applicable (3)

only partly applicable(2)

Online community, Webinar

Innovation circle, Customer board

Monitoring

Lead User

Usergropus, Customerclub, Newsgroup

Customer Focus Group, Workshop

Complaint Management

Survey

0%

not applicable at all (1)

The use of customer integration instruments in German IT service companies

In May 2010, we conducted a quantitative-empirical survey in Germany’s IT service industry. A total of 4000 companies were contacted, of whom 588 took part in 3

the survey. This corresponds to a response rate of 14.7%. Among other things, the survey examined the significance of customer integration for the IT service company concerned. 84% of the companies who answered this question consider customer integration in general “important” or “very important” (for detailed information see Reuter; Sautter; Göppert, 2011). However, the assessment of customer integration as being „very important“ or „important“ does not necessarily mean that customer integration is actually practised. In classifying customer integration instruments into a rank order according to the findings of the survey, it is to be found that the most common form of customer integration with 86% is a direct interview with the customer (survey). This also corresponds to the predominant recommendation in literature (Kleinaltenkamp; Schweikart, 2006). The use of surveys and all other customer integration instruments with the polled IT service companies can be traced in the order of their actual use (decreasing from left to right) as shown in figure 1. All in all, the quantitative-empirical survey confirmed the high or very high importance of customer integration in the German IT services industry (Reuter; Sautter; Göppert, 2011). In comparison to industrial production of material goods, services are marked by specific constitutive characteristics which have to be taken into consideration when aiming to increase service productivity. Viable constitutive features are immateriality, intangibility, unsuitability for storage, simultaneous production and sale (the so-called uno-actu-principle), and the integration of an external factor in service development and service delivery (among others see Burr; Reuter 2007; Burr; Stephan, 2006; Tomczak; Brockdorff, 2000; Meffert 2000; Voigt; Thiell, 2003). Especially the integration of the external factor, i.e. of the customer into the service development and service delivery process, enables the service provider to outsource activities to the consumer and to have him/her carry these out (the so-called service co-creation). In the case of business-to-business contacts, as described in this paper, not only the service provider is a company, but the service customer is a company as well (Bieger 2008). Service productivity (SProd) describes how much staff capacity (SC) input is necessary to achieve a certain output, i.e. the service (S) to be provided (Lasshof, 2006).

S Pr od 

S SC

At first glance, this measurement seems to be elusive because it includes only the provider activities in the calculation. But as service productivity is a measure to control the performance of the provider company, this approach is justified. (Lasshof, 2006) In practice, service providers are either controlled in the described way or in accordance with the sales per employee (Lah; O'Connor; Peterson, 2002). Instruments and models to specifically control and increase service productivity are needed (see e.g. Nachum, 1999). The models available for increasing service productivity show, however, an enormous research deficit both in their validity and their adaptation to specific service industries and service types (see e.g. Grönroos; Ojasalo, 2004), as well as in the involvement of customer controlling aspects. A first approach to address this deficit is presented with the dynamic management of cus4

tomer integration in the service life-cycle presented in chapter 4. But beforehand, the significance of IT on the way to a sustainable competitive advantage is made clear in the next chapter.

3.

Significance of IT resources on the way to sustainable competitive advantage

Theoretical foundation of the presented approach is the resource-based view (e. g. Penrose, 1959, Wernerfelt, 1984; Prahalad; Hamel, 1990; Grant, 1991; Barney, 1991; Collis, 1991; Hamel; Heene, 1994; Dyer, Singh 1998; Eisenhardt; Martin, 2000). Competing companies feature heterogeneous resources (Barney, 1991, Foss; Ishikawa, 2007) and, as a consequence, the different management teams can use different resources in development and production. These heterogeneous resources provide the background for all strategic decisions in a company (Bamberger; Wrona, 1996; Foss; Ishikawa, 2007). In principal, all resources are included in analysis and decision making (Foss; Knudsen; Montgomery, 1996). But somehow, it must be possible to differentiate resources alongside their potential for a company. A resource is termed valuable if it enables the possessing company to improve its position on the market vis-à-vis its competitors (Hoopes; Madsen; Walker, 2003). Further differentiation criteria are imperfect imitability, imperfect substitutability and rarity (Brumagim 1994). Imperfect imitability implies that replication costs of the respective resource are extremely high (Hoopes; Madsen; Walker 2003). Substitutability can take on two different forms. On the one hand, a resource is substitutable if it is possible to use another similar resource to conceive of or implement the same strategy. On the other hand, resources which are quite different at first glance might be substitutable if the usage of one or the other resource yields the same results for the company. A resource is rare if resource demand surpasses resource supply and if it supports the implementation of a strategy which is not implemented by a lot of other companies at the same time (Barney, 1991). However, rarity is irrelevant if the resource is not hard to imitate, hard to substitute and valuable at the same time (Hoopes; Madsen; Walker, 2003). Furthermore, resources can be segmented into eight different categories, namely the company’s physical capital, human capital and organisational capital (Barney, 1991), technology, financial resources and reputation (Grant, 1991), reputation and management team (Burr; Stephan, 2006). Most important in the context of this research project are organisational capital, human capital and management team. The controlling systems of a company, including the customer controlling systems, are part of the company’s organisational capital (Barney, 1991; Brynjolfsson; Hitt; Yang, 2002). Human capital, however, includes the employees’ know-how, their communication capabilites and motivation (Grant, 2008). Management team is equally important as „the one firm resource required in almost all strategies is managerial talent“ (Barney, 1991, 106). Therefore, managerial talent is very important in the process of value generation (Makhija, 2003), especially if customers are integrated in the process and resulting interrelations have to be managed. In general, processes consume resources (Kutschker, 2005a): Each task and each and every process step consumes, for example, the working time of employees. 5

Therefore, it is the task of the management team to decide how much time is attributed to each task and process step (Kutschker, 2005b). But how can resource-based arguments be used in order to explain the significance of IT and service productivity on the way to sustainable competitive advantage? A company is in possession of a competitive advantage if it has implemented “a value creating strategy not simultaneously being implemented by any current or potential competitors“. (Barney, 1991, 102) Whereas the mere presence of single resources and capabilities does not lead to competitive advantage, the coupling of resources and capabilities within a business process can do. Hence, prerequisite for the identification of competitive advantages is intimate knowledge of the organisational processes within the company or within the relevant business unit (Levitas; Chi, 2002; Rouse; Daellenbach, 1999). IT-based routines and standardized procedural methods within the company’s processes are prone to lead to competitive advantage (Pierce; Boerner; Teece, 2008). But do they lead to a sustainable competitive advantage as well? A competitive advantage gets sustainable via the uniqueness of “its pattern of resource deployment and / or scope decisions” (Hofer; Schendel, 1978, 25) vis-à-vis its competitors. It is important in this respect that proprietary rights in and/or the control over resources and processes are no necessary constraints in the achievement of a sustainable competitive advantage (Lavie, 2006). Not the resources themselves but the services [and processes] originating from the usage of the resources are of real importance in value generation (Penrose, 1959). If a resource is rare, this can lead to a sustainable competitive advantage of a company (Barney, 1991). But not the rarity of a resource alone decides over the capability to reach a sustainable competitive advantage. Moreover, the ability of this external resource to integrate in an existing system [of processes] determines if a sustainable competitive advantage originates. (Foss, 1997) In other words, the utilization of external resources and the competence to integrate these resources within the company is important for a company’s role in competition (Cohen; Levinthal, 1990). Even more so as, on the organisational level, most innovations derive from external sources (March; Simon, 1958). A company’s ability to integrate and internalize these external resources and innovations strongly depends on the capability of the company’s employees to accept and adapt external knowledge, information and innovation (Cohen; Levinthal, 1990). This construct of the so-called absorptive capacity actually consists of three steps. First, the value of the external resource is perceived. Next, the external resource is internalized within the company and, last but not least, the respective resource is put to practice within the company. (Cohen; Levinthal, 1990) This actual utilization leads to a shifting from formerly external to internal knowledge. The newly internal knowledge holds the potential to create synergy effects and is essential for the generation of sustainable competitive advantages (Freiling, 2008). Especially in cooperative partnerships between customer companies and provider companies, partner specific aspects of absorptive capacity are of importance. The longer customer integration is practised between two companies, the deeper is the required understanding and the process- and service-related knowledge. (Dyer; Singh, 1998) Furthermore, the imitability of resources has to be considered. As immobile resources are harder to imitate than mobile resources, the immobility of resources is 6

considered as necessary constraint in the generation of a sustainable competitive advantage. (Peteraf, 1997; Barney, 1991)

4.

Dynamic management of IT-based customer integration

Service Lifecycle

Controlling-supported Customer Integration

The preceding chapters have given an overview over the concept of labour productivity in services, the significance of service productivity as a measure of competitive advantage and the challenges in gaining a sustainable competitive advantage with the help of IT resources. Based on this theoretical foundation, both research questions are answered in the following and an approach at dynamic management of ITbased customer integration is presented. A basic impression of this approach is given in figure 2. Customer Integration Instruments Monitoring Survey

Newsgroup

Customer Focus Group

Complaint Management Usergroup

Idea generation and evaluation

Lead User

Identification and analysis of requirements

Webinar

Customer data base / CRM-system

Advisory Board

Workshop

Customer Club

Customer Controlling Instruments

Innovation Circle Customer Segmentation

Online Community

Service concept design

Implementation

Service delivery

Evaluation

Replacement

Improvement of Service Productivity

Fig. 2:

Dynamic Service Productivity Management

At first, research question (1) comes into focus. Very often, customer integration is interpreted as involvement and influence of the customer on rendering and distribution of services (Poznanski, 2007). This static definition which is solely based on the moment of rendering and distribution of services, however, does not go far enough. In fact, customer integration is not only important for the rendering and distribution of services but also for the entire service life-cycle. Therefore, another, more dynamic perspective is adopted: Customer integration is understood as a cooperative and voluntary teamwork of customers and providers across the whole service life-cycle (Vargo; Lusch, 2004; Reichwald; Piller, 2006). As already inferred, successful customer integration is due in large part to these joint learning processes. Its importance is undisputed on both the provider and user side. Therefore, service productivity is 7

not understood as a static but a dynamic concept (see also Grönroos; Ojasalo, 2004). The consequences of these dynamic aspects with regard to the interaction between customer integration and service productivity have not yet been researched in sufficient detail. A highly practical as well as scientifically promising perspective to improve service productivity unfolds here. Dierickx and Cool (1997, 165) state that the imitability of a company’s resource stock is determined by the characteristics of the development and production process. This holds true for the service development and service production process as well. The more innovative the characteristics of the service development and service management process are, the less imitable are these processes. From the viewpoint of the resource-based perspective, a company is successful if it constantly creates new resources and processes (Markides; Williamson, 1997) and uses them as well. The creation of these new resources and processes is supported by the integrated customers. The realization of sustainable competitive advantages, however, is down to the integration of external activities and technologies (Teece; Pisano; Shuen, 1997). Such external activities include the involvement of customers in service development and service management (Gerth, 2001). In order to guarantee the measurement of competitive advantages via the service productivity measure, adequate process mapping (Newbert, 2007) of the whole service lifecycle is needed. The service lifecycle model shown in the middle of figure 2 gives an overview over the general phases of the service lifecycle. The first four phases, namely idea generation and evaluation, identification and analysis of requirements, service concept design, and implementation are termed “service development process”. The second three phases, namely service delivery, evaluation and replacement, are known as “service management”. (Burr; Stephan, 2006) The service life-cycle is therefore understood as a learning process which starts with idea creation and idea evaluation ranging from service provision to the replacement of a service (Burr; Stephan, 2006). Controlling-based customer integration can be pursued in all phases of the service life-cycle shown in figure 2, however, only the first six phases have a positive impact on the productivity of the service concerned. Replacing a service, by its very nature, does not have a positive impact on its productivity. However, the service lifecycles of individual services differ in accordance with the service’s constitutive characteristics. In the approach presented here, service productivity is understood as labour productivity in the explained sense. From the point of view of the service provider, labour productivity is measured depending on staff assignment which is important in the respective phase of the service life-cycle. This ensures that the measurement of productivity is done dynamically and that changes of conditions can be adapted during the service life-cycle. Furthermore, the respective time of the staff assignment is – in the best case - reduced by the time of the customer assignment. Here, the measure-ment itself is made possible by the documentation within the scope of customer controlling. The following hypothesis is derived: Hypothesis (1): Separate measurement of service productivity in the various phases of service life-cycle and an ensuing comparison of service productivity across the

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various phases generates the dynamics necessary to measure the actual service productivity. Now, research question (2) is tackled. It is important to be able to put ideas across about control and measurement of sustainable competitive advantage (Brynjolfsson, 1993; Berndt; Malone, 1995). Service productivity as defined above is one measure in the detection of competitive and sustainable competitive advantage. The positive correlation between IT resources, productivity and value creation has been successfully proven in several empirical research projects (e. g. Bharadwaj; Bharadwaj; Konsysnski, 1999; Dewan; Min, 1997; Brynjolfsson; Hitt, 1996; Lichtenberg, 1995; Siegel; Griliches, 1992). Penrose (1959, 1) herself describes the evolution of companies as an “unfolding process”. In this respect, changes in the service development process and in the service management process can be seen as necessary measures for an effective use of IT systems in general (Eyholzer; Kuhlmann; Münger, 2002) and IT-based customer integration in particular. As the IT basis of customer integration are customer controlling instruments (see the upper part of figure 2), the investment in these IT instruments can be interpreted as an investment in the completion, the improvement and the enlargement of the basic resources of the company (Grant, 1991). However, IT alone is not able to change processes (Davenport, 1993), but the interplay between IT, organizational factors, and human factors is. In turn, this leads to process innovation (Hauschildt; Salomo, 2007). However, the extent of this positive correlation is determined by the pace with which the IT-induced process innovation establishes itself (Rogers, 2003). Hence, the importance of customer integration throughout the whole service lifecycle leads to a demand for adequate controlling instruments (Kleinaltenkamp; Schweikart, 2006) in every phase of the service life-cycle. Such instruments are to be found in the extensive set of customer controlling instruments including customer data bases, customer relationship management, customer segmentation, customer and contract statement of operations, customer structure analysis, customer satisfaction measurement and customer value analysis (Bax, 2004). Especially customer databases / customer relationship management (CRM) and customer segmentation are of vital importance to the business practice of our case study company, which is why this paper focuses on the use of these two instruments. In a lot of companies, IT is organised in a fragmented and island-like fashion. Different IT systems are still not integrated with each other and cannot be used together in a frictionless way (Hettich; Hippner, Wilde, 2001), although the first technological integration attempts started as early as the 1960es (Fochler, 2001). To date, relevant information about customers (Gerth, 2001) and the potential for cooperation with customers are still limited. Tools to avoid these pitfalls are customer controlling instruments such as customer data bases (Hettich; Hippner; Wilde, 2001). By definition, a customer data base is the same as a customer data warehouse: a company-wide IT system integrating and conserving all customer-related information in one central and up-to-date pool of knowledge (Hippner; Merzenich; Wilde, 2004). Somehow, this information stored in a data warehouse has to be come by. In this respect, different ways of data mining are known, e. g. classification and prognosis, segmentation and dependence analysis (Hippner; Merzenich; Wilde, 2004). Especially customer segmentation is able to identify relevant customer groups and help in9

tegrate them (Schinzer; Bange; Mertens, 1999). This segment-specific tackling of challenges results in a reduction of cost-intensive and inefficient diffusion of information (Kehl; Rudolph, 2001). In service management, the need to use customer relationship management and customer segmentation is already widely recognized (Becker; Knackstedt, 2004). But in service development, their usage is still scarce. The utilization of IT instruments in customer integration implies the application of further socially complex company resources. If these socially complex resources are hard to imitate, valuable, rare and hard to substitute, the company can combine them with the IT resources. Adequately combined with these further socially complex resources, the IT resources can display their full potential and lead to a sustainable competitive advantage. (Barney, 1991) This is especially true if the IT resources match the company’s value chain (Schiele, 2004). The systematic development of routines can be analyzed in the service life-cycle and in the course of business relations with the customer. Learning from customerspecific projects can - in the context of improvement of knowledge - be used to increase productivity in the service life-cycle if it is properly supported by customer controlling measures. Overall, the need for customer integration results from both the productivity effect of customer integration measures (e. g. Corsten; Gössinger, 2007; Büttgen, 2007; Lashoff, 2006; Johnston; Jones, 2004, Fließ, 2001) and from the complementary effect of coordinated measures that are considered a core challenge for the improvement of service productivity in literature (e. g. Baumgärtner; Bienzeisler, 2006). This leads to the following hypotheses: Hypothesis (2a): The coordination of customer integration measures in each phase of the service lifecycle can be handled better with the support of customer controlling instruments. Hypothesis (2b): The usage of IT-based customer integration in each phase of the service lifecycle enhances overall service productivity.

5.

Effects of the dynamic management of IT-based customer integration on service productivity: case study evidence

Focusing on the theoretical science aim without empirical tests is research without relation to reality. The pragmatical science (Anderson; Herriot; Hodgkinson, 2001) therefore combines knowledge-oriented and operation-oriented research (Töpfer, 2009). Apart from the described theoretical foundation, the practical relevance of the research topic is of importance as well. It is shown in this paper, that the IT-based integration of customers in the service development and service management process is highly important in enhancing service productivity. Hence, the presentation of an actual practical problem (Holmström; Ketokivi; Hameri, 2009) is the focal point of this research.

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The research project’s relevance is underlined by a case-study-based empirical foundation: the influence of IT-based customer integration is a relatively new field of research, which has not yet been thoroughly theoretically founded and is situated in the interface area between customer integration management, controlling and business informatics. This justifies the use of case studies (Yin, 1994) as an iterative learning process (Tomczak, 1992). In order to improve the informative value of an empirical study, an inquiry can be limited to one specific branch (Zahra; Pearce II, 1990), especially if the resource-based view is applied (Armstrong; Shimizu, 2007). Due to the high dynamics of technologies and markets in the IT industry as well as the high customization and interaction level, IT services are a particularly appropriate field for research and design of a dynamic service productivity management, taking into account customer integration aspects as well as the influences of customer controlling instruments.

Licence Service Lifecycle

Controllingsupported Customer Integration

As a result, this study is limited to a company from IT services, namely the Software Express GmbH & Co. KG (SWEX). Founded in 1988 and employing a staff of 35 in 2011, SWEX is located in Sindelfingen. In 2008 it opened an additional branch office in Berlin. The main business of SWEX focuses on licence consulting, licence optimization and licence procurement of standard business software for companies. Therefore, the term customer integration cited below refers to the integration of customer companies. Customer Integration Instruments Monitoring

Webinar

Complaint Management

Generation and evaluation of Licence idea

Identification and analysis of requirements

Usergroup Workshop

Licence service concept design

Survey Newsgroup

Implementation of licence concept

Customer Controlling Instruments Customer data base / CRM-system

Procurement and delivery of licence

Customer Segmentation

Evaluation Replaceand, if ment of necessary, licence adaptation concept of licence service

Improvement of Service Productivity

Fig. 3:

Dynamic Productivity Management at SWEX

The individual services offered by SWEX can be summed up under the generic term of licence services. Their distinct customer individuality requires the company to integrate the customer in all phases of the service life-cycle and to control the customer company by using different tools, which, on the one hand, both encourage and control integration, and on the other hand ensure constant service quality. Figure 3 provides a comprehensive overview over the licence service life-cycle as well as of the use of controlling-supported customer integration at SWEX. Complaint management, usergroups and newsgroups are utilized, but their importance is limited. The most successfully implemented tools of customer integration at SWEX are monitoring, sur11

veys, workshops and webinars. Customer integration is mainly supported by a comprehensive customer database which is based on a CRM system. This customer data base is successfully applied in customer segmentation. Customer monitoring in this case implies that all customer-related information is accumulated in a customer data base and analysed via the CRM system. Customerrelated information means: which customer contacted which SWEX employee at what time and on what topic? The frequency of contact and all e-mail correspondence between the customer and the SWEX employees is documented in detail. Personal conversations are briefly outlined. Even the participation of customers in further customer integration measures is documented in detail. Customer monitoring, in this case, goes far beyond customer monitoring according to the concept of Kunz and Mangold (2004). Customer controlling by means of the CRM system enables SWEX employees to create a complete monitoring profile of the respective customer. On the one hand, the monitoring profile is used to provide for optimum fulfilment of the current customer order and to ensure the best possible coordination among various SWEX staff members. On the other hand, future needs of the customer are anticipated by analysing and evaluating the customers’ needs and their buying behaviour in the past. Thus, it is obvious in every phase of the service life-cycle if the respective service suits the customer company and which needs for adaption still exist. Moreover, staff assignment is calculated in every phase of the service life-cycle, which helps to measure how productive the service actually is in every phase of the service lifecycle. Due to confidentiality, the exact calculation is not displayed in this context. But in sum, the intense evaluation of CRM data pays off in all phases of the service lifecycle. In this way, the effects on service productivity can be monitored in every phase of the service lifecycle as well as for each customer segment. Customer surveys are of special importance during the demand analysis phase at the customer company. The SWEX employees use standardized questionnaires in order to conduct an „as is“ analysis of existing processes in the customer company as part of an intensive on-site analysis. The findings of this analysis serve as a basis for licence optimization suggestions which are brought forward by the SWEX employees in charge during group sessions. The complexity of the subject matter in most cases does not allow for one-on-one interviews, but requires the presence of the manager, an engineer and an IT administrator on the part of the client company, and the participation of the SWEX employees, who support the software products of the respective producer and who are therefore familiar with the licence models associated with it. At this point, there is a fluid transition of the boundaries between the survey of employees within the scope of group discussions and the implementation of workshops in the customer company. Depending on how the workshop is defined, such a group session may well be a workshop and thus can integrate the customers even more than a survey tool alone. Even the information gained within the scope of the survey and the workshop is documented in the CRM system. The more intensely the customers participate in these discussions or workshops and become involved in the service configuration, and the more accurate this integration performance is documented in the customer controlling, the greater the positive effect on the service productivity. Furthermore, SWEX offers workshops covering topics related to licensing in cooperation with software producers on a regular basis, which serve to sensitize custom12

ers to new software products or licensing models. However, the further development of services was only a side issue during these workshops. Yet, incremental improvements in service arise when customers talk about their experiences; the employees at SWEX document these reports in the CRM system and later synchronize them with the specifics of their own services. In so-called creative workshops that are held in small groups, a topic is analyzed using creativity techniques. The results of the different workshops are used to further develop specific licence models and thus increase the service productivity. Internet-based workshops, the so-called webinars, in which only invited customers can participate, are also being used very often. As with the on-site workshop, a topic is presented by a software producer and the SWEX employees are at the customers’ disposal for questions regarding software licensing. The improvement of IT technical conditions (transfer rate, image quality and non-distortion during transmission) has in recent years - led to a sharp increase in the supply of webinars (see table 1). Year

2008

2009

2010

2011

2012 (planned)

Number of webinars per month

1 to 2

1 to 2

1 to 2

2 to 3

at least 4

Share of sales in licence services

5%

10%

12%

15%

Table 1: Development of webinars and sales in licence services at SWEX

More customers can participate in webinars than in on-site workshops while at the same time the preparation and realization effort is lower. The higher sales generated by the webinars can be achieved with the use of fewer staff capacity, which, in turn, means an increase in service productivity. In summary, it can be said that with the increasing complexity of software products licences, customer cooperation and thus its integration into the service life-cycle is getting more intense. The regular implementation of client workshops leads to an improvement of the customers’ know-how and thus increases the potential scale of the outsourcing of service components to the customer. In addition, the licensing services recorded a sharp rise in the share of sales (see table 1). As a result, the productivity of licensing services has significantly increased in recent years. The interlocking of customer integration and customer controlling has a positive impact on service productivity both in the individual phases of the service life-cycle and during the entire licence service, despite the fact that at SWEX no customer integration instruments with a high degree of integration are used. Neither customer advisory boards, nor innovation circles, nor the lead user concept (see Burr; Stephan, 2006) have hitherto been established at SWEX Another increase in service productivity can be achieved by a controlling-supported assignment of these customer integration instruments with higher integration intensity. It is possible, for example, to determine which customer is an eligible lead user. In this way, customer controlling enables a further expansion of customer integration and thus, as a consequence, a further increase of service productivity.

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6.

Conclusion

The quantitative-empirical research has shown that customer integration plays an important role in the IT-service sector. Even though some customer integration instruments did not prevail in all service companies, it appears, however, that most companies increasingly use customer integration. The qualitative-empirical study at SWEX confirms this observation. Moreover, it is obvious how diverse the possibilities are to practice customer integration in the IT-service industry and to properly support it with customer controlling instruments. The positive relationship between customer integration and service productivity has been confirmed in this case study. Service productivity can be increased by integrating customers more intensely in all phases of the service life-cycle and by properly supporting these integration measures through customer controlling instruments. Hence, hypotheses (2a) and (2b) are confirmed for the case study company. The case study shows that customer integration is a complex task. There are a lot of management-induced, project-induced and technology-induced reasons why customer integration could come to grief (Kehl; Rudolph, 2001). To what extent customer integration in general and IT-based customer integration in particular can succeed depends both on the activity level of the provider and the consumer. The extent of outsourcing and the know-how of the customer determine, in turn, how positive the influence of the customer toward service productivity ultimately is (Lasshof, 2006). Also, customer integration has to be supported by the management team within the company (Reichwald; Meyer; Engelmann; Walcher, 2007). As all these notions are positively found within the case study company, hypothesis (1) can be confirmed. However, there is still need for further research. The findings have to be examined in other IT service companies. Furthermore, the calculation of service productivity which has hitherto been carried out purely from the provider’s perspective is to be viewed critically. The working hours of customers' employees are not included in the calculation. Holistic service productivity should also contain the customer's view of service productivity. Moreover, the possibility of outsourcing sub-processes to the customer from the supplier's side should not be overestimated because otherwise there is a danger that the increase in service productivity comes at the expense of customer satisfaction and service quality.

7.

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Author Dipl. Oec. Ute Reuter Scientific Assistant Chair of Research, Development and Innovation Management Institute of Business Administration Department I Stuttgart University Floor 6a, Room 6.021 Keplerstrasse 17 70174 Stuttgart e-mail: [email protected]

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