SAP & ERP Consulting from the Customer Point of View

SAP Center of Excellence Governance

This post is based on information from my recent ASUG presentation in Atlanta…  Beyond Technology Alignment – Building a Center of Excellence @ http://bit.ly/jJefxP

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At the intersection of business and IT you have convergence.  At the place of convergence is where the Center of Excellence exists.

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One of the key SAP project success factors is to use a steering committee made up of key business stakeholders.  They can meet once a week or once a month, but generally they are involved to provide business level guidance to an SAP project or IT programs.  The most effective steering committees include at least one executive and several senior leaders from throughout the business (see The Real Reason Executive Participation Creates IT Project Success).

That steering committee performs a critical function over large projects like SAP implementations.  This group is critical to your project’s success because of the amount of time from company employees, capital from the organization’s coffers, and decisions which change the business.

Some of the key functions a steering committee carries out during the course of your SAP project include:

• Set SAP project scope and then help manage it.
• Define project objectives and evaluation criteria.
• Monitor project progress, including key milestones and deliverables progress.
• Oversee Quality reviews at key check points.
• Evaluate and mitigate organizational impact of business changes.
• Promotes the project throughout the organization.
• Coordinates staffing and resource levels from key business areas.
• Makes critical decisions which the project team is unable to resolve (escalations or key business decisions).

The ongoing functions and tasks of the SAP steering committee cannot be underestimated. During the course of their duties they gain that list of unique and critical skills related to applying technology to business issues and problems (see Using Your SAP Steering Committee for Business Transformation).

You go live and WHY do you disband your steering committee???

Integrating the SAP – IT Organization Into the Business

In an SAP Center of Excellence, after your SAP implementation goes live, the steering committee functions change to one of developing and managing technology road-maps.  Their skills with scope, schedule, cost, performance, prioritizing, and evaluating risks / rewards are ideally suited to their continued involvement in the application of technology to the business.  But the underlying issue here is that they must continue to function –, they should not be disbanded.

One of the key benefits of continuing to leverage the SAP Steering Committee after the SAP business software goes live is you continue to build on their experience and unique skills.  Even as they rotate out of the steering committee role these individuals move through the ranks of the larger enterprise and take that technology to business integration experience with them.  If they have served on a steering committee long enough to see the benefits technology can bring to the larger enterprise their exposure is invaluable to building a long term Center of Excellence –, an organization dedicated to converging business and technology to meet business marketplace requirements.

These individuals have worked through many key business decisions, budget decisions, scope and schedule decisions, and how to move to technology integration project success.  As a result of their experience applying technology solutions to the business they develop critical skills for the converged and integrated organization, these skills are difficult to replicate.  In a nutshell this steering committee develops a convergence of three critical skills for tomorrow’s powerhouse enterprises: they understand management, technology, and business integration.  Those are the key ingredients to the converged SAP enterprise.

Related Posts:

• SAP Program Management Requires a Type of CMMI
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• The Real Reason Executive Participation Creates IT Project Success
• Change How You Look at SAP to Create ROI
• Why Use the SAP ASAP Methodology?

SAP Business Convergence

I only have a couple more posts in my series on overcoming vendor sales tactics so I thought I would provide a brief distraction and look at a few key areas for SAP organizations to move to “excellence.”  This post focuses on some of the considerations for SAP Total Cost of Ownership (TCO) and SAP Return on Investment (ROI).

One key to achieving SAP ROI is through convergence or integration of the SAP staff into the business.  I’ve started down this path as part of a follow-up to the recent ASUG Atlanta conference presentation I did on “Beyond Business to IT Alignment – Creating Convergence in the SAP Enterprise.”  Those materials are now available online.  The first part of them consists of a two-piece resource kit, and the Roadmap Builder, can help to transform your enterprise and business prospects.

• ASUG Presentation on SAP / IT Convergence @ http://bit.ly/kLei7S
• Beyond Technology Alignment – Building a Center of Excellence @ http://bit.ly/jJefxP

Preparing the SAP and IT Organization for a Center of Excellence

This post will provide an overview of ways to achieve business benefit, reduce costs, and achieve ROI.  While I would like to go into detail for each of these components it is best to leave them in a list format.  To expand on them would create a 20 or 30 page document.

Your goal is to drive business innovation and marketplace differentiation

So, to keep things simple I will condense this down into a bullet-point list covering the 3 key topic areas of

1) Engaging the Business,

2) Reducing Complexity, and

3) Delivering Excellence.

The SAP Organization Must Engage the Business

• Converge IT and Business efforts
  • Regularly convene a senior business representative steering committee
  • Facilitate business and IT planning sessions
  • Use business resources to help manage the project
• Develop dotted line IT staff to business organization relationships
  • Assign one or more IT staff to each business area
  • Have IT / SAP resources work in the business areas on a regular basis
  • Ensure they perform some of the routine tasks in the business area
  • Develop improvements, solutions, or ideas in conjunction with business users
• Create Service Level Agreements (SLAs) for post production activities
  • New feature or functionality requests
  • System performance and uptime
  • Issue escalation and resolution
• Build Technology Solution Roadmaps
  • Define and prioritize technology requests
    • Need
    • Want
    • Market impact
    • Strategy impact
    • Business area(s) impacted
  • Perform cost / benefit analysis
  • Evaluate alternatives

The IT and SAP Staff Must Reduce Complexity

• Consolidate
  • Hardware
  • Applications
  • Network infrastructure
  • Application delivery infrastructure
  • Interfaces
• Decommission legacy systems
  • Reduce license management
  • Reduce technical support costs
  • Reduce interfaces
  • Improve data consistency
• Reduce custom solutions – clear custom development

The SAP and IT Organization Need to Deliver Excellence

• Lean implementation
  • Use SAP Solution Composer
  • Use SAP Solution Manager
  • Employ ASAP methodology
  • Leverage vendor templates where they are useful
• Optimize performance
  • Make use of automated batch jobs for repetitive transaction tasks
  • Use performance and monitoring tools
  • Create additional database indexes where useful
• Use QA processes to ensure Quality results
  • Ensure all project code is QA checked
  • Perform project QA’s at key milestones
  • Ensure deliverables are complete and useful (if they are not value added they are a waste of time)
    • An example of a wasted deliverable is something that serves only administrative “reporting” functions.
  • Ensure testing is thorough and challenge testing is performed
• Employ proper IT Governance Principles
  • Ensure proper standards are created and then followed
  • Evaluate, review, and escalate as necessary
  • Ensure key decisions are time bound
  • Be prepared to transition to support at go-live
  • Create issue and risk management processes
• Ensure knowledge transfer
  • Make sure that company IT or business staff can support the solution
  • Ensure end user training is thorough
  • Send IT or business support staff to SAP courses (pay now or you will pay far more later)
  • Use post production learning and improvement sessions

Conclusion on Reducing SAP TCO While Realizing SAP ROI

Customers who are either considering or undergoing an SAP project must perform due diligence to ensure they get what they are paying for.  Not only do you have to evaluate cost savings, but the cost of ownership (software, ongoing support, and maintenance costs).  Together with that it is important to ensure you get some business value from your SAP investment.  More than just promises it is important to define, develop, and then measure success criteria after the SAP implementation.

To make things even more complicated your SAP and IT support staff must work to become directly integrated into the business.  Your goal is to drive business innovation and marketplace differentiation.

Related Posts:

• Using Your SAP Steering Committee for Business Transformation
• SAP Offshore Development Project Experience
• Industry Specific SAP Consulting vs Deep SAP Application Experience
• More on Stupid SAP Vendor – Partner Selection RFI-RFP Processes
• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP

Business software negotiations

As we get close to wrapping up this series we will take a short look at ERP and business software licensing.  There are a lot of things to consider here and a number of strategies you can use in negotiating your licenses.

One thing to keep in mind here is that there are two revenue streams for the software provider.  The first is the license sale and the second is the maintenance agreement.

ERP – SAP – Business Software Licensing Negotiations

One negotiating tip I learned a long time ago is to always, always, always ask for more than you really need or want.  And I don’t mean in the form of the number of licenses or the amount of maintenance.  What I mean are the concessions you want the vendor to provide.  These are your negotiation “bargaining chips.”

It is always easier to give something up than it is to take something back so if you start from a position where you have several “throw away” items you will find yourself with a decent bargaining position.

• Software is licensed, not purchased.
• Determine “End Game” strategy for licensing
  • This Starts “Hard” Negotiations
  • Time is on Your Side – end of fiscal year and end of quarter negotiations are best because of pressure to meet sales goals
  • Use a “give and take” approach, or a “good cop, bad cop” approach on the vendor(s)
  • Carefully evaluate their sales approach
    • Telegraph to the vendor your willingness to “walk away” from the deal if the right agreement cannot be reached
• What are the different payment terms?
• Consider “tiered” licensing options
  • License “stage” commitments – # of initial licenses for developers / system users during setup, and then additional # of users at actual go-live only to be paid for when the system goes live.
  • Ask vendors for interest free licensing options
• Down payment requirements?
• How are software modifications addressed in the license?
• Sticker shock?

ERP – SAP – Business Software Maintenance Negotiations

Software maintenance fees can be a real challenge to negotiate.  This is one area where many software providers have a number of tactics they use to maximize your long-term payments to them.  One large vendor will just about give their software away, and even entice you with a one or two year, low maintenance fee agreement, and then “let you have it” just as the business and software have started to stabilize.  Right at the peak of your dependency on them they will suddenly balloon maintenance fees into the stratosphere.

• How much is the annual maintenance fee?
  • What are the maintenance options?
  • What if you go off maintenance?
  • Is technical support included?
  • What kinds of technical support and how frequent (Phone, e-mail, fax, online messages, etc.)?
• Negotiate any maintenance percentage of the software at the price you purchase it for, not at the list price.
• Link fee increases to standardized economic indicators like the Employee Cost Index (ECI), Consumer Price Index (CPI), Factory Orders Report, Purchasing Managers Index (PMI), etc.  If you expect an inflation spike or economic downturn the PMI or Factory Orders would likely provide the best hedge here.
• Lock in the rate for the entire duration of the contract to avoid “shock increases” as time goes on.
• Require free license upgrades to any new version(s) of software as part of your maintenance.
• What about Source Code?
• Even after you make the final software selection decision, consider license negotiations with both of the top finalists to use as “buy down” leverage against the real selection
• Try to negotiate contract language with caps or limits on how much or how quickly fees can increase.
• Every publicly traded software vendor has strong market incentives at the end of their quarter to make any deal they can to increase revenue (often times regardless of the margins) so be patient!
  • At quarter ends the larger software vendors may resist cutting maintenance percentages but may be much more inclined to provide great deals on licensing.  As long as the maintenance is tied to the negotiated license cost then this is the same as getting a maintenance discount.
• Seriously consider hiring a professional consultant who specializes in software negotiations.

Final Thoughts on SAP – ERP – Business Software Negotiations

Make sure your contract agreement does not contain “penalty” language if you decide to discontinue and then renew maintenance.  For example some contracts include provisions that if you stop maintenance and then re-start you will have to pay some amount of “make up” maintenance for the period you discontinued.

Probably the most important component of your negotiation strategy is patience.  You ALWAYS have the option of walking away and pressing for serious concessions if the vendor wants your business.  Believe me, you CAN wait them out.  Be willing to wait as long as it takes to get the terms that are right for you but it is also important to be reasonable and fair. In the end everything is negotiable.

Related Posts:

• Overcome SAP-ERP System Integrator Sales Tactics 6
• Overcome SAP-ERP System Integrator Sales Tactics 5
• Overcome SAP-ERP System Integrator Sales Tactics 4
• Overcome SAP-ERP System Integrator Sales Tactics 3
• Overcome SAP-ERP System Integrator Sales Tactics 1