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SAP & IT Outsourcing – RESULTS MATTER!

June 24th, 2014 by
In House vs. Outsource

In House vs. Outsource

Business today is looking for a way to provide shareholder value.  Outsourcing has become one of the latest “crazes” to boost stock values because shareholders believe it will reduce costs.  While your share price may increase in the short term, you may not see the cost savings and your share price will suffer later as your cost basis increases.

It is sad that the cost saving “dream” presented during all those sales pitches often become a “nightmare” of spiraling costs and management headaches.  If you go into your outsourcing arrangement with eyes wide open you are much more likely to get better results and you just might see some cost savings.

INTRODUCTION to OUTSOURCING RESULTS

In the spirit of full disclosure I’ll provide some insight on why I am doing these outsourcing posts.  The reality is I don’t like outsourcing, NOT because I’m threatened by it, and not because of any particular sense of betrayal by companies who take this path; my reason is simple, too often the outsourcing benefit claims are at best misleading and at worst blatant lies.

If you know what to look for and how to structure these arrangements you just might get apples to apples comparisons on real outsourcing costs.  If you know what you are getting into, and how to manage your outsourcing arrangement, you might benefit.  But that is up to you to construct your contracts, management structure, monitoring mechanisms, and QA processes to ensure those results.

EFFECTIVE MANAGEMENT OF IT OUTSOURCING VENDORS

It may seem obvious that you do NOT, NOT, NOT want to give up control of your business processes to an outsourced vendor but you would be surprised how often this happens.  And when it does you are the outsourcing vendor’s cash cow.  Someone will control the processes and if it isn’t you they will be controlled to favor the outsourcing vendor at your cost.

One of the first areas to contractually ensure some measure of control is in oversight.  You, as the client, must insist that you will have final say and control over all processes, standards, templates, and resources.  This should include but not be limited to:

  • QA reviews and internal audits
  • All Deliverables
  • Scope development and scope management
  • Change processes (or you WILL be change ordered to death!)
  • All code reviews
  • Adjustment and approval of all standards
  • Adjustment and approval of all processes
  • Adjustment and approval of escalation procedures
  • Project Management activities
  • How OCM (Organizational Change Management) will be handled
  • Data standards and processes
  • Testing requirements
  • Required documentation
  • Control of all resources the vendor might provide
  • Etc.

You get the picture.  The minute you give up management of any of these key areas you are headed for unanticipated consequences, change order costs, less than optimal results, etc.

CONCLUSION on IT OUTSOURCING

When you outsource your management requirements increase rather than decrease.  Because of the outsourcer’s profit motive you must be more diligent than ever to ensure you are getting results and getting what you pay for.  If you are not aggressive in managing these areas you will likely experience some nasty financial surprises.

My opinion is to do an honest assessment of your internal capabilities for more aggressive management of outside resources.  Strong management must be a key competence of any company wanting a successful outsourcing arrangement.

This is the wrap up to the series on Outsourcing:

 




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9 Games ERP Consultants Play

January 14th, 2013 by

ERP Consultant Games

Most in the ERP industry agree that software consultants can play a major role in helping their clients successfully implement a new ERP package. While some consulting firms have more expertise than others do, at least most firms try to operate with their client’s best interest in mind.

However, there are many firms within the ERP industry that are outright thieves. They will not hesitate to take advantage of their clients in order to pad their own wallets. In fact, some firms are so good at this it has become part of their standard operating procedures.

Clients that are educated and aware of the games consulting firms play can save themselves a few headaches and a lot of money. Below are some of their tricks to watch out for.

1)      The “Bait and Switch” Routine

During the sales process, this is when certain consultants are brought in to display the expertise within the firm. They may know best practices and the software, but it might be the last time you ever see them.

2)      Resumes: Lies and Half-Truths  

Outright falsification of consultant resumes is more common than you think. In addition, many resumes presented by the firm are not really resumes, but vague “profiles” that lack detail and read like sales literature.

3)      “Lowballing” the Quote

This is the oldest trick in the book, yet surprisingly many clients continue to fall into this trap. For example, all consultants know that for time and material quotes the actual implementation costs are usually much higher.  Also, most fixed price quotes are only fixed until further notice.  When the client wants to make only minor changes in the project scope, they are hit with expensive change orders. The change order costs are usually 100% greater than the actual time for the consultants to perform the work.

4)      The “Best” Implementation Tools & Methods

Most firms claim to have the very best implementation methods and tools available. However, do not be surprised when their consultants run off and do something entirely different during the project. Maybe the tools are not so great; otherwise, their consultants would use them!

5)      The Less You Know – The More Money They Make

For some firms, a potential client that has ill-conceived project objectives, an undefined scope, or lacks basic knowledge of ERP; is considered a gold mine. The idea is to gloss over these “minor” details until after the client signs the contract.

6)      Marquee Accounts for Reference Checks

When a potential client asks for a list of the firm’s other clients for a reference check, many firms provide only their “marquee accounts”. These accounts are compensated by the firm in some form for being a reference. Therefore, do not expect these clients to mention anything bad about the firm.

7)      Not Enough Time and Talent

Most consulting firms would love to “camp out” on your ERP project. One way to do this is convince the client that the organization lacks the right employees for the project. Also, some firms too easily support the premise that the client’s best employees have other tasks to perform that are more important than an ERP project. That is, “No need to get your hands dirty. Our consultants will do the project for you.”  

8)      “Add-on” Services 

Once consultants get their foot in the door, many try to sell their clients additional services. These include more consultants for readiness assessments, change management programs, best practices, and other services you may not truly need. Also, do not be surprised when your consultants push for software functionality that was originally out-of-scope. 

9)      The Promise of Software Knowledge Transfer

Most firms state that one of their goals is to “work themselves off the project” by transferring software knowledge to the client. However, nine times out of ten, if it is going to happen, the client must force the issue. Considering their hourly rates, what incentives do consultants have to transfer software knowledge?

This guest post is by Steven Phillips, author of the Street Smart ERP blog and the new book Control Your ERP Destiny.




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Building an Effective SAP ERP Delivery Organization

November 5th, 2012 by
Effective SAP Delivery

Effective SAP Delivery

There are generally 3 big components for improving SAP delivery.  These 3 components have the capability of improving SAP and technology delivery in general while impacting corporate business performance and marketplace success.

  • Delivery Approach
  • Delivery Methodology
  • IT Organizational Development

The following content is written with a focus on SAP, however it can be completely generalized to virtually any IT organization.

  1. A careful focus on the delivery approach is needed.  Here there are 2 key paradigms to focus on.  The first paradigm is service delivery vs. value delivery (SAP Service Delivery versus Value Delivery), and the second paradigm is software engineering vs. business process engineering (SAP Implementation Focus: Engineer Software or Business Processes?).
  2. A formal, structured, internal delivery methodology.  This should include a “checklist” of all project requirements including templates, tools, and resources for project delivery.  Because I know SAP I use it, however they have a powerful methodology which can also be generalized to virtually any IT project.  For more information see Why Use the SAP ASAP Methodology?
  3. A strong focus on IT organizational development.  The current “best practices” around IT Organizational Development includes a 3 tiered maturity structure:  Service provider, Business Partner, and Business Peer (Organizational Change Management Inside the SAP IT Support Organization).  The second part of that is a structured approach to creating the premier IT “Center of Excellence,” converged business-IT delivery organization (see SAP Service Provider to Business Peer Through Center of Excellence Maturity).  You can use 3 Development Phases for SAP Center of Excellence Maturity as a completely structured organizational outline.  It includes key activities and maturity steps.

Adopting these three pillars will create a great foundation for your company or organization for the long term.  They will also help immediately and transform your enterprise in the mid-term.




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