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More on Vendor Selection Criteria and Methods for ERP Project Success

June 29th, 2010 by

Make the Right IT DecisionUsing the RFI and RFP Process for your ERP or SAP Education

One of the key vendor selection processes is to use the RFI (Request for Information) and RFP (Request for Proposal) processes to solicit comments, methods, tools, and resource examples of how knowledge transfer will be handled.  In other words, be sure to actively engage in the RFI and RFP processes rather than simply using them as some kind of a checklist or scorecard for the correct vendor.  This is your first and best chance to gain badly needed knowledge for your implementation project. Be sure to leverage a Request for Information process and the RFP process as an educational experience (see Breakthrough Project Success: 3 of 4, Vendor Selection and Contracts).

The RFI and RFP process should also be leveraged to insist that every vendor provide actual sample templates, resources, project plans, tools, and any other item they claim will help ensure implementation success.  If necessary, proactively volunteer to sign an NDA (Non-Disclosure Agreement) and put in writing that you will not provide copies of any of the material to any of their competitors.  Note in the RFI or RFP that non-response to this item WILL disqualify them [**].

Successful Vendor Selection Process Best Practices

This is a followup to the previous post on SAP Implementation Partner or Company Selection Criteria.  That post reviewed a 2009 academic study from the country of Romania on successful ERP vendor selection criteria and processes.

The Romanian study (which I believe has fairly broad application) lined up several factors for a successful vendor selection process (Hurbean 2009, pg. 4-5).  Those include:

  • Develop an implementation plan prior to SAP implementation company selection
  • Have a clear understanding of the business with the reasons for the SAP implementation
  • Act as a change agent and avoid custom coding unless there is a clear business driver or business need

On developing an implementation plan and acting as a change agent you can use the RFI (Request for Information) process and the RFP (Request for Proposal) processes to have the vendors educate you.  For example, you may wish to ask each proposed vendor for example implementation plans from companies of similar size and similar type operations.  You may wish to ask for sample change management and training plans, or the number of consultants that were needed for each of those activities. 

During this process be sure to start out with a “checklist” for your vendor selection critieria, but routinely update that checklist as you go through the RFI and RFP learning process.

Vendor Selection Matrix of Resources, Budget Requirements, and Best Practices

If you use the RFI / RFP process well enough you can get a fair number of vendors to compare implementation processes with.  If there are plans and estimates (dollars, man hours, etc.) that are extremely high or extremely low in comparison to all of the others I would either ask for clarification on how that few resources can handle the responsibility, or why so many resources are needed – or you may just eliminate those vendors from consideration [***].  There may be some genuine validity to the points made on the number and quality of resources needed, but if vendors make certain claims be sure to spell them out in writing and include those claims by the vendor in your final contract agreement. 

To get a reasonable idea of the real resource and planning needs I would tend to stay near any clustering of effort, timeline, resources, that several vendors provide.  It is highly unlikely that any two of them will be exact, but they may be close enough to begin to make reasonable comparisons and use their information. 

For the business, that will take some effort to ensure you have defined the number of legal entities (company codes) number of physical locations (plants, warehouses, distribution centers), the number and types of customers or vendors, the number and types of materials, etc.  This will help to ensure proper scope and ensure a more even “apples to apples” vendor comparison.

Before you Make that Final SAP Implementation Company or Partner Selection

The one thing that can not be overlooked is the actual SAP consultants that an implementation company provides.  Do NOT accept generic resumes in the final round.  Once you have arrived at your short list of vendors, insist on actual resumes from the consultants that will be on the project.  Ensure that any RFP you offer spells out that this is a requirement, and ensure that any agreement penalizes or even disqualifies any vendor for any changes or substitutions of more than x% or y number of resources at the project start (there is a high turnover to the truly talented SAP consultants so many consulting firms experience a normal annual turnover of 15 – 25%). 

Do not hesitate to review, question, and even randomly spot check consultant references that are provided.  You will spend a LOT of money on them over the course of the project, far more than many of your company’s senior level management, so the up front due diligence can not be underestimated. They must be able to bridge the technology to business gap by possessing the following skills for success.  As I have previously outlined in Screening Methods to Find the Right Consultant – Part 2, a good consultant must possess the following skills:

  • Facilitation skills
  • Meeting skills
  • Process mapping
  • Business case (or whitepaper) development
  • Problem solving
  • Organizational dynamics

If the consultants they propose lack these skills you probably do not want them on your project anyway if you expect good results.  When it comes time to screen or interview them you might want to think twice if there are any type of language barriers to the employees you will be assigning to work with them.  After all, as I have said before, why does any company ever hire a consultant who has barriers to consulting?

Any consultant proposed by the SAP implementation company or partner will need all of these skills to perform the following project activities:

  • requirements gathering sessions,
  • design sessions,
  • blueprint writing,
  • solution assessments,
  • problem resolutions,
  • fit / gap analysis,
  • business process design,
  • translation of SAP / ERP speak to business language,
  • knowledge transfer,
  • training,
  • and organizational change.

The ability to communicate clearly, in an understandable manner, and to be able to translate application processes and requirements into intelligent business language is a key to these activities. How else are you going to get any kind of a decent blueprint, specification documents, or potential whitepapers explaining your options? If they are in SAPanese or other technical jargon they are virtually meaningless to a business driven project. If there are language barriers or the individual is too technical and unable to speak in plain, non-techie type language how will knowledge transfer and critical change management activities be carried out?

That list of the required consulting activities can also be used as part of your vendor selection checklist for templates, tools, resources, experience, projects plans, or other items needed for a successful project.

Vendor Selection Conclusion

In the end if the SAP implementation company or partner uses a good methodology, decent tools / templates, can help you understand key change management requirements, and ensures you have the best resources you are likely to be successful.  Any one of these areas can create a handicap right from the beginning and the maturity level of SAP is strong enough there is just no reason for it.

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Hurbean, L. (2009). Factors influencing ERP projects success in the vendor selection process.  West University from Timisoara (Romania), MPRA Paper No. 14430, Faculty of Economics and Business Administration.

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[**]  One of the routine scams that some SAP implementation companies use is to claim some special methodology or some special tools for implementing SAP.  This is almost always just some reformatted version of SAP’s ASAP (Accelerated SAP) Implementation Methodology and it is a scam.  The other routine scam by some SAP implementation partners is to claim that they use the SAP ASAP Methodology the way SAP provides it.  They may give you a couple of generic templates from that tool, but they have no actual client examples where they have actually used those templates and successfully adjusted them for the client.  You are looking for some type of redacted templates from actual client projects.

[***] Be VERY careful here.  A low number of resources, and a seemingly low budget may be a common shell-game.  Some vendors will come in far lower than others just to change order you to death and end up costing as much or more than the premium vendors in the end.  They may also be using “second string” or only slightly experienced consultants to keep their margins decent but costs low.  In the end this may work for an SAP INSTALLATION but not for an SAP IMPLEMENTATION.  If you are looking for a return on investment from the SAP implementation then this will likely not work.  On the other hand, the provider with significantly higher resource and budget requirements may be a large integrator with huge overhead that they have to support.  So you may be paying a premium in the number of required resources and budget.  In the end you control your own project fate and the more educated you are the more sophisticated of a service buyer you will become.

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A New SAP Implementation Methodology and Implementation Steps

June 28th, 2010 by
SAP Project Dimensions

SAP Project Dimensions

Studies have shown that there is a critical disconnect between projected benefits in business cases for IT investments and actual value achieved, because so many firms focus on going live with a project rather than its value delivery. An SAP / ASUG best-practice survey on the ability to capture the projected benefits of an IT project found that 73% of companies do not quantitatively measure value post-implementation. (SAP Executive Insight Series, pg. 7, 2009).

Critical business benefits for an SAP project require taking a hard look at the enterprise and its goals or direction [FN1].   The successful SAP project scope must encompass more than just operational considerations (process improvement and automation); they must include the critical components of focusing on the customer and product or service innovation (see e.g., Process Execution of Business and IT Innovation).  This is a significant departure from current consulting and system integrator paradigms.  Modern business no longer has the luxury of relying on static business processes that pay lip service to the customer or ignore the imperative for innovation.

Across the enterprise landscape, globalization, the Internet, disruptive innovation, and the threat of rapid commoditization have ignited the speed of change. It’s no longer a matter of keeping up, but rather of continuously reassessing, reinventing, and transforming operations on the fly. The pressure to adapt business processes—once thought of as airtight—at an ever-accelerating pace has never been greater… Rigid infrastructures and organizational models that hamper agility prevent businesses from growing or even coping (Bouhdary pg. 52, 2008). [T]he successful enterprise must think of its business as a holistic network, able to adjust and make changes on the fly and also able to free up resources for innovation rather than administration (Ibid. pg. 53, 2008).

This is obviously not a small task, but it is achievable.  To make this happen takes a conscious, concerted, and sustained effort to link technology to business needs and not just to implement technology for the sake of technology.

Companies that implement enterprise resource planning (ERP) systems aligned with the overall business strategy enjoy performance gains unknown to firms who do not implement these solutions…

While many commentators would suggest this approach takes a new SAP Implementation Methodology, in reality the approach, tools, techniques, and requirements have been spelled out for several years in the SAP ASAP methodology.  Unfortunately too few companies bother with following that methodology even though they routinely commit to it in all of their sales presentations and literature.

SAP Projects Must Produce Business Benefit, ROI, while Reducing Current TCO

Research indicates that ERP benefits require in depth discussion and strong coordination of goals and resources across business and IT personnel (Willcocks and Sykes, pg. 33-38, 2000).  These benefits, or the measurement of ERP success, are at least partially dependent on managing requirements throughout the entire ERP lifecycle (Holland and Light, pg. 1630-1636, 1999), including acquiring and managing user requirements (Ginzberg, pg. 459-476, 1981).

To manage the ERP lifecycle, goals must be established along with the education and communication of the long-term impact of the goals on the organization (Chang, pg. 6, 2004).

The answer to any successful business transformation is the establishment of open communication channels woven throughout the firm and its network of partners…

Research conducted by faculty at New York University, Massachusetts Institute of Technology, and Georgia Institute of Technology shows that companies that implement enterprise resource planning (ERP) systems aligned with the overall business strategy enjoy performance gains unknown to firms who do not implement these solutions (SAP Executive Insight Series, pg. 4, 2009).

The next generation of technology alignment will require a much more collaborative environment where the business is able to extract critical information from all of the business stakeholders:

  • employees,
  • customers,
  • vendors, and
  • any marketplace or trade sources.

Economic pressures, global competition, changing political landscapes, and the explosion in information sources available to consumers have forever altered the competitive business landscape.  While capital is not as easily available as in times past, it is still far more readily available across the globe, and in developing nations like never before in history.

The rise in consumer power, facilitated by easy access to capital and the Internet, is converging with technology to drive rapid commoditization, necessitating the continuous assessment, reinvention, and innovation of business models at greater speeds…  The answer to any successful business transformation is the establishment of open communication channels woven throughout the firm and its network of partners, making it a hotbed of inventive ideas. An organizational structure must facilitate and nurture those ideas so they can quickly find their way to the top and become strategic assets (Bouhdary ppg. 54, 2008).

Tomorrow’s most successful enterprises will be able to harness the various sources of information and then quickly assimilate and distill the information into actionable objectives.  These actionable objectives will be aligned to key goals and competitive pressures unique to that company or organization [FN2]

The Marketplace is Finally Seeking the Value SAP Implementation Methdology

The marketplace is beginning to show signs of demanding a new SAP Implementation methodology; a new guide or new implementation steps focusing more clearly on the two business value propositions of innovation and customer focus. The marketplace is finally beginning to demand the value portion of the SAP ASAP Implementation Methodology that has been around for over 10 years that I know of.

—————————————————-

[FN1]  KPI Development, Business to Technology Alignment, and getting real business benefit from technology investments.

[FN2]  The next generation of enterprise applications will rely heavily on the integration of collaboration.  These next generation systems will focus on how a company can integrate and develop both collaboration and customer-centric products and services.

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Bibliography

Bouhdary, C., (from SAP Fall / Winter 2008). Built to Adapt: High-Velocity Transformation and Integration.  The Journal of the EDS Agility Alliance, Volume 3 Issue 3, http://www.eds.com/synnovation

Ginzberg, M. J. (1981). Early Diagnosis of MIS Implementation Failure: Promising Results and Unanswered Questions. Management Science, Vol. 27, Iss. 4.

Holland, C. and Light, B. (May / June 1999). Critical Success Factors Model for ERP Implementation, IEEE Software.

SAP Executive Insight Series (September 7, 2009).  Accelerate Value Creation: The Virtuous Cycle of Using Technology to Maximize Business Value.  http://www.sdn.sap.com/irj/scn/index?rid=/library/uuid/70fa08b0-cf81-2b10-a396-89d18932fbd0&overridelayout=true (retrieved 4/23/2010).

Willcocks, L. P. and Sykes, R. (2000). The Role of the CIO and IT Function in ERP. Communications of the ACM, Vol. 43, Iss. 4.

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Change Management Strategies and Knowledge Transfer Processes for a Successful SAP Project 1

June 24th, 2010 by

Change Management and Knowledge Transfer

Why SAP Process Understanding, Troubleshooting Ability, and Knowledge Transfer Techniques are Missing in SAP or ERP Projects

Because an ERP system like SAP has a single database or a single instance of data, a full process chain of dependencies is developed.  Every organizational function becomes dependent on the process steps before and after it no matter what department or area is responsible (Kallinikos, 2004).  Because of these dependencies, a data error is no longer contained in a single isolated system as in times past.  Each data error, or each problem that occurs has both upstream and downstream consequences and the corrections cannot be made in isolation. Improper configuration or system design can have huge impacts on the amount of effort to correct the data and to maintain the system in an ongoing fashion (Sia and Soh, 2002).

A good consultant’s role on an SAP or other ERP project is to guide the company through design decisions and make the system settings to support those design requirements.  This is usually called the “implementation” process.  During this process they should be focusing on knowledge transfer as well.  However, many of the “consultants” who implement SAP or other ERP systems have little process or troubleshooting understanding (see A Cautionary Tale About SAP Knowledge Transfer).  As a result of this lack of consulting experience, or of the number of fakes in the marketplace, knowledge transfer is usually not sufficient.

Speaking in technical terms may make a consultant SOUND smart or knowledgeable, but it does not mean they ARE smart or knowledgeable. The mark of experience, intelligence, and knowledge is the ability to make the complex or technical seem simple or at least understandable.

For long term business benefit and ROI your implementation vendor must provide consultants with solid overall process understanding.  Without this process understanding, as well as their module specialization, those consultants will not  be able to achieve a process oriented implementation.  If they do not have a process understanding how will they help you realize any process efficiencies or improvements during the design process?  Without the overall process understanding how can they guide your company through the change management process needed for competitive business transformation?

If you fail to demand that the SAP implementation vendor provides strong end to end process consultants your company will struggle with day to day operations after the consultants are gone.  Without those strong end to end process consultants your transition to proficiency with the system will take much longer and be more difficult.  In the end any increases in productivity, or in business value will take much longer to realize, if you ever realize them.

SAP systems are typically implemented for business transformation.  That transformation generally is related to process improvements, automation, and customer focus; to address competitive pressures and business value propositions.  One of the most important components of that business transformation effort is the change management and knowledge transfer (however you describe those activities).

Achieving SAP Maturity by Using the Correct Knowledge Transfer Techniques

Business transformation and change management techniques are often described by many different names:  knowledge transfer, learning organizations, sustainment, production support, knowledge management, agile enterprises, etc.

There are a number of quality change and training programs available for SAP projects but few of them achieve a level of competence needed for an SAP Center of Excellence.  As the next post lays out, Change Management Strategies and Knowledge Transfer Processes for a Successful SAP Project 2, change management and knowledge transfer for business transformation requires several activities.  A more complete list of knowledge transfer methods includes:

  1. Transactional processing (typical keyboard training).
  2. Business process understanding (some projects use this method with transaction flowcharts for showing dependencies).
  3. Master data dependencies (few projects do this level of end user training because it is generally the implementation consultants who have this level of understanding).
  4. Operational processing (fewer projects still do this type of training because this is the production support “troubleshooting” type of training that requires seasoned consultants to be on site long enough to help users work through the issues).
  5. Ongoing knowledge transfer activities such as ad hoc troubleshooting meetings with all affected users (work through problems as a group in a conference room).
  6. Continuing communication about tips and tricks after the system is live.

For long term success in the marketplace, beyond the operational excellence proposition, a continuing change and transformation program needs to be undertaken after the system is live.  This requires post production support efforts to begin evaluating real areas of opportunity in the marketplace.  Organizational and business change is no longer an option, as Mike Myatt notes, it is an imperative in today’s global economy (see Leading Change and Change Management http://www.r3now.com/leading-change-and-change-management).

Poor Knowledge Transfer Planning or Methods and Implications for Long Term System Support and Cost

One of the biggest workforce readiness problems with any SAP implementation is that the consultants who implement the system rarely have any significant production support experience.  Without that production support experience, and the end to end process understanding, it is impossible for meaningful knowledge transfer techniques you need for long term success.  Without the understanding of support they are unable to address items 4, 5 and 6 listed above.  And without that complete level of knowledge transfer organization maturity takes much longer.

That lack of production support experience (and I do not mean the month or two after go-live, but longer term support) means these consultants don’t know how to design a solution that avoids some of the “lessons learned” from the past.  They do not know how to prevent you from “driving off the road” with your solution after you go live because they have never had to live with the decisions and “solutions” they have provided.  Most of the consultants who come to these projects do not understand how to untangle, resolve, or fix problems that occur in the system when it is productive (cf. Scott and Sugar, 2004).  Because they aren’t even aware of what to expect in a live environment they don’t have any basis to transfer that knowledge of troubleshooting techniques or methods to you as the customer.  As a result your support pains may be far greater and last much longer than you anticipate.

This same lack of consultant experience with post-production issue resolution prevents them from being able to transmit operational understanding to you, the client.  In other words, consultants without deep and broad experience are not capable of ensuring you have a relatively smooth go-live.  So not only do they fail to design solutions that are more streamlined or automated, they have little ability to ensure you have a smooth go-live experience.  When you combine this lack of support experience with the number of outright fakes and frauds in the SAP consulting space it is no wonder there are so many unhappy ERP customers (see Screening Methods to Find the Right SAP Consultant Part 1).

My experience has been that consultants who lack this broad and deep experience with production support rarely know what needs to be tested before the system is live.  And without adequate testing you can expect to find ongoing data and system design or setup problems for some time after you go live.

How Do You Remedy the SAP or ERP Knowledge Transfer Plans and Methods to Support Change Management Processes?

  1. If the consultants speak in overly technical terms, have a language barrier, or if there is a lack of overall process understanding ask your SAP implementation vendor to replace them (see Screening Methods to Find the Right SAP Consultant Part 2).  Speaking in technical terms may make a consultant SOUND smart or knowledgeable but it does not mean they ARE smart or knowledgeable. Baffling the uninitiated with technical jargon is a classic smokescreen to mask inexperience and incompetence. The mark of experience, intelligence, and knowledge is the ability to make the complex or technical seem simple or at least understandable.
  2. Communicate to ALL internal company project members before the project begins that they will be responsible for long term support and training of end users.  Let them know that they must immediately notify project management if any consultant(s) have significant barriers to transferring knowledge or understanding.  This must be communicated early in the project because by the time the knowledge transfer for training begins it will likely be very disruptive and risky to make the needed resource changes.
  3. If you need to remove a consultant don’t wait until the timeline is so tight it would create a significant project risk. Include a contract provision that if a consultant is replaced for lack of skill, language barriers, or other reasons related to skill, performance, or ability to ensure knowledge transfer that a credit for at least the prior 4 week’s billing is due (four weeks is reasonable for you to discover the problems and is not unreasonable to insist on a credit).
  4. Avoid customized or technical solutions for anything except mission critical requirements or for solutions that directly address business goals and marketplace competitive pressures (see SAP Implementation Focus, Software Engineering or Business Process Engineering?).
  5. Use the RFI and RFP process to solicit comments, methods, tools, and resource examples of how knowledge transfer will be handled.  Be sure to leverage a Request for Information process and the RFP process as an educational experience (see Breakthrough Project Success: 3 of 4, Vendor Selection and Contracts).
  6. Use the RFI process to ask for sample consultant resumes, and the RFP process to insist that final resumes for the actual project must be submitted.  Note in the RFP that any non-response may disqualify the vendor.  SAP is mature enough that there is no reason an SAP implementation vendor should have problems providing key resources.
  7. Check with client references from the consultant’s resumes who are submitted (and not the sales pitch references) for application skill, ability to do knowledge transfer and for change management skills.  Learn about  Protecting Yourself from SAP Consulting Fraud.
  8. Construct your services contract with an expectation of knowledge transfer (which I define as “operational independence”) or with a penalty for failing to do so.    For some ideas on how to structure a contract agreement to cover this see the section titled “Operational Independence is the Key Success Criteria or Measure of SAP or ERP Knowledge Transfer” toward the bottom of the post  A Cautionary Tale About SAP Knowledge Transfer.
  9. Be ready for a drop in productivity right after the system goes live.  However this should be a temporary situation and the better the knowledge transfer and change management has been the less pronounced and shorter the duration will be.  If done successfully there should be an improvement in overall productivity after a short (and shallow) initial drop.
  10. As you move into support mode after going live then begin to document the transaction processing steps necessary for fixing, resolving, or troubleshooting problems that arise.  Conduct weekly or bi-weekly training and knowledge transfer sessions to internal employees and provide different tips, tricks, or techniques for problem solving.  During the production support period helpful fixes, reports, or tools will come up to resolve issues.  These should be more broadly communicated.
  11. Monitor progress within each process area and continue to keep the communication program going within the company after the system goes live.

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Kallinikos, J. (2004), “Deconstructing Information Packages. Organizational and Behavioral Implications of ERP Systems.” Information Technology and People, Vol. 17, No. 1, pp. 8-30.

Scott, J. and Sugar, D. (2004), “Perceived Effectiveness of ERP Training Manuals.” Proceedings of the Tenth Americas Conference on Information Systems, New York, pp. 3211-3215.

Sia, S. and Soh, C. (2002), “Severity Assessment of ERP-Organization Misalignment.” Proceedings of the Twenty-Second International Conference on Information Systems, New Orleans, pp. 723-729.




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