The other day I was talking to a pair of executives looking for a way to determine whether or not their SAP implementation cost was higher or lower than their competitors. They had wanted benchmarks or some other way to know if they were in line with the marketplace. The CFO was worried that they might have paid way too much for their SAP implementation.
After talking for a few minutes they realized that they were looking at the question the wrong way. While they were asking about how their expenditure compared with other competitors, what they were having a hard time articulating is whether or not they got what they paid for.
I provided them a simple illustration to drive the point home quickly–, if they spent twice as much as their competitors, or if they spent half, what matters is the return on technology dollars. The numerical illustration I gave them is if they spent $50 million and their next closest competitor spent $20 million, they are looking at the wrong thing. What really matters is the return. If they achieved a 10% financial return from process improvements, automation, task time reduction, etc., and their competitor was achieving a -3% return then even at 2 ½ times the cost of their competitor they got the better deal.
By the time we finished the conversation it was clear they were asking how to measure any return or business results they received from the implementation. However, from the conversation it didn’t sound like they were very happy with their results. And this leads us to the issue of whether you are focused on service delivery or business benefits delivery.
Control SAP Implementation Costs and Promote a Return on Investment by Focusing on Investment Drivers
The best way to understand how SAP can benefit your business is to start out by understanding what you are trying to accomplish with an SAP implementation. This in turn will determine what your success criteria is and that success criteria is a critical factor in value realization from your SAP implementation.
As SAP Blue Book author Michael Doane says “just because a project is delivered on time and on budget does not make it a successful project.” To wring value out of SAP it must be seen as an investment, an important component of your company’s growth, its long-term health, and part of the investment portfolio much like capital equipment or financial leverage.
This investment paradigm out of necessity includes a component of return on that investment, and a view of the investment that goes beyond the delivery date for the project, therefore it must include more than a project that is delivered on time and on budget.
You wouldn’t define a successful stock investment as spending the money and then receiving the stock, over some period of time you would want a tangible return on your investment. You should begin with that mindset from your SAP implementation. Also, you generally wouldn’t expect that return the day you purchase the stock either.
Stay tuned for the next installement, “Where do you start with SAP Return on Investment or ROI?” This includes some of the details of what to consider for achieving ROI with SAP.
After that, at some point over the next few months, I will release a complete ROI / TCO / payback system. This set of evaluation tools and resources should be used for your initial implementation, however they can be used to help plan out an upgrade, enhancements, or possibly to evalaute the implementaiton you’ve already done.
If I can find one or two companies who are looking to evaluate their current implementations, or are looking at implementing SAP to try this out I will be happy to work through it with them. Contact me for more information.
Contact me today through our site contact form ( http://www.r3now.com/contact ), phone, or e-mail.