SAP ROI — Enterprise Architecture & Business Solutions

SAP Business Technology Convergence

How Long Term SAP Steering Committee Integration Changes the Enterprise

One of the biggest benefits of an SAP implementation is the business transformation it can bring.  At first the changes and challenges are uncomfortable, even downright painful.  But in the mid to long-term SAP brings about a business culture transformation.  When that transformation is enabled by ongoing steering committee involvement then business to IT convergence occurs.  Over time this convergence of business and technology produces financial and marketplace improvements.

Use the Steering Committee’s Experience for Ongoing Governance

An SAP best practice is to form a steering committee before the project even begins.  In other words this group should be together before the first RFI is issued.  They (the steering committee) should be key members of senior leadership who have the ability to make business altering decisions.

The most effective SAP steering committees typically:

• 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).
• Etc.

Even on a relatively short duration project of six months, many of these steering committees will have worked together in this fashion for a year or more.  Going through the initial business needs analysis, software selection, vendor selection, the project execution, and then go-live support for some period brings this group together for some time.

Gaining Competitive Advantage through the Ongoing Integration of SAP into the Business

As a steering committee works together over the course of a year or two they develop a unique and key skill set that is well-suited to ongoing technology integration into the business (called “convergence”).  As the SAP project goes live and some stabilization occurs the SAP steering committee has learned more about the enterprise from a leadership perspective than anyone in the company.

While the project team is gaining the focused process skills within an SAP module the steering committee is gaining invaluable insight into the overall operations of the business from a leadership perspective.  This steering committee is also exposed to technology and how it applies to business, solving problems, its capabilities, and its limitations.  They have become the most capable future leaders of business transformation and of competitive advantage in the marketplace.  They have worked through the hard things in an interconnected and integrated way.  They have set the stage for future advances.

What happens next?

Your company moves into maintenance mode and the steering committee disbands!

That my friends is a crime!

Do NOT Disband Your SAP Steering Committee After Go-Live

The ideal solution is to retain the SAP steering committee and convert their role to one of managing technology to business integration.  The skills they gain during the course of their duties cannot be underestimated.  They are invaluable to future IT initiatives of expanding the SAP footprint in the enterprise or other key business centered technology projects. This is a role and a function that is seriously lacking from today’s businesses.

In 2007 the BTM Institute (or Business Technology Management) published research indicating that companies who focused on converging business and technology enjoyed greater revenue growth and net margins than their competitors.  They were also found to have consistently greater returns on their investments than their competitors. [FN1]  The BTM Institute defines four broad categories for analysis of business and technology convergence which are:

• Strategy & Planning
• Strategic Investment Management
• Governance & Organization
• Strategic Enterprise Architecture

Think about it, your SAP steering committee has engaged in all of these broad dimensions throughout their existence.  Assuming the SAP steering committee was in place before the project for RFI and RFP preparation they would determine business objectives, priorities, strategic direction, and then develop scope.  These are clearly strategy, planning, and strategic investment activities.  As the project progresses they would engage in oversight, decision making, high level technical architecture analysis, and organizational requirements.

The steering committee must continue to function but take on a new role as the SAP project goes live and you move into stabilization.  Don’t kill the strategic engine of business transformation just as it is finished being built.  They are a critical component of the conversion to an SAP Center of Excellence after your SAP system goes live.

Steering Committees can ensure SAP or IT to business convergence to move from project, to competency center, to center of excellence.

The idea of a center of excellence is the integration or convergence of technology, leveraged in a powerfully competitive way, to ensure business benefit.

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For more information on developing an SAP Center of Excellence please see:

• Series on SAP Competency Center or SAP Center of Excellence
• Toward an SAP Center of Excellence or SAP Competency Center – PART 1
• Toward an SAP Center of Excellence or SAP Competency Center – PART 2
• Toward an SAP Center of Excellence or SAP Competency Center – PART 3

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[FN1] Business Technology Convergence Index, The Role of Business Technology Convergence in Innovation and Adaptability and its Effect on Financial Performance, BTM Institute, June 2007

Related Posts:

• Achieving Business Value from SAP Investment
• 3 Keys to Reduce SAP TCO & Move to SAP ROI
• CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
• How To Navigate the SAP Business Transformation Journey
• Series on SAP Competency Center or SAP Center of Excellence

SAP Best Business Practices

Over the last couple months I’ve seen a few posts developing a debate around the use of software “best business practices.”  The basic takeaway is that if everyone uses the standard delivered “practices” there is no competitive advantage.  While this may be true for many software applications there are two things with SAP which causes this idea to be misleading.

Many of these commentators fail to recognize that SAP refers to different things as “best business practices.”  The key types of SAP best business practices involve the processes included in the SAP software itself– software supported business processes.   Then there is the management and integration practices around software alignment to business — or the whole Business to IT Alignment dynamic which focuses on business value. [FN1]

The posts and comments complaining about “best business practices” I refer to are the ones where the authors complain about software supported business processes.  The common denominator I find in all of these authors’ complaints is they have little or no exposure (let alone experience) with SAP.  Their commentary is a bit misleading because of the depth and breadth of options available to any SAP customer.

SAP Best Business Practices for Business Software Integration

Few of the “best business practice” detractors are aware that SAP best business practices are far more than just the software business processes you put in scope and implement.  SAP’s best business practices include structured decision making and governance around applying software solutions to business (shocking isn’t it!) [FN2].  The whole idea behind these types of “best business practices” are to find ways to gain tangible benefits from the application of technology.  By identifying value based governance and project criteria you can achieve measurable Return on Investment (ROI).

Use of SAP’s Best Practices for Speeding Time to Benefit [FN3]

Best-practice value identification, transformation, and measurement approaches include:

- Incorporation of business case objectives throughout the project lifecycle
- Communication and documentation of process objectives and project success criteria
- Use of both existing and new program-specific financial and operational key performance indicators, based on the business case objectives, to measure project success.

The points above come from the SAP literature.  If you look at what SAP is proposing in those points you will see a company that is encouraging accountability to the business in the implementation and integration of its software.  Unfortunately few of the SAP implementation vendors or partners encourage this type of accountability.

SAP as a business software company spends over $1 BILLION Euros a year on Research and Development (R&D) (or over $1 Billion US).  That is to support both types of “best business practices” and is more than nearly all of SAP’s competitors generate in gross revenue each year [FN4].  Is it any real surprise that most of these complainers do not work with SAP?  Many of them are from competitors.

SAP Software Supported Best Business Practice Process Design and Setup

The SAP software supported best business practice processes generally refers to a broad type of functionality that the application contains.  For example, in the automotive sector, on the materials management side, it means that you have special functionality for JIT (Just in Time) or Forecast schedule agreements.  Along with that it also includes “sequencing” for automotive manufacturers and suppliers to guarantee that components and assemblies are delivered to the production line in exactly the order the OEM manufacturer builds them.  This is industry specific business process functionality.

In that one small example, what is not “understood” by many of the best business practice software process detractors is that there are literally dozens, if not hundreds of individual and granular system setup options for how each step of that process works.  On top of that there are also dozens, if not hundreds of master data points between the vendor, materials, pricing, and other possibilities that directly influence how the steps of that process are carried out.  So in a generic sense you have SAP “best business practices” processes in the form of industry accepted JIT and Forecasting along with automotive specific sequencing.  The details of how you execute that functionality can be finely controlled along the way without custom coding.

Conclusion on SAP Best Practices for Business Processes

The example just provided above is one small processing example of hundreds of processing options, within one single industry vertical.  SAP supports over 20 major industry verticals covering industries as diverse as Chemicals, Public Sector (government), Retail, Pharmaceuticals, Consumer Goods, Healthcare operations, Hi-Tech, Services, Aerospace and Defense, etc.

Even though SAP offers a “best practice” setup library with documentation on system settings to support specific business processes, they are a starting point.  The SAP documentation and resources do not cover all of the fine details of setup that only experience brings.

The ability to finely tailor or “tweak” system settings to meet a particular need or requirement, with hundreds, and in some cases thousands of variations, means that two companies using the exact same functionality can create entirely different processes to support different business strategies.  Together with that you have dozens or even hundreds of master data settings which rely on this system setup to create a virtually unlimited set of options.  And then before building some completely separate, stand-alone application there are user exits (or enhancement points in ECC versions) to program very specific requirements.

In the end an experienced consultant can guide you through the process of making the finely detailed adjustments to handle nearly any requirement with a minimal amount of custom coding.  And that is where true “best business practices” intersect with IT. Combine the right consultants with proper project or task governance and you have an optimal solution for the least Total Cost of Ownership (TCO).  Together with reduced TCO you gain real Return on Investment (ROI) with the application of “best business practices” surrounding good governance to create business solutions with IT (rather than IT solutions for business).

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[FN1] This site focuses more on “best business practices” related to business and technology alignment. There are any number of great resources for the business process related topics so another site would add little benefit.  In fact I’m not sure anyone could compete with SAP’s own “SAP Community Network” (or SCN, http://scn.sap.com ).

[FN2] 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).

[FN3] SAP Executive Insight Series, pg. 6, 2009.

[FN4] SAP Annual Report for 2009.  Review of R&D Operations.  http://www.sapannualreport.com/2009/en/annual-report-2009/review-of-operations/research-and-development.html (retrieved 3/05/2011).

Related Posts:

• Using SAP to Improve Revenue and Profitability
• SAP Implementation is an Investment NOT an Event
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• SAP Service Delivery versus Value Delivery

SAP Strategic Business Transformation

Lots of business ideas and paradigms have been proposed over the years.  Some of them turn out to be fads and other have enduring legacies.  While many have merit they all have one thing in common–, they are supposed to address the marketplace in some way.  Whether or not they stand the test of time depends on how well they help businesses compete in a globally competitive marketplace.

Enduring business ideas generally become part of an accepted business strategy.  One example is Michael Porter’s five competitive pressures (as the keys to strategy) for focusing on operational excellence, customer focus, vendor management, and competitor pressures.  The ability to address these competitive pressures is directly related to the quality of consultants your SAP system implementation partner provides.

The only thing that matters is the specific consultants they bring to your business to make a difference in how your business operates.

When changing the enterprise culture to one that is strategically focused and performance based several stages are required. These stages relate directly to the early, up-front work needed for an SAP implementation. Although the following quote is related to implementing a Balanced Scorecard initiative, the same change process applies to an SAP implementation and business transformation.

Initially, the focus is on mobilization and creating momentum, to get the process launched. Once the organization is mobilized, the focus shifts to governance, with emphasis on fluid, team-based approaches to deal with the unstructured nature of the transition to a new performance model. Finally, and gradually over time, a new management system evolves—a strategic management system that institutionalizes the new cultural values and new structures into a new system for managing (emphasis in original) (Kaplan and Norton, pg. 16, 1992)

The authors then note that the “various phases can evolve over two to three years.”

Over my SAP career beginning in 1994 I have seen this over and over.  What SAP causes is a cultural transformation that can be harnessed to achieve great things.  SAP, properly implemented and properly guided through the business transformation process provides front line managers with key information to move from day to day transaction management to longer term strategic management.  The idea would be to use SAP as a change enabler or change lever (Change How You Look at SAP to Create ROI).  By doing this successfully you can transform your business in the marketplace (Why SAP Projects Fail to Deliver ROI and How to Change IT).

This transformation process requires a phased approach that moves you through the process from go-live to competency to excellence (Series on SAP Competency Center or SAP Center of Excellence).  The reality is with an integrated ERP application like SAP it takes about 1 – 3 years to change the middle management culture from one of tactical day to day execution to strategic data analysis and competitive insight.

Mobilization – In SAP terms, the mobilization effort consists of the upfront business planning, strategy definition, goals and performance metrics definition.

Governance – The governance phase would include the necessary project tools to accomplish the organizational transformation. These are tools and resources not only for the SAP implementation itself, but also for the change management program within the enterprise.  In SAP, project governance begins from before the vendor contract is signed and continues on long after go-live to address ongoing business needs and requirements in the live system environment.

Strategic Management – The strategic management system occurs over time as the new metrics, resources, and tools available in your SAP implementation are used throughout the enterprise. It is the old business axiom “what gets measured gets done.”  After go-live new features or functions may be added to address marketplace competitive pressures.  As the actionable data is able to be analyzed by middle and lower level managers over time decisions can be made to more effectively address those competitive pressures.

SAP Organization Change is Ongoing

Depending on your timeline and organizational tolerance for change, by the time the SAP system is stabilized (anywhere from 3 – 12 months after go-live) your organizational transformation will be well underway. Within 12 – 24 months after go-live your organization should begin seeing real benefit from a properly implemented, business focused SAP implementation.

It takes about 1 – 3 years to change the middle management culture from one of tactical day to day execution to strategic data analysis and competitive insight.

My personal opinion is that because so much of the focus has been operational and “getting the system in” for an “on time and on budget” implementation that the upfront business work is little known and even less understood by the wealth of “technicians” that most consulting companies provide. Often times the consulting companies with established client relationships are eager to get as many consultants billing as they can. The several months of up front strategy work, even at super-premium rates, only engages two, and even in large far-flung enterprises, only 4 or 5 consultants. The SAP implementation itself will engage at least 5 – 10 TIMES that many consultants and so if a client does not insist on this up front strategy work, SAP vendors are reluctant to press a client in this direction from the RFP phase on.

That is not to say that consulting companies have not tried, only that customers or host companies, have focused so strictly on getting the existing transactional processes into SAP that they often fail to have the upfront business case for change created before the project begins.

To be successful, this upfront business design and change work must become the central focus of the SAP implementation.

SAP Business Transformation for Competitive Advantage

Business transformation with SAP is entirely possible even in massive enterprises if the business transformation effort begins by mobilizing your team at least a few months before an SAP RFP.  After the RFP you will need active change management throughout the SAP implementation.  For more information on various insight and ideas on SAP RFP strategies please see:

• Breakthrough Project Success: 2 of 4, IT Vendor Proposal RFP
• More on Vendor Selection Criteria and Methods for ERP Project Success
• Breakthrough Project Success: 3 of 4, Vendor Selection and Contracts
• ERP and SAP Business Case for ROI, Business Benefit, and Success

The RFP process is your first real opportunity to find the right vendor and the right consultants to transform your business.  By navigating this process successfully you can start out on solid footing.  One thing to always remember is that it is the quality of consultants on your project that makes the difference in the results of your implementation.  It is NOT the size of the company, the scope or reach of the consulting firm, how many offices they have, how much marketing material they put out, or how many fancy clients they can name.  The only thing that matters is the specific consultants they bring to your business to make a difference in how your business operates.

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Kaplan, R. and Norton, D. (1992), “The Balanced Scorecard – Measures that Drive Performance”, Harvard Business Review 70 (1).

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• Where do you Start with SAP Return on Investment or SAP ROI?
• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
• Using SAP to Improve Revenue and Profitability
• SAP Service Delivery versus Value Delivery