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Scams, Shams, ERP System Integrator Tactics

April 25th, 2011 by
SAP System Integrator

SAP System Integrator

 

I recently read two articles I thought I should summarize and review here.  The articles provide two opposing viewpoints of consulting and some lessons learned for service buyers.

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This article on CIO about “7 Dirty Consultant Tricks (and How to Avoid Them)” [FN1] caught my attention.  Especially the part about ways consultants try to “extract money from their clients…”:

IT consultants are among the most slippery of the bunch. Among their favorite tricks: Using “scope change” to line their pockets, claiming expertise they do not actually possess, promising you their superstars and then sending in the rookies, purposely delaying decisions and sowing confusion as they rack up billable hours, and collecting kickbacks from other service providers. The worst ones may even hold your company’s intellectual property or systems hostage until you pay up.

The article title notes it is the consultants but in reality it is the SAP system integrators who pull these types of tactics.  While the scams and shams happen all too often it is the system integrator that uses the “scope change” tactic, does a “bait and switch” with “con”sultants who have little experience, etc.  The CIO article does concede that not all consultants are this way.

The Seven Consulting Dirty Tricks to Separate You from More of Your Money

1.  Bid low and bill high – some SAP SI’s will deliberately bid low and then change order or customize you to death.  Even though you start out with a project you believe will cost “X” they will constantly work on ways to leverage more and more revenue from you.

2.  Bait and switch – they sell the “A” team but deliver the back benchers and water boys.  Sometimes they pad their RFIs and RFPs with first class resumes for consultants who never show up for your project.  Some of the placement firms bring fakes and knowingly help them create fraudulent resumes as well (see Screening and Interview Methods to Find the Right SAP Consultant and the follow-up piece Screening and Interview Methods to Find the Right Consultant – Part 2)

3.  Using stall tactics and distractions – they avoid creating momentum and enable indecisiveness.

4.  Hostage takers – build special “trap doors” into their solutions, use password protected infrastructure, or create contracts that give the consultant / company all of the legal rights to any solutions.

5.  Kickbacks – consultants may push a product, solution, or other consultants that they get paid for.

6.  Selling you far more than you will ever need – does it meet the business requirement, or is it a sledgehammer to swat at a fly when you really need a fly-swatter?

7.  Empty suits or vampires – both will bleed you dry.  Incompetent or unqualified consultants end up on the project and bleed the budget and timeline until there is nothing left.

What an absolute mess!  Unfortunately these 7 ways you get scammed, shammed, or are taken advantage of are pretty common.  The article I referenced provides some great suggestions on how to protect your company.  It’s worth the read.

The Alternatives to the Consulting Fraud Factories

In contrast to these practices, or maybe because of them, we are beginning to see customers use small firms and individual consultants more and more.  While this is a trend that many sophisticated SAP customers are beginning to use there are also things to be concerned about here as well.  Another post presents a great counterpoint to a trend for quality consultants that is beginning to take hold [FN2].

Unlike their larger counterparts, these small one to five person consultancies seem to be more principled in their approach to growing the business. Some of the common values adopted by smaller firms and missing from the larger include:

1. Do not promise what you cannot deliver

2. Do not overextend your resources and get a reputation for poor performance.

3. Do not tell the customer what he or she wants to hear. Tell them what they need to know. They will respect you for it.

4. Network constantly on professional sites such as Linked In. Hit the “Answers” feature and accumulate an “Expert” rating from your peers in your field. This allows buyers to not blindly trust that they will get the right resource but be certain in advance.

5. Blog like there is no tomorrow. A blog is quite different than a web site. Provide good, solid information free of charge and use blog searches for synergistic businesses to team with. Teaming is an absolute necessity these days.

6. Be prepared to provide information, samples and valuable service gratis as a marketing tool. Introduce yourself and then immediately engage the client with your presentation tools available to bring your expertise to whatever topic they are interested in. Let them take you where they want to go with their concerns and their needs. Apply your presentation tools and expertise dynamically on the fly in a sincere manner to those concerns and needs and you will be in demand for follow up business.

7. Quote and bill what the client can afford and grow with him (in content and resources).

8. Be dedicated to working yourself out of a job with a specific customer and having your client take over by training him. He will remember you and recommend you to 10 others.

9. Remember growth is a function of persistence and foresight. Know where your market is headed and get their first – then write and speak about your success indirectly by helping others. Demonstrate humility and a satisfaction in helping others succeed. They will find ways to give you credit. There are ways of tooting your horn without making peoples’ lights go out.

10. Word of mouth advertising from pleased clients is a sure ticket to success.

There are a number of small firms and individual consultants who do outstanding work.  They deliver great results and help you to mitigate project risks while delivering a high quality work product.

And with this introductory post I will be starting a series on the tactics, strategies, and scams used by system integrators in their sales cycles to gain your business.  In the end they are less concerned about delivering results than they are about collecting their fees.

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[FN1]  CIO online, April 11, 2011 – http://www.cio.com/article/679330/7_Dirty_Consultant_Tricks_and_How_to_Avoid_Them_

[FN2]  The Return of Boutique Consultancies…
http://duckdown.blogspot.com/2011/04/return-of-boutique-consultancies.html

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Will Next Generation IT Finally Transform Business

April 18th, 2011 by

Technology Enabled Business TransformationNew IT Value Propositions – Moving from Operations to Customers and Innovation

Throughout everything I do as a consultant I try to categorize my activities into the three key value proposition areas of business–, operations, customers, or innovation.  Even though I have been working primarily in the supply chain areas of SAP since 1994 (SD – Sales and Distribution, MM – Materials Management, and PP – Production Planning) I have been focusing more and more on the key value areas of customers and innovation.  The big driver for my focus on customers and innovation is because that is where business is done.

By focusing only on processes, operations, and cost reductions business and IT efforts result in mass commoditization.

Certainly every company must contain, control, and reduce costs to stay competitive in the marketplace.  More and more however the companies who are able to ensure long term success are those with a more balanced focus on retaining and acquiring customers while innovating new products or services.

Where IT has been and Where IT is Going

The last 30+ years the business and technology “revolution” has focused on operations and done little to directly address the customer or innovation.  It is almost as if technology organizations only understand Henry Ford’s assembly line mentality with business processes.  The operations focus can be seen in ERP applications (like SAP), EDI or interfaces, machine logic controllers, wired and then wireless data transfer, the Internet, or any other number of technological advances.

Today’s leading companies are integrating their IT operations into the fabric of the business.  Today’s leading companies are focused on innovation and customers.

Today, innovation is about much more than new products. It is about reinventing business processes and building entirely new markets that meet untapped customer needs. Most important, as the Internet and globalization widen the pool of new ideas, it’s about selecting and executing the right ideas and bringing them to market in record time.

In the 1990s, innovation was about technology and control of quality and cost. Today, it’s about taking corporate organizations built for efficiency and rewiring them for creativity and growth. [FN1 – excerpted from “The World’s Most Innovative Companies,” see the footnote link below.]

In announcing the recent list of innovative companies, MIT noted these companies are “setting the agenda in an increasingly important market, on the verge of disrupting an established market, or creating an entirely new market.” (BostInnovation Feb 22, 2011 citing an MIT study of innovative companies).

The Operations IT Focus Has Turned All Products Into Commodities

This better, faster, cheaper automation paradigm has worked well when processes were mostly manual and labor intensive.  As more and more processes have been automated and streamlined further technological advances provide less and less return at higher costs.  Along with that, the cost-cutting chase, and the speed of automation and process improvement has dramatically accelerated the rate of commoditization of products and services.

As just one example of how dramatic this transformation is, I personally own an iPhone.  On that iPhone I have a free application that: a) uses the phone camera to capture and process product bar codes, and then b) goes online to immediately price-compare that product to local and online sources.  My wife loves it.  She can be out shopping and do real-time price comparisons.  What does this mean? 

Every major product seller is now a commodity outlet.  Every product can be comparison shopped in real time making it a commodity also.

As a product supplier, your customer does not have the option of you re-numbering, or using a different SKU.  Why?  Because the very same ability to search for the lowest price is the same tool that finds your product to begin with.  Changing the SKU would be more counterproductive to sales than engaging in the commodity-based price wars.

The future of technology and business integration provides the two areas of business most neglected by IT or ERP or technology to focus on–, innovation and direct customer interaction.  While I personally believe we are in the early “Wild West” era of social media tools, their hype and popularity is proof enough that the marketplace as a whole recognizes a gap in customer interaction that must be filled.  The real question is what will tomorrow’s successful social media business models look like after all of the hype and snake oil sales are finished.

Next Generation Enterprises – Will They Transform Business?

Already we are beginning to see seeds of transformation being sown.  All around the globe companies are beginning to focus more directly on innovation and customer focus through technology integration.

The hype around social media and Web 2.0 is beginning to give way to a few practical applications.  The same can be said for “cloud” computing even though it is still heavily immersed in the “hype” phase.

These are all IT solutions.

What about business integration?

What are the details of how technology and social media will bring about a revolution in customer focus and innovation?

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[FN1]  The World’s Most Innovative Companies (Bloomberg)
http://www.businessweek.com/magazine/content/06_17/b3981401.htm




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Do You Know When To Do SAP Custom Development?

April 11th, 2011 by

Use SAP Best Business Practices for commodity processes and development for value added processesUse SAP Best Business Practices For Commodity Processes But More Carefully Evaluate Competitive Processes

The debate and discussion around SAP best business practices usually assumes an “either-or” mindset.  Either you use the SAP best business practices as they are or you abandon them (for more background on SAP’s “Best Business Practices” see What are SAP Best Business Practices Anyway).  Several commentators suggest you should not do a software vendor’s “best practices” because you are adopting the “herd” mentality and will not be competitive in the marketplace.  They completely ignore the reality that some processes do not need huge development investments.  SAP provides a number of tools and resources to evaluate its solutions for your enterprise’s business processes (see Using SAP Solution Composer for SAP Scope – Process Alignment).

Commentators who are broadly against “best practices” have failed to recognize that there are different types of business processes.  One type are what I call “commodity processes” or the things you must do to run business, that everyone does, but adds little or no value to reducing cost, increasing revenue, or improving margins.  The other type are “value added” processes where the process itself (not ancillary manual steps) directly aid in reducing cost, increasing revenue, or improving margins.  Some business processes justify custom development when a standard solution will not do certain business critical processes (see e.g. Lower SAP Application Support Costs – TCO – by Reducing Custom Solutions).

Value added processes must directly contribute to market share or address a specific pressure from a competitor or they are commodity practices which are good candidate for “best practices.”  By reducing costs or increasing revenue and margins you are directly affecting your competitive posture in the marketplace.

What Are Value Added Processes in the SAP Organization?

Let me clarify one thing here, a “value added” process can be any process in a company.  In one company or environment a process may be a commodity process, however in another company, or industry, that same process may be a value added process.  The test for a “value added” process is whether or not it adds to your business marketplace competitive advantage.  That generally means it has to reduce cost or increase revenue in more than a minimal way.  As an illustration ask yourself, if you significantly increase your margins on a slow moving, outdated, low volume product or service is it worth a huge amount of time and effort?  Was the investment worth it?

Management’s primary responsibilities are to increase revenue, reduce cost, and improve margins

A value added business process will generally have some type of reporting requirement attached to it.  Some way to measure its performance because the process is critical to the organization’s mission.  If you have developed KPI’s, goals, metrics, or reports for a particular portion of your business processing you can be sure it is a good candidate for special attention as a “value added” process (see Why Indexed KPIs are Critical for Business Performance and Success and Using Key Performance Indicators for Building a Strategy Focused Organization).

What are Commodity Processes in the SAP Organization?

In most companies “commodity” processes would include purchasing, warehousing, inventory, distribution, or other routine processes.  Commodity processes and those business functions that do not have a direct impact on your competitive position.  If you are a third-party logistics provider then your competitive processes would include warehousing and distribution.  It is the core of your business and what you do.  However in other businesses those would be commodity processes.  If you are a consumer products company then sales and marketing processes would be value added where purchasing and inventory would be more commodity processes.

Worse still, in recent years IT has been seen as a “commodity” resource to be outsourced.  As IT and technology functions have become more and more focused on cutting costs and shaving pennies from a few process areas they are finding smaller and smaller returns at more and more cost.  As new technology is rolled out and it stabilizes the business and senior management see IT as more and more of an expensive cost center with functions that can be performed elsewhere at a lower cost.  IT organizations everywhere must begin to aggressively focus on business integration and value realization or become prey to outsourcing themselves (see IT Outsourcing, Off Shore Support, Cost Cutting and IT Department Changes).

SAP Software Best Business Practice Processes

While I have long advocated for business process engineering rather than software engineering there are times when custom development is justified.  The key to understanding when you might choose one approach or the other is related to whether a process (or sub-process) is a “commodity” process or a “value added” process.

Considering cost, revenue, and margins separated from marketplace competitiveness is misplaced.  Unless there is some significant competitive advantage or directly aligned business driver then only standard functionality should be used.

When you consider your SAP software investment it would provide the greatest business benefit to pay special attention to value added processes. Do not waste time or development effort on commodity processes.  Spend the time, effort, and money on change management for commodity processes because after the initial change cost ongoing Total Cost of Ownership (TCO) for these SAP processes will be the least expensive (see Where do you Start with SAP Return on Investment or SAP ROI?).  Regression testing, patches, fixes, new functionality, and all of the other things you do with SAP business applications will be easier and less expensive for the commodity processes.




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