Customer Retention | SAP ROI -- Enterprise Architecture & Business Solutions

Will SAP HANA Lead to a Big Data Revolution?

December 17th, 2012 by Bill Wood

SAP HANA – Big Data

Lots of folks focus on HANA as a competitor to Oracle, and it is. Even if HANA adoption and sales were to completely devastate SAP’s biggest competitor (Oracle) that would not be HANA’s biggest impact–, the HANA product has the potential to disrupt entire industries in the context of Big Data.

Unlike Big Data, I’ve been skeptical about the benefits and use of social media in the enterprise, writing about it in Why Social Media Marketing Success Is Elusive for Business and Social Media Fads and the Risk to the Enterprise. On the other hand, Big Data hasn’t gotten anywhere near the attention even though it has a fairly clear business case. Big Data has the capability to transform enterprises, organizations, and even entire industries. We are not talking about abstract “build it and they will come” theories here either. We are talking about a revolution in the way business is done.

Big Data will have huge impacts on customers, products, even whole regions of the world. What do I mean when I refer to Big Data?

BIG DATA: The ability to analyze large volumes of both structured data (like transactional data streams) AND unstructured data (social media, industry information, news trends, etc.) leading to market makers and market losers across virtually all industries.

This ability to synthesize structured and unstructured data streams with technology advances WILL transform companies and industries.

Over the next 5 – 10 years:

Computing power will continue to grow.
High speed memory processing (like in SSD drives) will improve.
Massive memory storage will come down in price.
In-memory database technologies will mature.

This “perfect storm” of Big Data know-how and technology advances will lead to the ability to identify:

Subtle and even unknown market segments.
Market and sales trends.
Customer sentiments, needs, and wants.
- Leading to new product or service opportunities.
Competitor strengths or weaknesses.
Etc., etc., etc.

Big Data will be part of the ERP iii [FN1] technology innovation driving customer focus related to customer acquisition, customer retention, and marketplace performance. Big Data represents a business transformation shift in how business will be done in the future–, it represents a potential seismic shift in business performance in the marketplace.

The Big Data Revolution

The struggles are the semantics in how to synthesize the information and filter the nuggets from the noise. Big Data allows you to understand what the keys are in terms of words, concepts, and ideas. It then allows you to synthesize those keys with the various data sources.

In other words, how do you take the product sales information (transactional data), customer demographics (transactional), corporate market knowledge (unstructured internal), key word search (semi-structured internal and external such as with Google or Bing), with marketplace intelligence (unstructured external, including external social media), and innovate new or existing products and services? That is the challenge that some folks are beginning to work on today. That is the challenge that SAP’s HANA product enables for the future enterprise.

Big Data means “Business Intelligence” will finally become, well, intelligent!

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[FN1] For more information on ERP 3 see this comprehensive ERP treatise ERP vs. ERP II vs. ERP III Future Enterprise Applications.

Sustained Business Value from SAP Business Software

February 20th, 2012 by Bill Wood

SAP Benefit and ROI

From time to time I review academic literature about the application of technology and offer my SAP experience based perspective. Recently I was reviewing one of these studies from a few years ago when the authors made a key clarification: they recognized two types of implementations which are problem-based (i.e. address your “pain points”) or innovation based.

Their suggestion was that some elements of both would be present on any large scale IT project, like an SAP implementation for example, but each type of application presented its own special set of challenges.

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Throughout the study (linked to at the end) the authors managed to clarify key points so they are easy to understand. I have always considered the hallmark of genius the ability to take the complex and make it simple.

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There are many situations where a strong business case has been made for an investment together with a well-considered ROI calculation, yet the business benefits sought never actually materialized, despite the fact that the project was delivered on time, within budget, and met the technical specification.

The benefits to an organization from IT-enabled change essentially emerge from three causes: either stopping doing activities, doing what [was] always being done but better (i.e., cheaper and/or faster), or doing completely new things. If organizations are to increase the likelihood of success from their IT investments, they must separate out the different sources of the benefits before developing an implementation plan. (Peppard and Ward, pg. 53).

They warn against one of the most common hidden pitfalls of Enterprise Software (ES) like SAP turning into a technology project rather than a change lever for advancing corporate strategy. It is sadly very common to lose sight of the purpose of the technology being applied. The study authors’ description provides great insight around enterprise applications. Read carefully how they describe CRM. Substitute your favorite SAP application, whether it is ERP (ECC), HCM, SRM, SCM, APO, BI/BW, or any other product for their description of CRM and the message is the same.

CRM is not a product that can be purchased; it is a discipline, a framework, [an] integrated approach to managing relationships with customers that requires continuous improvement. It is a strategy, not a tactic; and although supported by IT, it involves considerable organizational re-design, often changing the focus and culture of the organization. CRM implementation is not easy and the evidence suggests that many companies are struggling with their efforts. (Peppard and Ward, pg. 54).

One of the problems they noted with the case study they used was at a retail bank they wanted inconsistent goals for their CRM system. I run into these frequently and call them “mutually exclusive requirements.” Or, as some say, they “want their cake untouched and want to eat it too.”

The case study noted the company wanted to implement a CRM system for better customer management and servicing but at the same time wanted a quick payback. The whole idea of developing customer relationships–, through gaining intelligence, aggregating customer data, and analyzing customer interactions so you can manage and service customers better takes time. Not only that, one of the key goals of the initiative was to deepen customer relationships to reduce their servicing costs while selling them better products and services. If they had that level of awareness of their customers to do this within a short payback time period they wouldn’t have been looking at the CRM project. The company had set themselves up for failure by insisting that a business approach which naturally takes time should have an immediate payback.

Attempting to resolve the current and future business models often highlight a major disconnect between the strategic intent of implementing the system and the resulting actions that must be completed. One UK bank had difficulty in getting branch staff involved in defining requirements during their CRM project. Senior management’s vision of the project was built around customer retention and cross-selling. Branch staff, on the other hand, just wanted a system to process transactions speedily and to get the customer out of the branches as quickly as possible. Getting appropriate engagement and buy-in proved difficult and progress was laborious at times. Yet, after the system had been up and running for a year, staff began to see what was possible and became very active in making suggestions for further development. (Peppard and Ward, pg. 59).

This point where I will leave off this week is critical. Frequently companies purchasing enterprise software solutions like SAP are not aware of the capabilities or how to apply them. Only after some period of time, or a shakeout period, users begin to see and understand how the functionality and information can help achieve strategic business goals. That is generally when the second phase of implementation, or new functionality, or new enhancements, or even a reimplementation begin to gain consideration.

This study was really well written and easy to understand. The authors offered tremendous insights into the world of Enterprise business applications which are important for every business software customer and consultant. I’ve included a link below and it really is worth taking the time to read through.

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Peppard, J. and Ward, J. “Unlocking Sustained Business Value from IT Investments,” California Management Review, vol. 48, 2005, pp. 52-70.

Posted in: IT Management, IT Strategy, SAP, Strategy, Value ROI TCO
Tags: business software, CRM, CRM implementation, customer retention, enterprise software, IT Project, SAP, SAP implementation

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SAP IT Governance – Achieve Business IT Engagement

October 24th, 2011 by Bill Wood

Business - IT Convergence

Proper SAP project governance is a function of the business in partnership with IT. With the exception of a few of SAP’s technical applications (like parts of Solution Manager, HANA, etc.) the entire application suite is about business; business transaction processing and business processes. If key business resources are not directly engaged in SAP project governance you may never realize the SAP benefits you expect.

This brings me to the point of what benefits you expect from an SAP implementation?

From what I have seen there are generally 2 broad “buckets” of benefits on SAP projects. The first “bucket” is focused on consolidating and eliminating systems while the second is all about transactional business execution. Or, IT benefits and business benefits.

SAP Project Drivers in IT

The first benefit “bucket” is related to pure IT cost reduction with a focus on consolidating and eliminating legacy systems for many of the following reasons:

reducing numerous applications’ license costs
narrowing technical infrastructure needs
simplifying technical architecture
reducing system maintenance costs
reducing legacy staffing needs
standardizing on a single development platform

If your SAP project is more of a pure landscape play, around replacing legacy systems, then SAP project governance would fall more clearly under IT. However these types of projects usually end up having the business user community demand that all legacy system functionality be meticulously reproduced in SAP. In the end you will likely achieve some measure of savings but far less than you originally anticipated. Any expected savings will generally be consumed through mountains of custom coded solutions which will need continual care, maintenance, and feeding after go-live. These custom coded “solutions” are not supported by your SAP maintenance agreement and can eat you alive in post-production support costs.

SAP Project Drivers in the Business

The second benefit “bucket” is related to business processes and business transaction execution producing results such as:

improved cycle times
greater process automation
inter and intra departmental integration
unified reporting data
improved inventory management
better planning capabilities
greater supply chain efficiencies
faster, more accurate financial closes and statements
better operational decision making tools

As you can guess, the list goes on. The difference here is the focus is on direct engagement and active participation with the business. This is the real challenge. A business partnership in your SAP project requires more change management, greater flexibility, and a clear understanding that some business needs will override IT drivers and IT goals. The goal of well executed SAP project governance is to achieve measurable benefit –, it is more about delivering business objectives and strategic direction.

IT Governance of the SAP Enabled Organization

When the SAP enabled IT organization is able to deliver on business objectives and focus on strategic direction their role in the enterprise changes. This SAP change moves the IT organization from being a mere “service provider” (a very expensive cost center) to a critical “value added” business partner. When the SAP IT department is seen as a “service provider” you quickly encounter budget and cost cutting pressure. As I have previously noted:

In today’s competitive global economy, filled with international economic instability, no part of the enterprise can afford to move very far from what pays the bills. If your SAP or IT organization is focused completely on technology solutions you lose sight of what is important to the business. And what is that? Customers! Customer retention, acquisition, loyalty, satisfaction, and experience. Without customers there is no growth or revenue. Without growth or revenue there is no need for that expensive SAP or IT investment…
Without a clearer focus on customers as well as innovation in the enterprise, or “how business gets done,” the SAP and overall IT organization becomes a very expensive operational support layer. Without the genuine business focus the organization becomes a commodity to be outsourced (see SAP IT Convergence Beyond Business to IT Alignment).

SAP Governance Includes Business to IT Convergence

The whole area of governance and convergence is very closely related. For effective governance the business direction and integration must be a key component of all SAP or IT initiatives. When you have that involvement, over time, and with some effort, convergence happens. It isn’t automatic but the environment for it to occur begins with direct business engagement.

If the business isn’t in the SAP co-pilots seat you may be headed for a IT crash landing.

If you’re thinking to yourself this “doesn’t apply to me” then you might want to think again. A recent IBM study found that many corporate lines of business are beginning to make their own independent technology purchase decisions. And they are doing this outside of the SAP or IT organization. Add to that Ray Wang’s recent Harvard Business Review Blog Post about the consumerization of [business] IT (see Integrating Business Stakeholders as Part of SAP IT Convergence) and you have a serious issue to contend with. As his research noted, “corporate tech spending is up by 17 to 20%… [but] spending by IT departments is flat.. business leaders, not their IT colleagues… are driving purchasing decisions.”

Business decision makers are starting to use their own budgets to make their own IT decisions rather than making the contribution to what they see as a very expensive “service provider.” That integration or “convergence” with the business is more important than ever because in the end they have more influence over your budget than you may realize.

For more information on this topic please see these additional posts:

SAP ROI — Enterprise Architecture & Business Solutions

Will SAP HANA Lead to a Big Data Revolution?

The Big Data Revolution

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SAP IT Governance – Achieve Business IT Engagement

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