SAP ROI — Enterprise Architecture & Business Solutions

Clearing the SAP Business Transformation Fog

THREE PART SERIES ON DEVELOPING AN SAP CENTER OF EXCELLENCE.

You probably already knew that a “Competency center” is focused on SAP application support like help desk functions, system stabilization, troubleshooting, etc.  But did you know that a true “Center of Excellence” is focused on the business and business drivers?  The key goal of a “Center of Excellence” is to integrate not just the application, but the application support staff into the business.

Business Transformation from an SAP or ERP business application is no longer an option.

For business transformation to occur it will take business and IT convergence –-, a Center of Excellence is an extension of a business’s competitive advantage.

To achieve breakthrough results you have to go beyond the idea of business to IT alignment, you have to move beyond the idea of your IT organization as a support organization.  Your SAP and IT organization must become an active participant in the business and work to participate directly in business success.

Why Haven’t More Organizations Made the Transition to an SAP Center of Excellence?

When system integrators or vendors are asked to develop an SAP Center of Excellence, or some form of a Business Transformation Center, they frequently offer you outsourcing options.   You speak about business needs and they see outsourcing or support organization opportunities.  All they are familiar with is creating help desks and reactive support organizations to handle your issues.  They have little or no guidance on how to develop a powerful, collaborative, and business integrated SAP organization.

If they had the insight you need then there wouldn’t be so much academic research or IT related surveys which consistently raise “business to IT alignment.”  And worse still, while they are still trying to figure out “alignment,” getting in line with business needs is just the first step–, full SAP convergence is the answer.  And that is only just beginning to come onto the radar screen even in the academic literature. 

Your IT or SAP Center must be integrated into the business in the same way that SAP integrates the operations of your business.  It must become enmeshed and integrated into all of your organization’s operations.

This series provides insight, guidance and direction on developing a proactive SAP organization focused on long-term business transformation.  For more information, including a detailed plan, methodology, and concrete steps for creating an SAP enabled Center of Excellence please feel free to contact us.

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Solution brief presented at the SAP ASUG Atlanta meeting on June 17, 2011

Beyond Technology Alignment  Steering Committee Participation in Building a Center of Excellence.

Presentation provided as part of the session.
SAP & Business Convergence

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Toward an SAP Center of Excellence or SAP Competency Center – PART 1

Explaining the differences between an SAP Competency Center or sometimes referred to as an SAP Center of Expertise and an SAP Center of Excellence.  As Peter Drucker wrote either Do Things Right or Do the Right Things.

Toward an SAP Center of Excellence or SAP Competency Center – PART 2

A more complete and thorough explanation of the differences between the SAP Competency Center (or Expertise Center) and the SAP Center of Excellence (or the Business Transformation Center).  An understanding the operating differences and how the Competency Center is focused on reactive processing of things like help desk tickets, problem resolution, data correction, and knowledge transfer.

Toward an SAP Center of Excellence or SAP Competency Center – PART 3

Business model application of steps, techniques, and methods to produce an SAP Center of Expertise or an SAP Business Transformation Center.  The major business transformation steps on moving from an SAP Competency Center to an SAP Center of Excellence.

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For background information see the following posts.  As you move toward being a business-centered SAP or ERP shop these posts will help drive the right IT direction for your projects, budgets, and efforts.

A New SAP Implementation Methodology and Implementation Steps
http://www.r3now.com/a-new-sap-implementation-methodology-and-implementation-steps

The “Center of Excellence” concept focuses on knowledge transfer, change management, and creating a “learning organization.”  For KEY background information understanding the business imperative for a Center of Excellence see the following RESEARCH based posts.

Change Management Strategies and Knowledge Transfer Processes for a Successful SAP Project 1
http://www.r3now.com/change-management-strategies-and-knowledge-transfer-processes-for-a-successful-sap-project1

Change Management Strategies and Knowledge Transfer Processes for a Successful SAP Project 2
http://www.r3now.com/change-management-strategies-and-knowledge-transfer-processes-for-a-successful-sap-project2

Also, for more information see the second half of this post for more information on Knowledge Transfer and ensuring user and business maturity in using SAP technology:

Change Management Strategies and Knowledge Transfer Processes for a Successful SAP Project 1

Related Posts:

• How To Navigate the SAP Business Transformation Journey
• Achieving Business Value from SAP Investment
• SAP Service Delivery versus Value Delivery
• SAP Customer Responsibility for SAP Project Success
• 3 Development Phases for SAP Center of Excellence Maturity

Using the RFI and RFP Process for your ERP or SAP Education

One of the key vendor selection processes is to use the RFI (Request for Information) and RFP (Request for Proposal) processes to solicit comments, methods, tools, and resource examples of how knowledge transfer will be handled.  In other words, be sure to actively engage in the RFI and RFP processes rather than simply using them as some kind of a checklist or scorecard for the correct vendor.  This is your first and best chance to gain badly needed knowledge for your implementation project. Be sure to leverage a Request for Information process and the RFP process as an educational experience (see Breakthrough Project Success: 3 of 4, Vendor Selection and Contracts).

The RFI and RFP process should also be leveraged to insist that every vendor provide actual sample templates, resources, project plans, tools, and any other item they claim will help ensure implementation success.  If necessary, proactively volunteer to sign an NDA (Non-Disclosure Agreement) and put in writing that you will not provide copies of any of the material to any of their competitors.  Note in the RFI or RFP that non-response to this item WILL disqualify them [**].

Successful Vendor Selection Process Best Practices

This is a followup to the previous post on SAP Implementation Partner or Company Selection Criteria.  That post reviewed a 2009 academic study from the country of Romania on successful ERP vendor selection criteria and processes.

The Romanian study (which I believe has fairly broad application) lined up several factors for a successful vendor selection process (Hurbean 2009, pg. 4-5).  Those include:

• Develop an implementation plan prior to SAP implementation company selection
• Have a clear understanding of the business with the reasons for the SAP implementation
• Act as a change agent and avoid custom coding unless there is a clear business driver or business need

On developing an implementation plan and acting as a change agent you can use the RFI (Request for Information) process and the RFP (Request for Proposal) processes to have the vendors educate you.  For example, you may wish to ask each proposed vendor for example implementation plans from companies of similar size and similar type operations.  You may wish to ask for sample change management and training plans, or the number of consultants that were needed for each of those activities. 

During this process be sure to start out with a “checklist” for your vendor selection critieria, but routinely update that checklist as you go through the RFI and RFP learning process.

Vendor Selection Matrix of Resources, Budget Requirements, and Best Practices

If you use the RFI / RFP process well enough you can get a fair number of vendors to compare implementation processes with.  If there are plans and estimates (dollars, man hours, etc.) that are extremely high or extremely low in comparison to all of the others I would either ask for clarification on how that few resources can handle the responsibility, or why so many resources are needed – or you may just eliminate those vendors from consideration [***].  There may be some genuine validity to the points made on the number and quality of resources needed, but if vendors make certain claims be sure to spell them out in writing and include those claims by the vendor in your final contract agreement. 

To get a reasonable idea of the real resource and planning needs I would tend to stay near any clustering of effort, timeline, resources, that several vendors provide.  It is highly unlikely that any two of them will be exact, but they may be close enough to begin to make reasonable comparisons and use their information. 

For the business, that will take some effort to ensure you have defined the number of legal entities (company codes) number of physical locations (plants, warehouses, distribution centers), the number and types of customers or vendors, the number and types of materials, etc.  This will help to ensure proper scope and ensure a more even “apples to apples” vendor comparison.

Before you Make that Final SAP Implementation Company or Partner Selection

The one thing that can not be overlooked is the actual SAP consultants that an implementation company provides.  Do NOT accept generic resumes in the final round.  Once you have arrived at your short list of vendors, insist on actual resumes from the consultants that will be on the project.  Ensure that any RFP you offer spells out that this is a requirement, and ensure that any agreement penalizes or even disqualifies any vendor for any changes or substitutions of more than x% or y number of resources at the project start (there is a high turnover to the truly talented SAP consultants so many consulting firms experience a normal annual turnover of 15 – 25%). 

Do not hesitate to review, question, and even randomly spot check consultant references that are provided.  You will spend a LOT of money on them over the course of the project, far more than many of your company’s senior level management, so the up front due diligence can not be underestimated. They must be able to bridge the technology to business gap by possessing the following skills for success.  As I have previously outlined in Screening Methods to Find the Right Consultant – Part 2, a good consultant must possess the following skills:

• Facilitation skills
• Meeting skills
• Process mapping
• Business case (or whitepaper) development
• Problem solving
• Organizational dynamics

If the consultants they propose lack these skills you probably do not want them on your project anyway if you expect good results.  When it comes time to screen or interview them you might want to think twice if there are any type of language barriers to the employees you will be assigning to work with them.  After all, as I have said before, why does any company ever hire a consultant who has barriers to consulting?

Any consultant proposed by the SAP implementation company or partner will need all of these skills to perform the following project activities:

• requirements gathering sessions,
• design sessions,
• blueprint writing,
• solution assessments,
• problem resolutions,
• fit / gap analysis,
• business process design,
• translation of SAP / ERP speak to business language,
• knowledge transfer,
• training,
• and organizational change.

The ability to communicate clearly, in an understandable manner, and to be able to translate application processes and requirements into intelligent business language is a key to these activities. How else are you going to get any kind of a decent blueprint, specification documents, or potential whitepapers explaining your options? If they are in SAPanese or other technical jargon they are virtually meaningless to a business driven project. If there are language barriers or the individual is too technical and unable to speak in plain, non-techie type language how will knowledge transfer and critical change management activities be carried out?

That list of the required consulting activities can also be used as part of your vendor selection checklist for templates, tools, resources, experience, projects plans, or other items needed for a successful project.

Vendor Selection Conclusion

In the end if the SAP implementation company or partner uses a good methodology, decent tools / templates, can help you understand key change management requirements, and ensures you have the best resources you are likely to be successful.  Any one of these areas can create a handicap right from the beginning and the maturity level of SAP is strong enough there is just no reason for it.

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Hurbean, L. (2009). Factors influencing ERP projects success in the vendor selection process.  West University from Timisoara (Romania), MPRA Paper No. 14430, Faculty of Economics and Business Administration.

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[**]  One of the routine scams that some SAP implementation companies use is to claim some special methodology or some special tools for implementing SAP.  This is almost always just some reformatted version of SAP’s ASAP (Accelerated SAP) Implementation Methodology and it is a scam.  The other routine scam by some SAP implementation partners is to claim that they use the SAP ASAP Methodology the way SAP provides it.  They may give you a couple of generic templates from that tool, but they have no actual client examples where they have actually used those templates and successfully adjusted them for the client.  You are looking for some type of redacted templates from actual client projects.

[***] Be VERY careful here.  A low number of resources, and a seemingly low budget may be a common shell-game.  Some vendors will come in far lower than others just to change order you to death and end up costing as much or more than the premium vendors in the end.  They may also be using “second string” or only slightly experienced consultants to keep their margins decent but costs low.  In the end this may work for an SAP INSTALLATION but not for an SAP IMPLEMENTATION.  If you are looking for a return on investment from the SAP implementation then this will likely not work.  On the other hand, the provider with significantly higher resource and budget requirements may be a large integrator with huge overhead that they have to support.  So you may be paying a premium in the number of required resources and budget.  In the end you control your own project fate and the more educated you are the more sophisticated of a service buyer you will become.

Related Posts:

• Achieve Breakthrough ERP, SAP, or IT Project Success: 1 of 4
• Breakthrough Project Success: 2 of 4, IT Vendor Proposal RFP
• Breakthrough Project Success: 3 of 4, Vendor Selection and Contracts
• SAP System Vendor Project Success Criteria 1
• SAP Implementation Projects: Still Crazy After All These Years – Part 2

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 [FN1].   The successful SAP project scope must encompass more than just operational considerations (process improvement and automation); they must include the critical components of focusing on the customer and product or service innovation (see e.g., Process Execution of Business and IT Innovation).  This is a significant departure from current consulting and system integrator paradigms.  Modern business no longer has the luxury of relying on static business processes that pay lip service to the customer or ignore the imperative for innovation.

Across the enterprise landscape, globalization, the Internet, disruptive innovation, and the threat of rapid commoditization have ignited the speed of change. It’s no longer a matter of keeping up, but rather of continuously reassessing, reinventing, and transforming operations on the fly. The pressure to adapt business processes—once thought of as airtight—at an ever-accelerating pace has never been greater… Rigid infrastructures and organizational models that hamper agility prevent businesses from growing or even coping (Bouhdary pg. 52, 2008). [T]he successful enterprise must think of its business as a holistic network, able to adjust and make changes on the fly and also able to free up resources for innovation rather than administration (Ibid. pg. 53, 2008).

This is obviously not a small task, but it is achievable.  To make this happen takes a conscious, concerted, and sustained effort to link technology to business needs and not just to implement technology for the sake of technology.

Companies that implement enterprise resource planning (ERP) systems aligned with the overall business strategy enjoy performance gains unknown to firms who do not implement these solutions…

While many commentators would suggest this approach takes a new SAP Implementation Methodology, in reality the approach, tools, techniques, and requirements have been spelled out for several years in the SAP ASAP methodology.  Unfortunately too few companies bother with following that methodology even though they routinely commit to it in all of their sales presentations and literature.

SAP Projects Must Produce Business Benefit, ROI, while Reducing Current TCO

Research indicates that ERP benefits require in depth discussion and strong coordination of goals and resources across business and IT personnel (Willcocks and Sykes, pg. 33-38, 2000).  These benefits, or the measurement of ERP success, are at least partially dependent on managing requirements throughout the entire ERP lifecycle (Holland and Light, pg. 1630-1636, 1999), including acquiring and managing user requirements (Ginzberg, pg. 459-476, 1981).

To manage the ERP lifecycle, goals must be established along with the education and communication of the long-term impact of the goals on the organization (Chang, pg. 6, 2004).

The answer to any successful business transformation is the establishment of open communication channels woven throughout the firm and its network of partners…

Research conducted by faculty at New York University, Massachusetts Institute of Technology, and Georgia Institute of Technology shows that companies that implement enterprise resource planning (ERP) systems aligned with the overall business strategy enjoy performance gains unknown to firms who do not implement these solutions (SAP Executive Insight Series, pg. 4, 2009).

The next generation of technology alignment will require a much more collaborative environment where the business is able to extract critical information from all of the business stakeholders:

• employees,
• customers,
• vendors, and
• any marketplace or trade sources.

Economic pressures, global competition, changing political landscapes, and the explosion in information sources available to consumers have forever altered the competitive business landscape.  While capital is not as easily available as in times past, it is still far more readily available across the globe, and in developing nations like never before in history.

The rise in consumer power, facilitated by easy access to capital and the Internet, is converging with technology to drive rapid commoditization, necessitating the continuous assessment, reinvention, and innovation of business models at greater speeds…  The answer to any successful business transformation is the establishment of open communication channels woven throughout the firm and its network of partners, making it a hotbed of inventive ideas. An organizational structure must facilitate and nurture those ideas so they can quickly find their way to the top and become strategic assets (Bouhdary ppg. 54, 2008).

Tomorrow’s most successful enterprises will be able to harness the various sources of information and then quickly assimilate and distill the information into actionable objectives.  These actionable objectives will be aligned to key goals and competitive pressures unique to that company or organization [FN2]

The Marketplace is Finally Seeking the Value SAP Implementation Methdology

The marketplace is beginning to show signs of demanding a new SAP Implementation methodology; a new guide or new implementation steps focusing more clearly on the two business value propositions of innovation and customer focus. The marketplace is finally beginning to demand the value portion of the SAP ASAP Implementation Methodology that has been around for over 10 years that I know of.

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[FN1]  KPI Development, Business to Technology Alignment, and getting real business benefit from technology investments.

• Why Indexed KPIs are Critical for Business Performance and Success
• Using Key Performance Indicators for Building a Strategy Focused Organization
• Business and IT Alignment – Integrating Technology and IT Spend with Business
• CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
• ERP and SAP Business Case for ROI, Business Benefit, and Success
• Using SAP to Improve Revenue and Profitability

[FN2]  The next generation of enterprise applications will rely heavily on the integration of collaboration.  These next generation systems will focus on how a company can integrate and develop both collaboration and customer-centric products and services.

• What is the Proper Relationship for the CIO, CEO, and CFO?
• ERP vs. ERP II vs. ERP III Future Enterprise Applications
• Process Execution of Business and IT Innovation
• ERP III – Is the Integration of Collaboration the Future of Enterprise Applications

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Bibliography

Bouhdary, C., (from SAP Fall / Winter 2008). Built to Adapt: High-Velocity Transformation and Integration.  The Journal of the EDS Agility Alliance, Volume 3 Issue 3, http://www.eds.com/synnovation

Ginzberg, M. J. (1981). Early Diagnosis of MIS Implementation Failure: Promising Results and Unanswered Questions. Management Science, Vol. 27, Iss. 4.

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

SAP Executive Insight Series (September 7, 2009).  Accelerate Value Creation: The Virtuous Cycle of Using Technology to Maximize Business Value.  http://www.sdn.sap.com/irj/scn/index?rid=/library/uuid/70fa08b0-cf81-2b10-a396-89d18932fbd0&overridelayout=true (retrieved 4/23/2010).

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

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Related Posts:

• Toward an SAP Center of Excellence or SAP Competency Center – PART 1
• SAP Success Factors for Vendor Selection – Responsibility Matrix 1
• SAP Implementation is an Investment NOT an Event
• Designing startup metrics to drive successful behavior
• Series on SAP ERP Project Success Factors