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Integrating Business Stakeholders as Part of SAP IT Convergence

August 29th, 2011 by
Business to IT Convergence with an SAP Center of Excellence

IT Convergence

The other day I was having a conversation with an IT executive from one of America’s largest companies.  I was really interested in his perspective as a hard working senior level IT insider.  We started talking about the role of IT and business as well as the future of business and technology.  In the process I relayed my passion for how IT needs to integrate with the business and how the future was going to change significantly (see e.g. What is the Proper Relationship for the CIO, CEO, and CFO?).

I gained a new appreciation for how difficult an IT executive’s job can be when the economy is in turmoil.  I’m sure my comments and perspective were challenging but here is part of what I gained from that conversation (my assumptions and my “read” may be wrong)…

The wider global technology discussion (inside and outside of the company) is putting real pressure on IT return on investment, IT Convergence, and full integration with the business (see Steps to Achieve SAP IT Convergence).  Even while all of this takes place there is still a critical need to stay on top of technology trends and be sure the organization does not stagnate.  To stay competitive what does he do with “cloud” processing, do they need different applications for some of their processes (CRM, APO,SRM, etc.), what about social media (does it even fit), virtualization, shared services, service excellence, outsourcing, in-sourcing, etc., etc., etc.

This executive’s IT organization is being challenged to do more with less.  As a result of cost-cutting pressures his organization is having to look at outsourcing while he also has to maintain a positive and upbeat appearance in the face of working through difficult cuts.  He has to continue encouraging and rallying the troops while some of them will not be there.

A Simple Response to the Nagging Problem of Business IT Convergence

With all of this background in mind one of his responses to me set me back a moment for its simplicity, candor, and most of all the underlying frustration.  It is certainly one of those very difficult struggles that many corporate technology leaders today face:

“What is the business responsibility for this?”

The business not only has responsibility but they have to help drive solutions and delivery. The various business stakeholders must see, understand, and then accept their role in developing the technology roadmap. And once it is developed they must help ensure its execution.

The Business to IT Convergence Solution That Was There All Along

The IT Convergence approach in the SAP enterprise is partially based on best practices around IT Governance.  By creating a governance structure that involves and integrates both the business and IT stakeholders you gain business buy-in and involvement.  I have written a solution brief on this approach and provide a free, no-obligation MS Access application to build technology roadmaps (see the Solution Brief, governance process, and application overview here:  Beyond Technology Alignment )

The basic takeaway here is that business involvement is critical.  They are already making technology investments, with, or without your involvement. So it is critical to gain that convergence so that technology investments are performed as a partnership and not in isolation.  As a recent Harvard Business Review post by Ray Wang notes:

“[O]verall corporate tech spending is up by 17 to 20% in our latest data, spending by IT departments is flat at best. It’s business leaders, not their IT colleagues, who are driving purchasing decisions.”

Coming to Terms with the Consumerization of IT, http://blogs.hbr.org/cs/2011/07/coming_to_terms_with_the_consu.html and a followup with more details on his site at:  http://blog.softwareinsider.org/2011/08/22/mondays-musings-balancing-the-six-ss-in-consumerization-of-it/ (both retrieved 8/23/2011)

So the key here is to integrate the business into the IT and application infrastructure.  One way to do that is through leveraging SAP steering committee skills and business connections to ensure meaningful involvement by IT.

Additional Steps to SAP IT Convergence – Creating the Center of Excellence

Last week’s post provided a few high level steps to achieve SAP IT Convergence, and this week I am adding to that list the following items.

  • Pursue business executive sponsorship but don’t wait for it to get started.
  • Start a communication program
  • Engage at all levels of the organization
  • Conduct one or more pilot programs and capture lessons learned
  • Hold IT staff accountable for participation
  • Don’t let available tools stifle participation or innovation

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Steps to Achieve SAP IT Convergence

August 22nd, 2011 by
SAP IT Convergence Best Business Practices

SAP IT Convergence Practices

Last week’s post on SAP IT Convergence is About Business Focused Integration provided an overview of Business – IT Convergence and why it is important.  This week we look at some of the key principles around creating SAP IT Convergence including some steps on the path to convergence.

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What is the Difference Between Business to IT Alignment and Business – IT Convergence?

There is an important distinction between convergence and alignment. Business to IT alignment works to mature the IT organization for synergy in applying technology to business goals.  Convergence on the other hand seeks to blur the lines between IT and business–, IT becomes a key component of the business itself.  The alignment seeks to get IT and the business to work together, convergence seeks to fully integrate the IT organization into the business.  Alignment is more like transactional processing and is focused on operations, convergence seeks to integrate IT functions so they have a direct impact on customers and markets.

Business & IT Alignment is the degree to which the IT applications, infrastructure and organization, the business strategy and processes enables and shapes, as well as the process to realize this (Silvius and Smit, pg. 2, 2011 citing Silvius, 2007).

In the last several years there has been progress in Business to IT Alignment through employing the “SAM” (Strategic Alignment Model) (Silvius and Smit, pg. 2, 2011 citing Luftman, 2000) but there is still much further to go.  Rather than alignment, the real domain of IT Convergence is around business value and one widely accepted academic definition around this is “[b]usiness value can only be derived from the efficient and effective utilization of information” (Hedman pg. 2, 2010 citing research from 2000).

What is Wrong with Business to IT Alignment?

As I continue to explore these topics a consistent theme continues to emerge–, SAP, IT, or the technology organization are supposed to “work with” the business toward alignment.  So what’s wrong with that?  This approach allows your technology organization to stay separate from the business –, true integration or convergence never really occurs.

IT Convergence occurs where business and technology grow together causing business opportunities to expand

Business to IT Alignment creates a focus on operations (which is important) but too many information silos continue to exist.  Convergence on the other hand creates efficient and effective utilization of information to affect business outcomes, not just measure business activity. 

Business to IT Alignment is focused on business activity (transactions) while Business to IT Convergence is focused on business outcomes (results).

Because of the lack of IT Convergence the separation of the technology organization from the business causes them to specialize in providing information, they leave the business portion of the “utilization” of the information up to the business.  Some of the symptoms of this are when IT waits for the business to tell them “we need x report in y format” or “we need to do z type of processing.”

SAP IT Convergence Integrates the Technology Organization and Busines

During your SAP project one of the key benefits to the business is the process oriented integration of all departments.  The whole business comes into a single database with opportunities for both improvement and standardization.  Organizational silos are broken down and dependence across the entire process chain is created.  Throughout this difficult transition  (and after the SAP go-live) the SAP or IT organization remains separated.  Beyond reactive support (help desk, enhancement requests, bug fixes, etc.) there is little done to create IT Convergence between the business and IT functions.

SAP IT Convergence is Focused on Business Integration and IT Innovation

Stop and think about this recent quote by Mark Dean, Engineer of the original IBM PC:

Innovation flourishes best, not in applications or hardware but, in social places where people and ideas meet and interact…

This is what SAP IT Convergence is about.  How does this apply to your SAP or IT organization?  This whole idea goes beyond technology and integrates the interaction of business and IT to converge the organizations.

A converged SAP organization uses technology as a change lever for business competitive advantage.  The primary focus is on innovation and customers by leveraging SAP, IT support staff, and other technology investments to achieve measurable business outcomes.

SAP IT Convergence occurs when IT is part of the business and not just SAP, IT support, or the IT organization.  A few of the characteristics of what an SAP IT Converged organization looks like:

  • SAP and IT staff communications, internally and externally, are more in business language rather than technology.
  • Proactively seeks out new business opportunities.
  • Able to interpret, and then implement, business marketplace requirements by turning them into technology solutions.
  • Adapts to business market conditions.
  • Not worried about the latest “techie buzz” like social media (Twitter, Facebook), cloud, etc. unless there is a direct business marketplace connection.

I describe this full SAP IT Convergence as an SAP Center of Excellence–, if you would like more understanding around the SAP Center of Excellence concept please see this SAP ASUG presentation on SAP & Business Convergence.

Conclusion on Steps to Achieve SAP IT Convergence

As time goes on I will address many of the items below in more detail.  Here are some of the key things to consider for creating IT Convergence within your SAP organization:

  • KPI full court press
  • Steering Committee Engagement
  • MBA in the organization
  • Mobile BYOD
  • Internal consulting on business direct buy technology solutions
  • “Exchange staff program” to integrate the IT organization into the business
  • Invest in technical and NON-TECHNICAL IT training
    • Facilitation skills
    • Questioning and Negotiation
    • Meeting skills
    • Conflict management and resolution
    • Managerial skills

This approach helps your organization develop business skills and business understanding which naturally leads to the better utilization of technology and information.  SAP IT Convergence is impossible if you can’t both speak the same language and have a similar cultural understanding.  Since it is unlikely that the business is going to learn ABAP, Java, SQL, or how to make settings in the IMG, it is up to you to be the Business IT ambassador to bridge the gap.

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For more information and background on the concept of IT Convergence in the SAP enterprise you might want to consider the following posts:

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Hedman, J. (2010), ‘ERP Systems: Critical Factors in Theory and Practice’, Center for Applied ICT, Copenhagen Business School.

Luftman, J. (2000), ‘Assessing Business-IT Alignment Maturity’, Communications of the Association for Information Systems, Vol 4, Article 14.

Silvius, A. (2007), ‘Business & IT Alignment in Theory and Practice’, 40th Hawaii International Conference on Systems Sciences (HICSS-40).

Silvius, A. and Smit, J. (2011), ‘Maturing Business and IT Alignment Capability; the Practitioner’s View’, 44th Hawaii International Conference on System Sciences (HICSS-44).

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SAP IT Convergence is About Business Focused Integration

August 15th, 2011 by

SAP IT Convergence for ROI

SAP IT Convergence

The problems with Enterprise SAP IT organizations are they are focused on SAP and IT.  They lose sight of their purpose which is to support and promote the broader objectives of the enterprise.  In an SAP centered IT organization this means your whole existence is about ensuring business benefit, focusing on enterprise goals, strategies, and objectives.

Somewhere between the SAP sales cycle and the SAP go-live the concept of business benefit gets lost and is never found again.  By the time you go live with the SAP application the entire IT organization becomes narrowly focused on the care and feeding of the new system.  Everything is all about the “new” ERP application and the business is left holding an empty bag –, the money is gone but the business now has to struggle through getting their operations stabilized just to continue doing business.

The entire IT organization’s existence must focus on enabling business.

Today’s enterprises will no longer pay the premium prices for SAP or IT organizations which exist in a silo.  To continue with this old way of doing SAP or IT support will turn those internal services into very expensive commodities to be outsourced to the lowest cost provider(s).  If you want to do more than survive, but rather to thrive, you must build a converged SAP or IT organization.  Without IT convergence you can expect budget cuts and more outsourcing pressures.

Research Shows a Business Focus Produces SAP Results Needed for IT Convergence

Successful SAP projects require the management and measurement of expected benefits and the purpose for the project throughout the entire SAP life-cycle (Holland and Light, pg. 1630-1636, 1999).  To gain business benefits from an ERP package like SAP you will need serious discussion of goals, direction, objectives, and what the business software can do in those areas.  After that, coordination of key resources from both business and IT is also required to create business to IT alignment (Willcocks and Sykes, pg. 33-38, 2000).  This business to IT alignment produces some great results but is just the beginning.

[F]irms that invested more heavily in business process redesign and devoted more of their IT resources to increasing customer value (e.g. quality, timeliness, convenience) had greater productivity and business performance (Hitt, Wu, and Zhou, pg. 3, 2004 citing Brynolfsson and Hitt)…   [A 1999 study on] the impact of ERP systems on self-reported company performance based on a survey of 101 US implementers of SAP R/3 packages [showed]… companies reported substantial performance improvement in several areas as a result of their ERP implementation, including their ability to provide information to customers, cycle times, and on-time completion rates (Hitt, Wu, and Zhou, pg. 5-6, 2004).

In the 2004 study just cited they also referenced compiled research by Gattiker and Goodhue (2000) which identified four broad categories of ERP benefits including (1) better information flows, standardization, integration, communication and coordination; (2) centralization of administration activities like, AP, payroll, etc. (i.e. “shared services”); (3) reduced IS maintenance costs and improved ability to deploy new IS functionality; (4) a move to “best business practices” around business processes.

Some of the additional and very interesting findings (Hitt, Wu, and Zhou, pg. 18, 2004) include:

  • Greater sales employee performance
  • Higher profit margins
  • Better return on assets including greater asset utilization
  • Higher inventory turns
  • Greater receivables management (including better “cash to cash” cycles)
  • More revenue generated per unit of input

This is impressive but notice these benefits are nearly all operational business performance results.  They certainly appeal to the CFO and improve market valuation making them meaningful. However, as operational benefits they are nearly all focused on lagging indicators of business success.  Shareholders approve of these results with the valuations of companies who implement ERP systems like SAP being “worth approximately 13% more than their non-adopting counterparts, controlling for assets, time and industry” (Hitt, Wu, and Zhou, pg. 20, 2004).  So implementing SAP has a positive impact on stock values.  While the focus on operational results generally produces good results, a focus on business and marketplace results can produce disruptive results.

Today’s SAP Enterprise Can Realize Even More Through SAP IT Convergence

All of these benefits and gains from roughly a decade ago are not enough today.  While the study from Hitt, Wu, and Zhou (as well as the others reviewed here) showed tremendous benefits for SAP they were based on studies at least 10 years old.

In the last decade the entire global landscape has dramatically changed –, the Internet and the pace of technology change has disrupted every value proposition model relied upon by business.  No area of the enterprise is off limits–, business is in the midst of a global and dynamic transformation of operations, innovation, and customer focus.  To thrive in our modern business era we will all have to move past the IT to business alignment model and push into IT convergence.

Your SAP Enterprise Can No Longer Avoid Full Business to IT Integration (i.e. “Convergence”)

The business benefit focus has been difficult for SAP or IT leaders trying to quantify returns from their investments.  Even though SAP has been at the forefront of addressing this message it is slow to catch on.  Over a year ago I highlighted SAP’s “value delivery” and value focus to implementing their software:

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…  (see A New SAP Implementation Methodology and Implementation Steps).

And while all of this is critical for realizing SAP ROI from your investment there is still more to do.  With this groundwork focusing on the need for business benefit, or measurable ROI, we can take the next step and start to explore full IT convergence around your SAP endeavors.

Next week we will look at some methods to create SAP IT convergence.

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Gattiker, T., and Goodhue, D. Understanding the plant level costs and benefits of ERP: Will the ugly ducking always turn into a swan? In: R. Sprague, Jr. (Ed.), Proceedings of the 33rd Annual Hawaii International Conference on System Sciences ( CD-ROM), Los Alamitos, CA: IEEE Computer Society Press, 2000.

Hitt, L., Wu, D.J., and Zhou, X. ERP Investment: Business Impact and Productivity Measures.  Wharton School at U of P (2004).

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

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




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