SAP ROI — Enterprise Architecture & Business Solutions

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).

Related Posts:

• Integrating Business Stakeholders as Part of SAP IT Convergence
• Steps to Achieve SAP IT Convergence
• What are SAP Best Business Practices Anyway
• Why Indexed KPIs are Critical for Business Performance and Success
• Using SAP to Improve Revenue and Profitability

SAP consulting services best practices

Last week’s post took a hard look at the types of consulting services you need for a high speed SAP project (see SAP Consultants for High Speed SAP Projects).  Consultants who work on SAP projects in the small and mid-sized business space develop great breadth of SAP experience across an entire area.  This week we will look at the other side of that coin, consultant skills from large, long-term type SAP projects and what their experience provides.

Consultants on the larger, longer-term SAP projects may not develop the breadth of experience gained through smaller company experience but they develop depth of experience.   Small and mid-sized SAP implementation projects create breadth of experience while large projects create depth of experience.

How is Consulting Service Delivery Impacted by Large SAP Project Skill Development

On larger SAP projects the projects are usually broken out into sub-teams within a module or area.  These SAP consultants may cover a small subset of a module, or of the overall solution within a small subset.  As a result they spend much more time digging into the details of the functionality around that small subset of SAP setup.  That type of focus creates a high degree of narrowly focused specialization.

For example, a consultant who focuses on just the SAP GL Account setup will easily become an expert at every setting and every option related to its setup.  They will learn about the different posting possibilities, account settings, document types, how to deal with taxes, reporting issues, data elements that can be stored in the GL, etc.  An SAP SD consultant who focuses on order setup might become an expert at all of the copy rules around moving the data from an order to a delivery or to billing.  Depending on how the responsibilities are broken out they might focus on the different types of item categories and all of the functionality they drive.

Small and mid-sized SAP implementation projects create breadth of experience while large projects create depth of experience

Big SAP project consultants gain great depth of experience with very narrow areas of the application.  Those with many years of experience are great for projects that require specialized focus for complex processing around a very specialized area.  So if you are having a particular problem, in a very narrow area of the application, these SAP consulting skills may provide value.

SAP Consulting Services to Produce Business Value and Achieve ROI

Depending on what you are trying to achieve different types of consulting skills are required.  When you need SAP architecture, complex process design, involved SAP custom development, or other unique requirements you will want an SAP consultant with many years of all around experience.  That type of consultant needs both depth and breadth of experience with a well-rounded background in small, mid-sized, and large company SAP implementations.

The obvious but often overlooked fact is SAP consulting service delivery is directly related to the type of consulting experience you are provided

This type of experience will generally take around 10 or more years of experience.  I’ve written about this previously in Expert SAP Consulting to Reduce SAP TCO and Improve SAP ROI where the academic studies lay out the path to “expert performance.”  Unfortunately for most SAP customers they will rarely find this level of skill with any of the consulting firms or system integrators unless those integrators use contractors.  Few consulting companies provide these types of consulting services because as I’ve pointed out, if you haven’t moved up “through the ranks” after 10 years in a consulting firm, your future is pretty dim.

Where Can Customers Find These Skills or High Quality SAP Consulting Services?

One of the most important areas where you can make a difference in your solution results is to hire solution experts (see Industry Specific SAP Consulting vs Deep SAP Application Experience).  They are not easy to find, but they are out there.

If your SAP project is large enough to have more than one consultant per module then demand that at least one of those consultants has both depth and breadth of experience.  If they are the only consultant for an entire module you may wish to insist that they have a significant amount of small and mid-sized project experience.  If you need specialized skills then you will certainly want to consider large project experience in that particular sub-area of expertise.

As an SAP customer you have to insist on the level of skill and experience that a consulting company provides in their initial proposal.  In other words, your SAP RFP must call out what level of skill and experience you expect.  You must insist in writing on this and build it into your SAP consulting service contract with the vendor you choose.  Until SAP customers begin demanding this from the marketplace nothing will ever change, results will continue to be sub-par, and ROI from your SAP investment will continue to be lacking.

One last consideration is to be very, very careful of the consultants you or your SAP consulting firm hires.  There are so many frauds, fakes, and con artists out there it is frightening.  And I don’t mean just exaggerated either, but outright fabrication and fraud.  Unfortunately many of the staffing firms knowingly allow the fraud to continue (see Screening and Interview Methods to Find the Right SAP Consultant and Screening and Interview Methods to Find the Right Consultant – Part 2).

Related Posts:

• SAP System Vendor Project Success Criteria & Factors 4
• SAP System Vendor Project Success Criteria 1
• Reduce SAP, ERP, or Technology Project Stress: Part 2
• Series on SAP ERP Project Success Factors
• How the SAP Consulting Peter Principle Works

SAP Project Success

In all the years I’ve been involved with SAP I’ve often puzzled about what makes a really good project rather than some of the freak shows they call SAP projects.  After involvement in over 20 SAP projects I’ve seen a few of them go really well, a few that were more like horror shows, but most were mediocre.  I’ve often asked myself “Why?”  What makes the difference between a good project and one that is nothing short of a mess?

One key item that stands out is project management.  Even with the most talented and dedicated resources bad project management can ruin an otherwise great SAP project.

I don’t blame client project managers because if they had all of the resources they would not need outside help and guidance.

Before I get into this, let me define what I consider a “good” project.  A good project is one where there is a lot to do, but the stress level is not intense.  The timeline may be tight but it is achievable (maybe a little bit of a stretch).  The project is delivered on time, on budget, within scope and the result is high quality (a fairly smooth transition without a chaotic go-live).

Methodology Considerations for a Good SAP Project or SAP Program

The list below is from a synthesis of materials from SAP’s ASAP methodology, the PMI (Project Management Institute), and my personal experience over the years.  Much of this is contained in the SAP ASAP methodology in one form or another so you really have to wonder what any consultant is following if they claim to use it and these items are lacking.  In fact the latest ASAP Methodology version 7.1 includes a project start-up checklist to ensure key components are addressed.

Unlike several years ago when contract project managers had to rely on experience alone – the SAP ASAP Methodology is well-proven and mature today.

There are several key characteristics of a well managed SAP project which includes:

Early SAP Project or Program Management Activities (Before the Overall SAP Project is Fully Underway)

• Success criteria defined and communicated for the project.
• One of the first things that is defined for the project are the key roles, responsibilities, and tasks that will be performed by each participant group in the project.
• A clear, definitive project plan with WBS elements, networks, and activities planned for every major work-stream throughout the entire timeline.
• A clear list of deliverables, milestones, templates, and instructions on their usage are provided for the entire project.
• Deliverables are clearly tied to project value rather than useless administrative exercises (value added activities) (see SAP System Vendor Project Success Criteria & Factors 1 scroll down to Sections 8 and 9).
• Scope, time, issues, risk, cost, communication, and integration management plans, together with additional key components are defined.
• Various standards for the project are defined and documented, including but not limited to business process, development, configuration, enhancement, transport management, testing, etc.

If you are using outside contract project management resources and  these items are not substantially in place by the time you start your project you will likely have your timeline and budget destroyed.  Along with the blown schedule and budget your project will also be a pressure cooker filled with stress, anxiety, and frustration. These are also characteristics you find when an SAP project manager or SAP program manager is not qualified.  The chaos, tension, stress, and confusion caused by their inability to coordinate the many moving parts of the project are a direct result of their lack of experience and ability.

I don’t blame client project managers because if they had all of the resources they would not need outside help and guidance.

The project should be delivered on time, on budget, within scope and with high quality…

Conclusion on Effective SAP Project or Program Management Practices

You are headed for a project disaster when a contract SAP project manager or SAP program manager fails to ensure the following items are in place early in the project:

• responsibilities by group and role are defined,
• deliverables are well laid out,
• templates are properly prepared,
• forward looking expectations are set,
• coordination occurs between all project groups,
• etc.

I’ve only ever been on a few projects when the SAP project manager or SAP program manager failed to produce a properly detailed project plan.  Every one of those projects had one thing in common, they were absolutely horrendously stressful, difficult, and took more time and cost more than necessary.  Along with the failure to produce a proper project plan the lack of proper deliverables, proper roles and responsibilities, and all of the other things a good project plan would help you define were also missing.  If this happens to you FIRE those contractors, you are being bled dry and are headed for a budget and timeline disaster.

For much more detail on what happens when you have bad contract SAP project managers or SAP program managers see the post Some Reasons SAP Projects are Over Budget and Over Time.

Related Posts:

• More SAP Project Leadership Tips for Managing Conflict
• 5 Leadership Tips for Successful SAP Project Management
• SAP Project Manager – SAP Program Manager, Lessons from the Trenches
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