When implementing or upgrading SAP too often I encounter back yard mechanics that have changed the oil on someone else’s cars and checked the tire pressure–, somehow they think that qualifies them to do engine overhauls on Formula 1 race cars.
And just in case the analogy doesn’t seem to make sense, why again do you expect these old-style implementation vendors and consultants to transform your business into a competitive powerhouse by only addressing cost-focused ROI and TCO methods?
What About SAP and ERP Cost Savings for ROI and TCO?
Sure, cost-savings and process improvements are critical today, and they can not be ignored or dismissed on any ERP project, but they can NOT be the key focus of the project either if you expect your company to gain any marketplace competitive advantage.
No wonder survey after survey shows C-level executives disappointed by the return on their ERP investments. If you want Formula 1 results in the marketplace, use Formula 1 approaches, methodologies, vendors, and consultants on your SAP implementation or upgrade. I must warn you though, most consultants and vendors are clueless at how to do anything but take you down the same old tired cow paths to marketplace obscurity.
A cost based ROI or TCO implementation or upgrade approach will never make you a winner in the marketplace. It’s certainly important and it may save you a few bucks, it may reduce some of your overhead, but you can only squeeze so much out before something else has to give. There is nothing about it that makes you unique that can’t easily be copied by all of your other competitors in the marketplace. Worse still, sometimes when you are the first to implement all of these new process improvements and automation methods your competitors get your lessons learned on what worked and what did not when it comes time to modify their own processes.[FN1] You pay the R&D premiums for the trial and error which they receive the benefit of in lower costs and reduced time. Sure, they may lag a little behind you but in today’s world I can assure you they are not that far behind.
With today’s globally competitive environment focusing on cost-based metrics alone will not make you win in the market unless that cost decrease is a clear game changer. Many of today’s modern companies are in the last few miles of business process improvement in system design–, the last few miles of “better, faster, cheaper” ways of doing business. The drive to reduce cost has become so extreme that to squeeze the last few pennies out of products and services companies now outsource entire factories, plants, and operations to Third World countries. But now everyone is doing that too.
Except for some game changing process transformation (which is not likely) those last few miles of process improvement yield the smallest gains at the highest cost. ALL of these ROI and TCO methodologies use lagging indicators to measure success. And lagging indicators will not provide you with the forward business benefit you need to win in the marketplace.
Dusty Old Trails – Why ERP Implementations Focused on Cost
The herd mentality is alive and well with ERP implementatoin vendors. Marching down the ROI and TCO road all I find are the same old worn-out cow paths cut in the brush that everyone wants to follow. In the technology arena, known for innovation, cutting edge transformation, and forward thinking, these old dusty paths are silly. Sure, these implementation vendors try to re-package their offerings, try to suggest a focus on ROI, but they only understand cost-based lagging indicators because they don’t truly understand business.
The Perfect Lagging Indicator of Cost Control
Here’s an extreme example of why these methods are dangerous, unless there is a significant improvement in cost without a significant impact in operations or marketplace competitiveness.
It is the PERFECT lagging indicator or the “perfect” accounting scenario. It is a set of perfectly balanced books, with no deviations, no discrepancies and no risks. It is the model of absolute simplicity. The books close immediately with no lag, and they always balance to the penny. It is the company with no employees, no inventory, no products, no services, no buildings, no assets, no expenditures, no shareholders, no nothing. It is an empty, hollow shell. But that is the “perfect” lagging indicator of accounting and financial performance. It’s also an extreme illustration of some of the silliness in the marketplace around ROI and TCO for an implementation. And don’t get me wrong, as I’ve often said and written, cost savings are an important part of any implementation or upgrade. But unless the cost savings are dramatic, unless they provide you with a major improvement in the “operational excellence” value proposition, they are often hardly worth the effort. Using lagging indicators such as cost-based measures of implementations or upgrades does little to alter a company’s competitive landscape.
So why won’t it work? Unless you have huge process improvement gaps either as an industry, or compared to your competitors, you just don’t gain that much from process improvement initiatives alone. Should you avoid it? Of course not, it would be both silly and absurd to suggest you should not take on process improvement initiatives. Every little bit helps, there’s no denying that. But without dramatic changes most process improvement initiatives are little more than tactics when your business needs strategies to address your competitive pressures and revitalize your value proposition. And then this needs to be translated into your SAP ERP or CRM implementation–, you need solid, strategy-based IT solutions!
SAP’s Rarely Used Tools and Techniques for Strategic ERP Implementation
It’s always shocking to me to find out how many vendors, consultants, and sales people have no idea about the value and strategy tools and resources SAP provides. And of the few that do, most of them have little idea or understanding on how to use them because they are not experts, they are merely technicians. Along the way they’ve found or developed their one or two “wrenches” and they’ve found “cool” ways to convince you their tire pressure gauge is the best at working on your race car. They’re not Formula 1 mechanics they are oil changers.
With so many vendors and consultants who are not aware of the SAP value and strategy tools, or how to use them, how can SAP customers be aware of them? Few vendors or consultants understand business strategy, competitive pressures, value propositions, and how to integrate them into an SAP implementation of the ERP package or CRM. They know how to change oil and and show you their cool tire pressure gauges. Sure, they’ve got slick presentations to try to convince you their wrench or pressure gauge is really a super-secret James Bond gadget that can do magic, but if that were the case there wouldn’t be so many frustrated C-level executives over the lack of ERP results.
Now that SAP is a very mature product with significant market penetration the focus of the conversation is changing. CIOs, CFOs, and CEOs are now starting to cut back on their SAP budgets, ignoring upgrade requirements, running to alternate support vendors, and generally have little or no desire to go through a painful upgrade process. And the number one reason why this is all happening is because C-level executives are not seeing the return promised by all those implementation vendors.
For over 10 years that I know of many of these tools and techniques have been available freely to customers and vendors in one form or another. Even though they are not used nearly as often as they should be, SAP continues to develop and invest in them but somehow they keep getting missed. While all of those consultants and implementation vendors are out there tuning up their oil changing techniques, and trying to build better tire pressure gauges, the market marches on and C-level executives continue to challenge the ERP paradigm.
The Future of SAP is in Leading Indicators of Business Success Like Customer Acquisition, Customer Retention, and Revenue Generation
Surveys of CIOs routinely show that top priorities for their IT department spend is to focus on business related issues like customer acquisition, customer retention, profitability, etc. And implementation vendors are unable to articulate how an SAP implementation or upgrade can enable that to happen. SAP provides the tools and resources to make that happen but no software company can change the skills, talents, and abilities of the implementation vendors or their consultants. That is up to the educated ERP consumer to ensure they are actually getting what they are paying for.
Significant SAP and ERP Success Criteria will not Change Until Business DEMANDS that Fakes and Frauds are Removed from the Marketplace
Business must become more savvy at “looking under the hood” of their implementation vendors. Vendor claims must be more carefully evaluated and the skills of the consultants they provide more thoroughly vetted.
To this day I’m still shocked by the number of resumes I see which show some 5 – 10 years, and 3 or more full lifecycle implementation projects in a country where the individual making these claims can barely understand or speak the language. Again I have to ask how did they lead the requirements discussions sessions to know what needed to be set up? And how do they lead meetings and discussions related to markets, company direction, or required processes to support your business? And who wrote their portion of the blueprint or logged their issues or resolved complex process and integration problems that came up during the project? Just exactly how does someone who barely speaks the native language of the company they are performing the work for take care of the communication intensive knowledge transfer and change management activities? Are you getting the picture here? [FN2]
In other words, do you really have to wonder why your implementation didn’t deliver to your expectations when so many of the consultants you bring onto your project can hardly understand the language?
It’s a testament to SAP’s ability to deliver methodologies like ASAP, Best Practices, and other materials that there aren’t more lawsuits for all of the outright fraudulent “consultants” with completely fake resumes in the marketplace.
Is it any wonder there is little genuine business awareness on what tools and techniques SAP offers to take your business to the next level?
Too often these vendors and their consultants are just like the carnies at the County fair on the midway hawking their “better, faster, cheaper” midway games to the unwary. And just like those carnies, they’ve got lots of slick marketing, slick packaging, and supposed unique methodologies and approaches to solve your problem and deliver to you cost-reduction based ROI.
They replace your legacy transaction systems with future legacy transaction systems in the form of your SAP implementation. But they have no idea on how to use the tools and techniques SAP provides to realize value based on a strategic implementation method.
SAP Tactics, Strategies, or Both?
So here we are, back to the old back yard mechanics, the ones who checked their tire pressure and changed the oil on a few cars but want to overhaul a Formula 1 race car engine. Good luck!
Doing research for an upcoming book on using a strategy based implementation or upgrade approach to SAP I’ve read probably thousands of pages of academic articles, research information, and company websites about “ROI” with IT systems, and more directly, “ROI” with ERP implementations. Maybe one percent (1%) of the material I read contains any substance about strategic options for ERP. This seems to be a “mystical subject” where the Formula 1 mechanics can’t be found so companies continue to rely on tire checkers and oil changers to overhaul their race cars.
Companies undertaking an ERP implementation will continue to be disappointed until they begin to demand the Formula 1 teams and realize they may cost a little more than the backyard mechanics. They will be disappointed until they begin to demand real business consultants from the marketplace who understand and can communite about competitive pressures, value propositions, and change management about the SAP application in terms of:
- Knowledge transfer
- Change management
- Competitive pressures
- Marketplace performance
- Supply chain integration with the customer
- Customer experience
- Customer or sales conversion
- Product or service innovation
- Niche markets
- Joint venture opportunities
- Product or service portfolios
and a whole host of business issues that the application can enable. That list contains BUSINESS issues, not application issues. How is a company going to achieve real breakthroughs in SAP or ERP implementations or upgrades with-out focusing on business reasons for the system? And even if you do, you still need to find the vendors and consultants who understand how to translate these business-centered strategic initiatives into application solutions.
Why, why do you buy a Formula 1 race car and then bring in backyard mechanics to work on it?
Some of the research I read is plainly misplaced, it is more like marketing material for the backyard mechanics claiming they have the answer to working on your Formula 1 racer. One research piece that tried to make the case that just improving processes alone “supports” goals of revenue and profit growth. Sure, that’s a marginally true statement, but business doesn’t just need the “support” that process improvement offers (unless there are large improvements), business needs a new IT focus.
That same research paper went on to explain that business should not be cutting back on ERP IT spend during tough economic times. And while I agree, it is for an entirely different reason. ERP IT spend should be preserved, but with a new focus and direction. That direction is on strategic implementation and upgrade directed at business benefit along with the tactical cost-based process improvements. [FN3] In other words, IT spend should be focused on producing business centered solutions and results, not just replacing transaction systems with cool new best practice processes.
SAP Technicians or Experts?
They say a good magician never reveals their tricks. Well, I’m no magician so I’ll give you a little insight. Lagging indicators, those affected by process improvements, cost-based ROI and TCO methods, and current ERP mindsets are reactive.
Leading indicators, those which directly affect the competitive business landscape are proactive.
SAP and ERP technicians are reactive. They can make system settings, they can help you to make a small tweak here or there, but they are tactical and tend to be shortsighted.
SAP experts are proactive. Not only do they understand how to deliver process improvements, along with those process integration points, they also tend to be proactive and propose innovative solutions to nagging business problems.
SAP experts evaluate more than the SAP application alone, they are aware and actively promote solutions that address they key areas your business is concerned with. They consider the customers in your marketplace, the vendors in your supply chain, how you might innovate your product or service pipeline, and the competitive strengths and weaknesses of your company compared to those in the marketplace. On top of that, they know what processes, or process improvements, are necessary to address each of those areas to address those competitive pressures. Along with all of this the truly talented ERP experts can evaluate your company’s culture during the implementation to understand how much change the organization can absorb.
SAP and ERP technicians on the other hand simply replace your existing legacy systems with a more integrated IT system. They work to make your brand new shiny ERP system look and behave a lot like your old system. They are unskilled at knowledge transfer and have little ability to deliver critically needed change management and business transformation. In effect they are high-priced IT technicians and contrary to popular mythology they are NOT knowledge workers. [FN4]
SAP Consulting Skills Include Change Management and Strong Communication
And when some new “gee wiz” requirement comes up, or when some new problem presents itself, the technicians are the first to immediately race to a new system requirement to solve it.
I can’t tell you how many times I have been on projects where the client had a legitimate need SAP’s applications could address but the organization could not absorb the change. Experience has taught me to look ahead to the days, weeks, and months after go-live and consider whether or not the level of support for the new processes would be sufficient. And if not, either find some way to work through the necessary organizational changes or push back on the client because it was not in their best interests. ERP technicians will not do this, all they are interested in is being able to stick something else on their resume. Some “new skill” or “new experience” they might be able to sell to some other customer.
What Can You Do to Help Promote ERP Project Success – Get Educated!
Be part of the solution, not part of the problem. Get educated about the best approach to use with your SAP implementation or upgrade project.
If you’re an SAP customer, take the time and trouble to thoroughly evaluate the vendor you bring into your company, carefully evaluate every consultant they propose, and not just on the face of a resume either. If you need to, do your own background checks on their resumes and if you find one that is a fake (which is more common than anyone cares to admit) then throw the entire vendor out the door. If they can’t even check the background of their own candidates then why should you pay them one dime to bring fakes onto your project.
If you want to get the best implementation you possibly can then create a structured, objective RFP process that has a rational scoring system to evaluate the vendor. When you go strictly on “relationships” you may be missing out on your own fiduciary duty and responsibility to deliver to your company the best possible solution to win in the marketplace. And in today’s world that responsibility could very well mean the difference between being in business or out of business. Or at least facing the prospect of massive layoffs and cutbacks. You can’t afford to “give away the farm” to a “friend” who might not be able to deliver on what you need.
If you’re an implementation vendor avoid getting burned by some of the sophisticated SAP fraud shops. The ones that create fake resumes, they do the bait and switch with someone else doing their phone screen, and they get some of their friends to “vouch” for their “experience” at large companies. [FN2] The minute you find one of these resumes from one of your recruiters STOP doing business with that recruiter or recruiting firm. If they can’t or won’t do a simple employment / project verification on a candidate then run, don’t walk away from them.
Take some time to get familiar with the various SAP tools and methodologies. For customers they are freely available and for implementation vendors who are partnered with SAP they have access to even more resources. And once you’re in with SAP, those tools and resources are free! If you’re an SAP customer paying for maintenance and support then take advantage of what those fees are for. Get educated through your OSS ID access to internal SAP resources and tools. If you find something internally you think will benefit you and you don’t have access to it as a customer then contact your SAP sales rep and ask for access to that resource.
In the end there are lots of things you can do. But you have to get out and do them.
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[FN1] Change How You Look at SAP to create ROI
http://www.r3now.com/change-how-you-look-at-sap-to-create-roi
[FN2] Screening methods to find the right SAP consultant
http://www.r3now.com/screening-methods-to-find-the-right-sap-consultant
[FN3] Why SAP Projects Fail to Deliver ROI (and how to change it)
http://www.r3now.com/why-sap-projects-fail-to-deliver-roi-and-how-to-change-it
[FN4] See the section of the following essay that explains the difference between what many companies call “knowledge management” and what knowledge management actually is. This essay addresses collaboration, social media, and SOA in the enterprise. “SAP, ERP III, SOA — Learning Organizations through Social Media Collaboration”
http://www.r3now.com/sap-erp-iii-soa-learning-organizations-through-social-media-collaboration
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