SAP & ERP Consulting from the Customer Point of View

Since I started in the SAP (ERP) arena in 1994 I’ve heard it often repeated, reiterated, studied, and pronounced that one of the key criteria for IT project success is executive participation.  That mandate applies to any large scale project, whether it is ERP, CRM, APO, SOA, BI, or other solutions.

Many implementation companies wrongly believe this is because the executive brings a measure of authority and visibility to the project and that is the key reason for executive participation.  The most often overlooked reason has more to do with the senior executive role than any of these other reasons.  And although the previously quoted reasons are valid it is because of executive insight into the company’s future that creates the possibility for strong client satisfaction and success.
 
Most mid to large scale IT projects, whether they are ERP, CRM, Business Intelligence, or other business transformation initiatives last at least 3 months, and most are 6 months to 2 years (or more) depending on the size, scale, and scope of the company and IT effort.  Combine this with the senior executive role of setting direction and strategy, as well as mid and long term goals of the organization, and that insight is critical to ensure success. 
 
If you’re a CIO, IT Director, or IT decision maker, extended executive involvement can make a real difference with C-level satisfaction with implementation or upgrade results–, without it you may be headed for rough roads and difficult budget discussions.

A Couple Illustrations of Executive Participation for Project Success

I’ve been on SAP projects where the executives asked some key questions about application readiness for future events.  They were not clearly noted as such, but were definitely voiced, and then pushed into the project. 
 
On one very large client, the Senior VP of Operations asked what the requirements were for adding new companies if at some point in the future they decided to acquire another business.  A couple weeks later, the client project manager insisted that the company needed full documentation to support the required configuration settings to set up a new company code for financial postings only, not operations.  About six months after the go-live event they purchased another company where they left the operations in tact, without altering their existing systems, but interfaced to SAP as the financial system of record. 
 
At another company the CEO frequently attended weekly project team lead meetings and in one of those discussions noted the company needed to be able to source products from a different distribution facility, by customer, on an ad hoc basis and for periods of time that would not be consistent or continuous.  This was required at times even if the primary warehouse had stocks to service the customer. 
 
Special development efforts were made to integrate a customized solution allowing for the default customer distribution warehouse to be overridden by customer or product, or a combination thereof for a particular date range.   On this particular project about three months after going live the reason was discovered. 

The business was consolidating and closing a couple of distribution facilities and this allowed for an orderly withdrawal of inventory and of business without significant transportation or carrying costs.  It was transparent to the customer as well.  The MRP portion of the system saw the reduced demand on the closing warehouses and therefore planned less replenishment stock until the distribution facilities were mothballed.  By the same token, the additional demand on the consolidated warehouses was also picked up and accounted for so that disruption was minimal.

Without this future preparation built into the system at go-live, it would have created significant hardships and difficulties in addressing these business needs.  The failure to plan for future business needs in the initial go-live event is also where SAP gets some of the bad press about being “inflexible.”  The reality is that if you plan, design, construct, test, and then go-live with it over the years I haven’t seen very many process gaps in the application.

Where Strong Executive Involvement Produced Amazing Results 

The previous illustrations are a couple of examples where the future state of the business was designed into SAP solutions.  The reason success was achieved was because of the longer term insight the executive participation brought to the project.  I’ve seen a few projects where the executive imprint soundly focused the project on the future strategic direction of the business by constantly challenging and refocusing the entire project team’s attention on strategic sales and marketing goals. 

At one company a scope change request or newly defined custom development would only be approved if it fit the strategic direction of automating or empowering the sales and marketing groups to profitably increase revenue.  This drove the requirement to add special CO management reporting functionality, specialized marketing spend tracking by material, customer, and region of the globe, and a whole host of other significantly customer focused initiatives.  Marketing spend and return was captured down to the individual line item on a customer order and then posted against the marketing budget to track the spend.
 
That company is thriving today, in a down economy, and in a particular market that was, and is still contracting (or growing smaller), even before the economic downturn. 

This project was different because senior executive participation was evident throughout the project: it included a monthly round table of every C-level executive; the Senior VP of Finance (who answered directly to the CFO) was one of the two client side project managers, and the twice monthly steering committee meetings were attended by several VPs and senior directors. 

This entire project had the future strategic direction embedded throughout the SAP implementation.  This project delivered more in terms of automation, efficiency, along with key lagging and leading indicator business goal reporting than I had ever seen on any other project.  This was also the most involved and most complex project I had ever seen–, nearly 150 legacy systems were mothballed and close to 200 interfaces were still needed. 
 
This multi-billion dollar, multi-national company, delivered a level of operational efficiency, customer focus, and product innovation that I had never seen before and haven’t seen since.  It was done on time, on budget, and with extensive scope.  And let me reiterate, it continues to grow in a market that was contracting even before the global economic troubles we see now.
 
Because of the level of executive participation and visibility the implementation vendor brought in only their “A list” consultants, and over a third of the vendor’s consultants on the project were senior level independent contractors.  On this project only the “best” would do and it was reflected throughout the project and after the production environment went live.  Full cost-based, cost reducing payback was achieved in less than two years, and as previously mentioned; revenue and profit were pushed to significant growth in an industry and economy where that should not be occurring.
 
The executive level of involvement and participation helped educate the senior leadership team to wider business issues and IT challenges.  This in turn led to more acceptance and adoption of IT solutions for other business challenges.  The company ultimately developed a significant IT – business competency center with numerous business representatives directly participating with IT counterparts and the business staff funded from the various business budgets. 

They got it, they understood the critical business nature of IT solutions and saw it as a strategic investment in their own areas of responsibility.  They also saw this as a prudent method to ensure their organizations and business units were adequately represented in future technology initiatives and future technology funding.  This became a huge win-win for everyone involved that has played out in a company that is doing reasonably well when by normal standards it should not be.

Lessons Learned from Executive Participation on IT Projects

Executive participation in an IT project creates visibility within the company that the IT initiative is important.  It also demonstrates a measure of authority to break through log jams and make some of the difficult decisions.  But the most important reason of all, the one that I have never heard mentioned by other commentators or implementation vendors is the strategic imprint that executive involvement creates. 

By the nature of the executive role and responsibility they set direction and strategy for the company.  They live and breathe direction and strategy.  Senior leadership frequently surveys the marketplace and adjusts course for future goals and plans.  Strategic, future-state input in an SAP project is inherent in the nature of the executive whether the IT project is ERP, CRM, SOA, BI, or process work. 

As I have seen from past experience this executive involvement causes implementation vendors to bring their best and brightest to these types of projects if they want to stay in business.  That is because the visibility to the executive staff of the skills and abilities of the consultants has a strong bearing on whether or not the implementation vendor continues on with the project, or whether there are any follow-on opportunities.

If you are a CIO, IT Director, or other IT decision maker, it’s time to make the case for stronger executive involvement.  The executive participation will help to ensure that their expectations are met and will enhance your career possibilities as well.

Properly engaged senior leadership and executive participation puts the business first and turns the technology into a change enabler or change lever.  And in the end the business is more likely to achieve the business benefit and results they had hoped for. 

Additional Resources for ROI, IT Project Success, Competitive Pressures and Value Propositions: 

Why SAP Projects Fail to Deliver ROI (and how to change it) 
R3Now.com                SAP SDN Blog  

Change How You Look at SAP to create ROI
R3Now.com 

ERP Failure: The Organization is More Than Partially To Blame 
R3Now.com

Related Posts:

• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• Using SAP to Improve Revenue and Profitability
• SAP as a Change Enabler
• Business and IT Alignment – Integrating Technology and IT Spend with Business

When implementing or upgrading SAP too often I encounter back yard mechanics who changed the oil on someone’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 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 to save you a few bucks and 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 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 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) the 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.

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.

The last few miles of process improvement (i.e. cost reductions) yield the smallest gains at the highest cost.

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.

 

~~~~~~~~~~~~~~~~~

[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

Related Posts:

• Competitive Pressures and Value Propositions, Is Lean the Answer?
• The Real Reason Executive Participation Creates IT Project Success
• Using SAP to Improve Revenue and Profitability
• Opportunities for INNOVATION SAP, HELLO?
• Business and IT Alignment – Integrating Technology and IT Spend with Business