SAP & ERP Consulting from the Customer Point of View

SAP Program Management

Many may be unaware that SAP provides a broad set of tools and resources for Program Management and Competency Maturity Management (or CMM). Very few are familiar with SAP’s broad set of supports for this purpose such as the “new” ASAP Methodology Phase 6 “Run” enhancement. It is loaded with key information which aligns with Program Management responsibilities and CMMI.

So, what is CMM (or CMMI as it is more properly referred to)?

“CMMI (Capability Maturity Model Integration) is a process improvement approach that provides organizations with the essential elements of effective processes, which will improve their performance… CMMI models are collections of best practices that help organizations to dramatically improve effectiveness, efficiency, and quality” [FN1].

The entire CMMI methodology and development is maintained at Carnegie Mellon’s Software Engineering Institute. These CMMI standards have been applied in a vast number of organizations together with various methodologies. The CMMI approach is well suited to engineering and software development, design, or implementation. SAP’s entire ASAP methodology, and especially the “new” Run methodology incorporates a number of CMMI principles.

SAP Program Management is all about Competency Maturity Management (or CMM)

The contract SAP program manager is accountable for providing the key tools, templates, techniques, and resources to ensure projects are properly managed and delivered for business benefit. If they are not providing this type of methodology guidance, including key templates and techniques to deliver business benefit, what are you paying them for?

SAP Program Management or Project Management Gaps

After all these years one of my biggest frustrations is the lack of SAP contract program or project managers use of the ASAP Methodology. They all talk about it, and during sales presentations they use lots of SAP’s material, but as soon as the project begins you never see it. They seem to have absolutely no idea what they are doing.

As I have often said, I never believe that a client / customer of project management or program management services has the primary responsibility for this knowledge. If they did why bother hiring outside help and paying the rates for this service except for that contract “expertise?”

Contract SAP program management or SAP project management that is not able to deliver on clearly understandable methodology development are fakes. Anyone can call themselves a program manager, but what does that mean? What is the contract SAP Program Manager accountable for? What are they on the hook to deliver and how is their performance measured?

Using SAP ASAP and CMMI to Mature the SAP Enabled Enterprise

The SAP ASAP Methodology, in particular the Phase 6 Run section, should be studied by every SAP program manager before they start doing project or program work. Even though it is in the last ASAP Methodology phase, its greatest effectiveness is realized when you begin your internal SAP delivery maturity planning from the beginning of your SAP project.

One of the critical benefits of starting your CMMI related planning right from the beginning is your SAP project can be structured to support business integration at the outset. Using this type of maturity model integration as part of your project guidance can have significant benefits to the enterprise:

“Many CMMI using businesses have beneficial results to their bottom line… including improvements in schedule and cost performance, product and service quality, forecasting accuracy, productivity, customer satisfaction, return on investment, and other measures of performance” [FN2].

SAP has already done a significant amount of the work for you. All your program manager has to do is adjust the plans, alter the templates, follow the ASAP Methodology instructions, and build the resources to support this transition. You really must question SAP program manager service providers who do not keep up with the ASAP tools and delivery methodology that SAP provides and supports.

SAP’s Competency Maturity Model Starting Point

The following maturity model is just one small example of a powerful tool that is critical for long term technology and business integration [FN3]:

This model, provided freely by SAP as part of their standard ASAP methodology is a great starting point. Your contract SAP program manager should be able to use this as it is, or adjust it to fit your particular organizational needs. This is just one very small component of the Run Phase and an even smaller component of the entire ASAP Methodology toolset.

In many cases you would be better off sending your own internal employees to SAP ASAP certification courses and Microsoft Project classes and making use of their new found knowledge. At least then you would have a knowledgeable employee who could help keep an integrator who claims to use ASAP honest. And if they claim to use ASAP in their sales materials or sales pitches GET THAT CLAIM IN YOUR STATEMENT OF WORK AND YOUR CONTRACT WITH THEM!

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For more information on related topics please see:

• SAP Project Manager – SAP Program Manager, Lessons from the Trenches
• Effective Results from SAP Project Managers – SAP Program Managers
• SAP IT Convergence Beyond Business to IT Alignment
• Create SAP Convergence Instead of Business to IT Alignment
• Integrating Business Stakeholders as Part of SAP IT Convergence
• Steps to Achieve SAP IT Convergence
• SAP IT Convergence is About Business Focused Integration
• Steering Committee Governance for an SAP Center of Excellence
• Using Your SAP Steering Committee for Business Transformation

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[FN1] CMMI Overview: Software Engineering Institute at Carnegie Mellon University, retrieved November 5, 2011. http://www.sei.cmu.edu/cmmi/

[FN2] Why CMMI: Software Engineering Institute at Carnegie Mellon University, retrieved November 5, 2011. http://www.sei.cmu.edu/cmmi/why/

[FN3] SAP ASAP Methodology version 7.1, WBS 6.2.1 – Table 1: Maturity Level Characteristics. For more information on the SAP ASAP Methodology please go to http://www.sap.com/services/more/servsuptech/asap.epx

Related Posts:

• Steps to Achieve SAP IT Convergence
• Steering Committee Governance for an SAP Center of Excellence
• ERP and SAP Business Case for ROI, Business Benefit, and Success
• Why Use the SAP ASAP Methodology?
• SAP IT Governance, SAP Program Management, SAP PMO Metrics

SAP IT Convergence Practices

Last week’s post on SAP IT Convergence is About Business Focused Integration provided an overview of IT Convergence and why it is important.  This week we look at some of the key principles around creating SAP IT Convergence including some steps on the path to convergence.

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There is an important distinction between convergence and alignment. Business to IT alignment works to mature the IT organization to a point where there is synergy in applying technology to business goals.  Convergence on the other hand seeks to blur the lines between IT and business.  The alignment seeks to get IT and the business to work together, convergence seeks to fully integrate the IT organization into the business.

Business & IT Alignment is the degree to which the IT applications, infrastructure and organization, the business strategy and processes enables and shapes, as well as the process to realize this (Silvius and Smit, pg. 2, 2011 citing Silvius, 2007).

In the last several years there has been progress in Business to IT Alignment through employing the “SAM” (Strategic Alignment Model) (Silvius and Smit, pg. 2, 2011 citing Luftman, 2000) but there is still much further to go.  The real domain of IT Convergence is around business value and one widely accepted academic definition around this is “[b]usiness value can only be derived from the efficient and effective utilization of information” (Hedman pg. 2, 2010 citing research from 2000).

What is Wrong with Business to IT Alignment?

As I continue to explore these topics a consistent theme continues to emerge–, SAP, IT, or the technology organization are supposed to “work with” the business toward alignment.  So what’s wrong with that?  This approach allows your technology organization to stay separate from the business –, true integration or convergence never really occurs.

IT Convergence occurs where business and technology grow together causing business opportunities to expand

Business to IT Alignment still allows for too many information silos but frequently fails to move the enterprise into efficient and effective utilization of information.  Because of the lack of IT Convergence the separation of the technology organization from the business causes them to specialize in providing information, they leave the business portion of the “utilization” of the information up to the business.  Some of the symptoms of this are when IT waits for the business to tell them “we need x report in y format” or “we need to do z type of processing.”

SAP IT Convergence Integrates the Technology Organization and Busines

During your SAP project one of the key benefits to the business is the process oriented integration of all departments.  The whole business comes into a single database with opportunities for both improvement and standardization.  Organizational silos are broken down and dependence across the entire process chain is created.  Throughout this difficult transition  (and after the SAP go-live) the SAP or IT organization remains separated.  Beyond reactive support (help desk, enhancement requests, bug fixes, etc.) there is little done to create IT Convergence between the business and IT functions.

SAP IT Convergence is Focused on Business Integration and IT Innovation

Stop and think about this recent quote by Mark Dean, Engineer of the original IBM PC:

Innovation flourishes best, not in applications or hardware but, in social places where people and ideas meet and interact…

This is what SAP IT Convergence is about.  How does this apply to your SAP or IT organization?  This whole idea goes beyond technology and integrates the interaction of business and IT to converge the organizations.

A converged SAP organization uses technology as a change lever for business competitive advantage.  The primary focus is on innovation and customers by leveraging SAP, IT support staff, and other technology investments to achieve measurable business outcomes.

SAP IT Convergence occurs when IT is part of the business and not just SAP, IT support, or the IT organization.  A few of the characteristics of what an SAP IT Converged organization looks like:

• SAP and IT staff communications, internally and externally, are more in business language rather than technology.
• Proactively seeks out new business opportunities.
• Able to interpret, and then implement, business marketplace requirements by turning them into technology solutions.
• Adapts to business market conditions.
• Not worried about the latest “techie buzz” like social media (Twitter, Facebook), cloud, etc. unless there is a direct business marketplace connection.

I describe this full SAP IT Convergence as an SAP Center of Excellence–, if you would like more understanding around the SAP Center of Excellence concept please see this SAP ASUG presentation on SAP & Business Convergence.

Conclusion on Steps to Achieve SAP IT Convergence

As time goes on I will address many of the items below in more detail.  Here are some of the key things to consider for creating IT Convergence within your SAP organization:

• KPI full court press
• Steering Committee Engagement
• MBA in the organization
• Mobile BYOD
• Internal consulting on business direct buy technology solutions
• “Exchange staff program” to integrate the IT organization into the business
• Invest in technical and NON-TECHNICAL IT training
  • Facilitation skills
  • Questioning and Negotiation
  • Meeting skills
  • Conflict management and resolution
  • Managerial skills

This approach helps your organization develop business skills and business understanding which naturally leads to the better utilization of technology and information.  SAP IT Convergence is impossible if you can’t both speak the same language and have a similar cultural understanding.  Since it is unlikely that the business is going to learn ABAP, Java, SQL, or how to make settings in the IMG, it is up to you to be the Business IT ambassador to bridge the gap.

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For more information and background on the concept of IT Convergence in the SAP enterprise you might want to consider the following posts:

• Using Your SAP Steering Committee for Business Transformation
• SAP ROI through Strategic Business Transformation
• 3 Keys to Reduce SAP TCO & Move to SAP ROI
• Steering Committee Governance for an SAP Center of Excellence
• A New SAP Implementation Methodology and Implementation Steps

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Hedman, J. (2010), ‘ERP Systems: Critical Factors in Theory and Practice’, Center for Applied ICT, Copenhagen Business School.

Luftman, J. (2000), ‘Assessing Business-IT Alignment Maturity’, Communications of the Association for Information Systems, Vol 4, Article 14.

Silvius, A. (2007), ‘Business & IT Alignment in Theory and Practice’, 40th Hawaii International Conference on Systems Sciences (HICSS-40).

Silvius, A. and Smit, J. (2011), ‘Maturing Business and IT Alignment Capability; the Practitioner’s View’, 44th Hawaii International Conference on System Sciences (HICSS-44).

Related Posts:

• SAP Program Management Requires a Type of CMMI
• Why SAP Projects Fail to Deliver ROI and How to Change IT
• SAP IT Convergence Beyond Business to IT Alignment
• Steering Committee Governance for an SAP Center of Excellence
• The Real Reason Executive Participation Creates IT Project Success

See PART 1 – SAP Implementation is an Investment NOT an Event

How much is it going to cost and how long is it going to take?  That is the classic approach to SAP implementations.  Today it’s not enough and the marketplace is demanding more from their IT dollars.  Now there are questions about measuring cost reductions, process improvements, as well as customer retention and customer acquisition. These are all important discussions.

Your money has to work for you in your business and it should work for you in your SAP investment as well.

If you’re looking to buy a new stock, or mutual fund, or some other investment you do your homework.  If you’re looking at a capital purchase in your business you want to understand the justification and the payback so you build a business case.  If you’re looking to implement SAP then define the business reasons for the implementation and do your homework! 

Take the time and do some research to understand how to avoid many of the sales scams, pitfalls, and ridiculous system integrator tactics.

SAP Cost Based Indicators, Total Cost of Ownership, and Return on Investment

Lagging Indicators and SAP Supported Process Cost Reduction

Using the stock investment analogy, the cost-based ROI component can be seen as the dividends paid by a stock–, generally known, stable, reliable payback, quantifiable and tangible.   In an SAP implementation the “dividends” would represent lagging indicators of performance.  There is a fairly reliable history to consider for the dividend payout. You have a pretty good idea of a number of your costs (or can find out what they are), such as:

• current legacy systems cost,
• you know what your man hours are (staffing, personnel, benefits, overhead, etc., etc., etc.),
• process cycle times,
• per transaction costs for things like purchase orders, sales orders, production orders, etc.,
• competitor transaction cost benchmarks,
• current application license and maintenance costs,
• etc., etc., etc.

These are all lagging indicators and they are all cost based, cost improvement focused portions of an SAP implementation.

Same Old, Same Old, Everyone at Least Pays Lip Service to Cost Based Process Measures

EVERYONE tries to do this to some extent.  It is not always structured, clearly defined, and then measured after the system is live, but there is a general expectation of improvement.  Even for those companies who buy into this paradigm during the sales process but never see it realized, it is still part of the system integrator pitch.  You are always promised “improvements” by the system integrators.  You always expect processes to speed up and process costs to go down.

The process improvement, automation, and cost reduction approach is no different than everyone in the marketplace who does SAP or some other ERP application–, it is the old “operational excellence” model of business.  It does little or nothing to address the key components that grow business or improve revenue.  And after an initial cost reduction boost it does little to increase profits.  

Leading Indicators, SAP Value Proposition and SAP Value Realization

Unless you are in a commodity market, or have clearly “broken” or significantly inefficient processes, the cost reduction or operational excellence approach to ERP should not be your only focus.  Considering your SAP implementation as an investment for ROI purposes you would understand that this is the first step in a long term system investment program.  After you get the system in, you should press your IT organization to move from an operational excellence paradigm into how to use the system to support corporate innovation and sales growth.

If you want value realization from your SAP or other business application implementation it takes a more rounded and tangible business centered approach or, a real SAP value proposition.  Using the stock analogy, the value realization comes from stock appreciation together WITH the cost saving dividends that are paid.  In your SAP implementation both lagging and leading indicators are used to finally realize value.

This new investment paradigm must focus a significant amount of attention on the end state after the business has started operating in the new SAP world.  And that “end state” focus on value realization from your SAP implementation should begin  before you write your RFP.  This entire site is dedicated to help you transfer critical knowledge needed for success from SAP value proposition all the way through value realization.

Marketplace Winners and Losers in SAP and ERP Investment

Innovation is one of the key and critical value proposition areas that separates winners from losers in the marketplace.  And even though your initial implementation may only consider the initial operational excellence areas that is just the beginning of the journey.

Does your system integrator have any ideas or methods for improving engineering, design, and delivery collaboration efforts?  Maybe you are not there yet, and that is fine, but it must be considered as part of your initial assessment of the path you are on with SAP.

Ask your system integrators how to use your SAP implementation to improve concept to market cycle times and for other innovation methods that will impact your marketplace.  Drill into the details, don’t accept “sales fluff,” ask for specifics and don’t settle for less. 

SAP Implementation Measurement of Return on Investment

To this day I am still surprised by how few companies define success criteria for their SAP implementations.  Fewer still do the up front due diligence to determine where they will have business benefit in terms of cost based lagging indicators:

• process improvements,
• cost reductions,
• automation,
• reduced transaction processing costs,
• reduced licensing for legacy systems,
• reduced system maintenance for legacy systems,
• improved cycle times,
• etc.

Even if there is some consideration of these categories or classes of cost savings, few companies quantify them and try to understand current costs and how they might be improved BEFORE bringing in a system integrator. 

During the selection process few companies ask the tough questions and demand the details of their integrators to validate their saving assumptions, and then even fewer hold the integrator accountable for them.  Few businesses attempt to tie incentives, compensation, or other means of achieving these results to their system integrator contracts. 

Talk about caveat emptor, or buyer beware!

Some companies consider legacy systems, and the cost savings for eliminating them, but beyond that there is not a lot of due diligence done to support long term cost reductions.  Key details are generally lacking.

Few companies, and fewer system integrators ever consider leading indicators of business performance such as:

Customer retention

• service processing
  • reducing overall service requests / requirements,
• repair and response turnaround times,
• first time fixes,
• solution databases,
• interactive response forums,
• etc., etc., etc. (come on, you didn’t expect me to tell you ALL the secrets of an ERP customer retention program did you?)

Customer acquisition

• target markets
  • by geography,
  • product line,
  • customer strata,
  • customer segment,
• promotion options
  • special product mixes,
  • offers,
  • promotion execution,
  • promotion cost tracking,
  • buy “x” get “y” at a discount or free,
  • buy “xyz” product mix and get “abc” mix at discount or free or both,
  • etc., etc., etc. (again, feel free to contact me if your system integrator has NO IDEA how to do all of this is the BASE SAP ERP system ;)  It is possible!)
• Customer analysis
  • stratification,
  • buying analysis,
  • product mix / popular combinations,
  • promotion integration,
  • segmentation
    • by region,
    • dollar value,
    • product mix,
    • product line,
    • customer group or product line profitability
  • overall profitability,
  • etc., etc., etc.  (again, feel free to contact me if your system integrator has NO IDEA how to do all of this is the BASE SAP ERP system ;)  It is possible!)
• And MANY more options…

Why is this lacking?  Because you, as the customer, do not demand it of the system integrators.  As a result the system integrator develops technicians.  And the cheaper they can develop those “technicians” rather than experts the greater their margins are. 

System integrators generally have little interest in promoting the idea that you should actually see a genuinely measurable business improvement.  If they did, those system integrators would be forced to bring in more competent, more highly skilled, and more seasoned veterans who understand business as well as the technology.  See for example, CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?  Using mostly a CRM example for illustration, that post helps you gain some insight on the types of consultants and insight you need for business success.

Short Term (operational excellence), Mid-Term (innovation), Long-Term (customer focus)

Relying on the investment analogy, your SAP portfolio should include several items or components of the application to implement.  And just like stock market investments, there must be some short-term, mid-term, long term, and business hedges built into a healthy implementation. 

Some items, such as “Wave II” or add-on functionality may be planned for at a later date but should be considered from the beginning.

For a long term successful SAP implementation it must become part of a business program, not just a system installation.

What does this mean?  This means that your thinking about SAP and its role in your enterprise must change.  As I’ve written before, Change How You Look at SAP to Create ROI.  SAP must be seen as a tool that enables the enterprise to change, to grow, and to spot opportunities and execute on those opportunities sooner than your competitors.  To do so requires a change in culture and thinking that companies often struggle with, however, SAP can enable these changes when SAP is seen as a business investment requiring regular adjustment, focus, balancing and change.  Just like your stock portfolio.

Use a Business Focused SAP Implementation for Business Transformation

If you want to see true competitive advantage it will take adding a real business imprint, real business insight, and key success metrics to create a long term business program.  That long-term business program is business transformation with SAP enabling the enterprise to be more competitive, more agile, and more robust.

At the the end of the day if you do not define what you want from SAP to consider it a SUCCESS, and if you do not have a focus on business drivers you will NEVER see the success you want from your implementation.  Worse still, if you don’t focus on these items from the beginning you will not have a good baseline to evaluate your system integrator or SAP implementation partner in the early RFI or RFP project stages.  Without that critical evaluation you may end up sinking your budgets in a “money pit” where you will NEVER see a return on investment.  Worse still, without these critical measures you may end up having a long term negative return that is dangerous for your long term prospects.  And it is NOT a shortcoming of the software!

Related Posts:

• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• Using SAP to Improve Revenue and Profitability
• The Real Reason Executive Participation Creates IT Project Success
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?