SAP & ERP Consulting from the Customer Point of View

Use 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.

Related Posts:

• Using SAP to Improve Revenue and Profitability
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• Aligning SAP Scope to Meaningful Business Requirements
• ERP Business Case: Do You Really Need a New System?
• SAP Development Landscape and Systems: Misguided Practices Carry Huge Costs

Business to IT Convergence

This is part of an ongoing exploration of creating an SAP or Technology “Center of Excellence” within your enterprise.  For the background and key insights on this approach see the Series on SAP Competency Center or SAP Center of Excellence .

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The real future of technology is for IT to integrate with business, or in other words to “converge” business and technology.  The idea of “aligning” with business is too weak of a statement to define what IT and SAP must do within the enterprise to generate significant ROI.

Think about it, during the course of an SAP project the focus is on integrating the enterprise into a single data repository with dependent process chains.  Somehow that same level of integration is not required of the business and IT after you go live.

Product Convergence Lessons for Next Generation SAP Organizations

Convergence, convergence, convergence, what do I mean by convergence?  The idea behind convergence is the enabling of business with technology so that the two can not be distinguished from each other.  It means the lines between business and IT departments must be deliberately blurred.

Although the following examples are about product convergence they are great illustrations for how business and IT should integrate, or “converge” their functions.

• ARPAnet which was created by the U.S. Defense Department’s Advanced Project’s group eventually became the Internet.  This was originally an advanced data and communications “fabric” that could withstand a nuclear war and route both data and communications in the event whole areas of the network were unavailable.  That back-end technology was later combined with early graphical software to create the public Internet as a global information resource never seen before in human history.
• E-mail was a convergence of network technology with hardware, communication protocols, and then combined with software applications.  These combined to create a new form of communication which has transformed both business and social structures.  That convergence has extended to the Internet for various forms of “webmail.”
• The advent of the personal computer and its increasing power made the way for decentralized processing in the form of “client-server” based applications.  Central business functions and tools could run on a server but each user’s experience and application needs could be tailored at their individual workstations.
• ERP applications such as SAP’s ERP suite were made possible by the need for a centralized source of data, at the intersection of databases, network technology, and software user interfaces.  “Cloud” based applications or Software as a Service (SaaS) were an extension of that convergence to include remote hardware sourcing and access through the Internet.
• Social media was the next “extension” of collaborative technologies.  They converged the Internet’s ability to connect people with software applications that allowed people to communicate in new ways. LinkedIn, Twitter, Facebook, and others are moving forward by connecting people to share more information in real time.

Look at most of Apple’s products.  For many years the Mac PCs and laptops only had marginal market share, while it is increasing it was their other products, their “convergent” products which produced explosive market penetration.  What was the difference?  It was convergence, the convergence of the customer experience with the things people use (see Business Strategy and IT Strategy to Reproduce Apple Innovation ).

What is Really Different About Apple Anyway?

Since Apple is so successful today we will look at their example.  The iPhone, iPad, iPod, all have one thing in common–, they took the idea of usability around the convergence of several technology streams to the next level.  Apple leveraged technology, communication, and entertainment to create something MORE than just a Graphical User Interface (or GUI), they created something useful for entertainment.  Apple products are a pleasure to use–, they created a “user experience.”  In the iPhone, even with its irritating lack of integrated e-mail calendar integration, it is a powerful business and personal communications tool which would have been considered a miniature PC a few years ago.

Apple didn’t really invent anything new.  Apple found that place of “convergence” with quality technology products and user experience

Apple didn’t invent the cell phone, portable music (remember Sony’s Walkman?), Internet data delivery (think, music sharing streaming software).  What Apple did was converge these technologies with a great front-end and delivery system.  Or as Steve Jobs has said, they “put a Mac in a cell phone.”  Apple also went one step further, they sought to own the entire content delivery infrastructure and the hardware architecture for their devices.  For the iPod it was the music delivery system (think iTunes), for the iPhone and iPad it was the extension of iTunes to add an Application store, etc.

That is an example of a product convergence that has had huge market impact.

Business and IT Convergence Can Transform Your Company

If we take this product concept one step further and apply it to IT and Business there are ways to bring about “convergence” in the IT enabled enterprise.

Business-technology convergence and business-technology management are terms that spring from a simple idea: Technology is a means for achieving business objectives; therefore, managing business and technology together provides significantly better results than managing them in separate silos. By converging business and technology management, enterprises can nimbly respond to changing marketplace dynamics, technology evolutions and competitive pressures—capabilities that are especially important during an economic downturn. [FN1]

[C]onverged enterprises know when to change the rules to maintain a strategic advantage over their competitors—and to sense and respond to changes in the marketplace.

I am a strong advocate for the convergence of roles between business and IT–, how will the IT organization know and understand the business “rules” without participating directly in business?

The best convergence candidates are likely your power users or super users who participated in your SAP project.  They come from the business but have exposure to the system and the challenges around IT.  The IT folks should also work in the business areas to become “super analysts.”  They need to know and understand how business actually gets done so they can figure out the best way to apply technology for business objectives to be addressed.

Completing the SAP Convergence

On top of the business users being integrated into IT and IT integrated into the business, the steering committee must not be disbanded.  This need cannot be stressed strongly enough.  That group of senior level business individuals are a key part of the “glue” for a successful and ongoing transformation of the business.  They are one of the critical ingredients for convergence to occur.

If you continue to develop your key business users and maintain your steering committee you have a power organization structure in place to build on convergence of business technology. For more information on the importance of continuing involvement by the steering committee long after the SAP project has gone live see my previous post on Using Your SAP Steering Committee for Business Transformation .

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[FN1]  http://www.baselinemag.com/c/a/Business-Intelligence/The-Value-of-Convergence-236013/

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• CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
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Legal Liability

To my talented friends and colleagues at Deloitte, Sorry folks!  This needs to be addressed.  It is not that all of Deloitte has a problem, I know some incredibly talented Deloitte folks, unfortunately a few bad apples CAN and sometimes DO spoil the whole entire bushel (or barrel if you prefer).

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The recent Marin County California Lawsuit against Deloitte Consulting took an interesting turn.  The initial complaint was filed in mid 2010 against Deloitte only for fraud in providing inept and incompetent consultants (for background see my previous post SAP ERP Project Failure Lessons Learned and Mini Case Studies 1).

Not long ago Marin County amended their complaint (a pretty standard legal practice after the initial legal complaint is filed) and included several other failed Deloitte projects as examples of a common practice.  Along with that SAP AG and SAP Services were joined to the complaint as additional parties.  The basis of SAP’s liability, as alleged in the complaint, is that SAP through its partnership with Deloitte knew or should have known of Deloitte’s fraud and continued to give them credibility.  That modified complaint was filed on December 16, 2010.

The SAP software itself was still not alleged to be the problem

The introductory statement of the complaint lays it out:

This action arises from defendants’ illegal and continuing scheme to defraud the County and other governmental entities while reaping tens of millions of dollars in ill-gotten gains in connection with the implementation of enterprise resource planning (“ERP”) software known as SAP for Public Sector, licensed by the German software developer SAP AG.  As part of this scheme, Deloitte, with the knowledge and assistance of the SAP Defendants, targeted the County by misrepresenting its skills and experience in SAP for Public Sector software to obtain a highly lucrative public sector implementation contract for itself, and licensing, maintenance and support contracts for SAP Public Services, Inc.

As a further part of the scheme, Deloitte falsely represented to the County – which had no ERP or SAP for Public Sector experience – that Deloitte had the requisite skills and experience in SAP for Public Sector software to deliver a successful implementation for the County.  Deloitte and the SAP Defendants also falsely represented that Deloitte, by virtue of its “alliance” with the SAP Defendants, was uniquely qualified to properly implement SAP for Public Sector software.  These representations were false because, at the time they were made, Deloitte and the SAP Defendants knew, or were reckless in not knowing, that Deloitte in fact lacked the ability and/or the intention to provide the County with appropriately skilled consultants.

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As a further part of the scheme, to conceal implementation problems that resulted from Deloitte’s lack of skills, Deloitte and the SAP Defendants engaged in unlawful conduct to ensure that the County proceeded to go live with the SAP system on the scheduled go-live dates, in order to secure payment of their fees.  Such misconduct included deliberate under-testing of the SAP system by Deloitte to obtain artificially positive results and thereby conceal system defects; attempt by Deloitte and the SAP Defendants to silence an employee who raised issues with Deloitte’s deficient implementation work; and efforts by Deloitte and the SAP Defendants to corruptly influence defendant Culver, a County official who was also the County’s Project Director, to cover up Deloitte’s deficient implementation work, obtain payment for work that was not properly performed (or not performed at all) and cause the County to enter into additional contracts with Deloitte and SAP Public Services, Inc.

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The fraudulent scheme that Deloitte and the SAP Defendants perpetrated on the County is consistent with a pattern and practice of similar misconduct that they have perpetrated on other public entities, including those in Los Angeles, San Antonio, Colorado and Miami-Dade in connection with the implementation of SAP for Public Sector software.

On January 26, 2011 it appears the case was removed to Federal District Court for Northern California from the Marin County Superior Court.   On February 23, 2011 SAP filed motions to be dismissed as parties from the case, and to strike their name from the complaint.  On March 21, 2011 the Motions to Dismiss and Strike were terminated because the parties all agreed to allow the complaint to be amended, and allowed for additional time to respond to the newly amended complaint once it is complete.

So, the case continues.  Once again there is a key and noteworthy item in this case, the SAP software itself was still not alleged to be the problem.  The allegations within the case surround the consulting practices of Deloitte and SAP is “guilty by association” because they put their “seal of approval” on Deloitte as a qualified integrator.

Consulting Industry Implications – Especially for SAP Partner Programs

This case reminds me of something Michael Doane wrote about some time back about the need for SAP system integrators to be certified as well as their consultants (see Certainly Certifiable – SAP System Integrators Not Just Consultants).

After reading through the entire complaint I can 99.999% guarantee that one or more of the “consultants” Deloitte brought to the project had partially or even completely fake resumes and SAP backgrounds.  I wouldn’t be surprised at all if the number of fake or fraudulent “consultants” on that project was closer to 30% or even higher.  I’m not talking about fake or fraudulent because they didn’t have public sector experience, I’m talking about completely fake and fraudulent work histories and experience in general.

If the Marin County outside attorneys at Kasowitz Benson Torres & Friedman LLP subpoena the employment application information and contractor resumes and do a thorough background check on the Deloitte consultants I wouldn’t be surprised if they find massive fraud.  Worse still I’m equally sure that a careful review of the Deloitte vetting process will reveal that the experience claims and employment history for contractors was not verified.  It wouldn’t surprise me if many of these “consultants” listed fake “certifications” on their resumes as well which was not verified (for more background on the MASSIVE fraud around SAP “consultants” please 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).

What Would be the Impact on SAP and SAP System Integrators if the County Wins?

If SAP bears even a small amount of liability by the end of this case it will have huge ripple effects throughout the entire business application space.  It might actually force SAP to ensure that their partners have some measure of verifiable skill rather than just buying a seat at the table.  On top of that it will put all system integrators on notice that if the current failure to verify skill and experience continues they may be held liable.

Maybe it’s time SAP finally put in that “transcript” service for consultants who claim to have SAP training or certification.  Let decent training programs apply to be “certified training centers” or “training alliance partners” to submit the training information to SAP’s transcript service.  After all, SAP offers a Higher Education industry solution so they have the software to support it.

One Way SAP MIGHT be able to Get Out of the Marin County Case Fast!

I’m guessing here that the reason SAP was joined to the complaint was because Marin County recently ripped out the SAP system and wants to get their SAP license fees and maintenance fees back.  If they can get treble damages for fraud, all the better.  Guess what SAP, if you are REALLY smart you might want to try to negotiate that with the County in a private settlement IMMEDIATELY.  Cut the legal fees, end the PR headaches on the heels of the Oracle debacle, give them back their money for the software and the maintenance fees and then fix the partner program!  Get those settlement negotiations started IMMEDIATELY because your private settlement discussions are NOT admissible in court.  Run from this mess fast!

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Complete Marin County Deloitte-SAP Complaint Removed to Federal Court

I have attached a copy of the entire, lengthy case for anyone who is interested in reading this.  Even if every allegation is not true, I have seen enough of these kinds of tactics to know that this type of thing happens routinely.  This complaint should be REQUIRED READING FOR EVERY POTENTIAL SAP CUSTOMER IN THE RFI OR RFP STAGE!  (Complaint document here).

Related Posts:

• SAP System Vendor Project Success Criteria 1
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• SAP Technicians or Experts
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