SAP & ERP Consulting from the Customer Point of View

I’m always amazed at how many projects miss one of the most important (and relatively simple) scoping requirements.  The worst part is that projects don’t just miss it but they get it completely backward!

After doing SAP projects since 1994, I still can’t believe SAP’s customers don’t use the old “Seven Habits” step of starting with the end in mind.  What do I mean by that? 

Start your SAP project with REPORTS and BUSINESS requirements! 

Come on now, WHY do so many projects wait until they are live with some new system to figure out what the reporting requirements are?  Reporting requirements must become part of the initial SAP scoping exercise.  Even if it is not spoken, every business that undertakes a massive ERP or IT project like SAP wants actionable information from the system after it is installed.  You want critical information that can enable you to:

• Make better management decisions
• Make better financial decisions
• Determine what products or services have good margins (and which ones don’t)
• How different product lines or geographies are performing
• What future business directions you should take based on ACTIONABLE information
• What competitive pressures in the marketplace to focus on
• Etc.

Aside from the operational automation and getting business processes defined, reporting is the key for :

• compliance,
• operations decisions,
• sales and product (or service) decisions,
• and for every part of the business. 

Reporting is so critical to a business yet on almost every project it is treated as an afterthought.  Too often “reporting projects” start after the system is in place and people start working in it.  From a budget and cost perspective you don’t need all of your reports done as soon as the system is installed, but the system must be designed from the beginning to support all of the data needed for those reports.  It must be designed from the start to produce actionable information after the operational and automation components are implemented. 

If you start from the beginning with your reporting requirements you can ensure that the system design addresses any reporting gaps.  By doing this from the beginning you will not have the system installed and then be disappointed that it does not provide you with the key actionable information you need for your business.

Using Reports for Driving Meaningful Business to IT Alignment

Without knowing in advance what the final actionable reporting requirements are you will not be able to take advantage of some of the really great information that a system like SAP can offer.  When an SAP system is properly implemented and constructed SAP provides mountains of data and field options.  There is the ability to add custom fields, re-purpose existing fields [FN1], and add other data dimensions so that you can track and report on any piece of information in any way you can imagine.  However, if this is not planned for in the beginning, and then set up and trained so that you can maintain that data, then after you go live you may be disappointed. 

If you do not do this up front exercise you may discover that you need certain key data requiring expensive rework, expensive customization, and additional time budgeted.  And in the worst case, depending on the system design, you may end up creating a design dilemma causing even more trouble down the road.  Worse still you may discover that the way the system was designed and implemented may prevent you from ever realizing key decision-making information.

There is one other benefit from this approach as well.  By defining end-state reporting needs and end-state actionable information needs you can use this during vendor selection to separate the capable from the incompetent.  The ideal situation would go so far as to provide actual desired end-state reporting examples (field names, field values, etc.).

By doing this exercise you also have the additional benefit of focusing the entire project, right from the beginning, on the end-state goal.  This will help to distill the project down into actual business needs and business requirements for success.

Where to Begin with SAP Scoping and Reporting

Every customer considering an SAP implementation should carefully read through the article on developing an SAP business case (ERP and SAP Business Case for ROI, Business Benefit, and Success, PDF version attached here). 

The key steps to getting the most from your SAP implementation or your SAP scoping exercise is to start with the tools and resources SAP provides free of charge to their customers (and prospects).  There are a couple of tools in particular that every customer, or prospective customer should insist on working with before doing their SAP implementation.  The first is the SAP Solution Composer [FN2], it is a free download and it is a great tool for understanding how to scope your SAP implementation.  As mentioned in the article linked above on developing the SAP business case, it is a great tool for:

• Developing an initial scope
• Creating process lists for starting some of the critical change management discussions
• Communicating in a “new” but common language about the processes.

The next tool available for a high quality project is the ASAP methodology.  It is an active HTML and Java script based repository which contains templates, resources, materials, and a project plan for ensuring you have a successful implementation or upgrade. 

Take Inventory of Your Existing Reporting Landscape and Define Desired Metrics

After your initial SAP scoping exercise it will be important to take an inventory of all of the spreadsheets, databases, and system reports that exist.  From these you can get a good idea of what will need to be accommodated in the system.  And from these existing reports the master data requirements that are required can also be derived.

After gathering the existing reports, begin short duration management workshops to define desired reports.  In other words what has been lacking from the business decision-making process that would provide strategic or tactical insight going forward.  For more information on one reporting and metrics strategy see the posts related to defining and understanding real Key Performance Indicators for business performance (see Why Indexed KPIs are Critical for Business Performance and Success, and Using Key Performance Indicators for Building a Strategy Focused Organization).

Once the initial operational requirements, existing reporting requirements, and desired reporting requirements are defined a final scope and blueprint can then be determined which will propel the business forward strategically into the future.

Conclusion / Summary on

Early Reporting Requirements in SAP Scoping and Blueprinting

In the end I’m still suprirsed at how many organizations finally get around to SAP reporting requirements after the system is already implemented an in place.  Just because you consider and plan for them from the beginning does not mean that you have to complete them by the time the system is in.  On the other hand, you will need them at some point so having the key data and understanding the business drivers for key information is crucial in your SAP implementation.

Too often the reporting metrics, goals, and drivers for business decision-making are treated as an afterthought.  Those reporting metrics and the business goals, key performance indicators, or business direction they represent are generally the reason for the huge investment in new systems to begin with. 

Stop and think about it, how will you ever know if any of the business-centered success criteria was delivered if you don’t have a clear direction in advance?  Those reporting requirements must include current and desired actionable data requirements in some measure of detail.  Certainly as a company and then during the sales cycles the buzz words and generalities of the information end-state are discussed;

• during the early research,
• during RFP preparation, and then 
• during the vendor sales cycles when all of those promises are made about a “future state” for your business. 

Some of the actionable data requirements, or efficiency improvements, or competitive improvements, or other business drivers are also explored during this period.  If they are not captured and distilled into some detail, and then included in your RFP and project charter how will you know if they were ever delivered without defining these critical business justifications for the system to begin with?

One other thing to keep in mind is that no system, no matter how good or how well implemented will change a business by itself, but properly implemented it will provide the actionable information to make sound business decisions for marketplace success (see also SAP as a Change Enabler, Using SAP to Improve Revenue and Profitability, and Change How You Look at SAP to Create ROI).

[FN1] SAP provides a huge number of fields that are never used on most projects.  Some of them are directly tied to application functions and can not be used, still others are not and without doing any custom coding or application changes you can use some of these fields for other purposes.  This “re-purposing” of some fields is a very easy, cost-effective way to solve a number of issues.

[FN2] Go to http://www.sap.com and search for “Solution Composer” (or use this link http://www.sap.com/solutions/businessmaps/composer - retrieved 4/13/2010).

Additional SAP Project Success Reading:

ERP and SAP Business Case for ROI, Business Benefit, and Success

Why SAP Projects Fail to Deliver ROI (and How to Change IT)

Related Posts:

• ERP and SAP Business Case for ROI, Business Benefit, and Success
• SAP as a Change Enabler
• Breakthrough Project Success: 2 of 4, IT Vendor Proposal RFP
• Why SAP Projects Fail to Deliver ROI and How to Change IT
• Using SAP to Improve Revenue and Profitability

Businesses everywhere are looking to shore up their bottom lines by cutting costs.  As a result, cost centers, like IT departments, are prime targets for outsourcing and off-shore maintenance.  The typical business script is that as the IT organization moves into maintenance mode that cost center with high overhead becomes a prime target for reducing costs.   

However, in spite of how things might appear, cost is NOT the real driver of IT outsourcing.  The real driver of IT outsourcing has more to do with its function than its cost…

IT departments generally have not focused on customer acquisition, customer retention, profitability or revenue generation and have become commodities to be outsourced. 

How Should Your SAP Support Department Differentiate Itself?

Imagine a presentation to the Board of Directors about how much money the company could save by outsourcing the sales and marketing functions.  I mean come on here, look at the massive budgets dedicated to sales and marketing!

If you were making that presentation I would suggest you have your resume in order and already have another job lined up. 

Can you imagine outsourcing discussions with that same Board of Directors if IT were seen as a strategic business partner, a business partner integrated with and indispensible to the revenue side of the business.  What if IT were actually considered a very real or even a pseudo profit center?  Not only would outsourcing be off the table for the IT functions that are directly related to revenue generation, but budget discussions and project ideas would be much easier to navigate. [FN1]

Why Has IT Become Nothing But An Expensive Cost Center?

The typical IT script has created an environment where it is seen as an expensive and expendable cost center.  For too long Information Technology departments have focused on applications, programs, and business support to address process improvement, operations, and quality.  These are all the cost side of the business and only look at “operational excellence.”  Once the bulk of the business processes are set up, running, and stable all those significant IT labor costs make great targets for reducing cost and overhead.  And from there the next step is to outsource, reduce staff, or off shore.

Is “operational excellence” important?  Of course it is.  But after integrating and automating the “back office” functions or operations of the business IT must then move on to product or service innovation and also revenue.

Without a move to the key revenue generation functions of the business IT will forever remain an expendable cost center rather than a key business partner.

Why Won’t CRM Applications Work to Change the IT to Business Dynamic?

A few of the applications in the market have tools and resources to help structure the customer acquisition and customer retention processes.  And some of them have some decent rules-based tools for automatically evaluating, and then stratifying customers.  There is application functionality in a number of major applications, and several niche applications for handing special offers, marketing programs, or other incentives focused on customer retention or increasing sales conversions. 

What is the CRM Problem, Why Isn’t it Delivering? 

There are three primary reasons:  1) clueless “CONsultants” who may have some exposure to a CRM application but little or no business knowledge (they lack an entrepreneurial perspective) [FN2]; 2) there are few applications, if any at all, which integrates and then actively engage customers in the business they are buying from [FN3]; 3) sales and marketing programs are poorly structured and designed and do not allow for good sales process analysis. [FN4]

In the SAP CRM space a lot of the benefit that is lacking is because of the number of frauds and fakes in the marketplace.  They entered the market when the applications were immature and experience requirements were low.  They came in droves with fake resumes, fake credentials, and little or no concept about sales and marketing.  [FN4]

Nearly all CRM applications are focused on sales processes, measuring conversion or retention, and all of the other sales process areas.  Software and IT applications do not directly engage the customer in the new product or service development cycle, quality management, marketing, feature or benefit development, or in working with them to address their product or service frustrations.  Archaic customer service centers serve as a “touch point” to the customer but beyond that customers are not intimately involved in, or incorporated into the business product or service lifecycle. 

Conclusion on IT as a Cost Center and IT Outsourcing

Until IT starts to more aggressively focus on the business side of the equation (like revenue, profitability, customer retention, customer acquisition, product development and engineering, etc.) then IT is little more than a dispensable cost center.

This model shows the IT application landscape of the future. It also shows the CIO role as a bridge between the CFO and the CEO, or between lagging and leading indicators of business performance and success. 

source: Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

Once again I will reiterate one of my opening paragraphs here;

Can you imagine outsourcing discussions with that same Board of Directors if IT were seen as a strategic business partner, a business partner integrated with and indispensible to the revenue side of the business.  What if IT were actually considered a very real or even a pseudo profit center?  Not only would outsourcing be off the table for the IT functions that are directly related to revenue generation, but budget discussions and project ideas would be much easier to navigate.

This model shows IT in precisely this way.  Application alignment is focused on the customer–, customer retention, customer acquisition, revenue generation and profitability.

Footnotes and Resources about IT Strategic Alignment with Business – Customer Retention, Customer Acquisition, and Revenue Generation

[FN1]  See these additional resources about business to IT to customer alignment:

Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation
http://www.r3now.com/changing-the-direction-of-sap-erp-and-it-applications-to-focus-on-the-customer-and-innovation

CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape
http://www.r3now.com/cio-cfo-and-ceo-alignment-why-roi-is-lacking-from-todays-system-landscape

[FN2]  Many businesses and Corporate IT departments have been sold a “bill of goods” with little to show for their investment

CRM, ERP, BI, and IT Investment — Where Do You Find the Business Benefit?
http://www.r3now.com/crm-erp-bi-and-it-investment-where-do-you-find-the-business-benefit

[FN3]  See the customer integration model for the IT landscape of the future which integrates the customer into the business process.

Business and IT Alignment – Integrating Technology and IT Spend with Business
http://www.r3now.com/business-and-it-alignment-integrating-technology-and-it-spend-with-business

[FN4] There is a fundamental change needed in how performance is perceived and measured to understand how to make a difference.

Designing Startup Metrics to Drive Successful Behavior
http://www.r3now.com/designing-startup-metrics-to-drive-successful-behavior

Related Posts:

• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• The Real Reason Executive Participation Creates IT Project Success
• Using SAP to Improve Revenue and Profitability
• Business and IT Alignment – Integrating Technology and IT Spend with Business
• Competitive Pressures and Value Propositions, Is Lean the Answer?

This series takes a look at the role of the CIO, the current technology landscape, where the gaps are, and this final piece looks at the emerging technology landscape and what the future holds. This is the last post on the future of business to technology alignment. 

This four part series covers the entire breadth of the business to technology landscape of the future –, IT organizational alignment, business alignment, and future technology alignment for success in tomorrow’s marketplace. 

What Does the Future Technology to Business Alignment Hold – Future ERP, SAP, and IT Value

A number of changes on the horizon will produce a number of winners and losers in the technology marketplace.  Those software companies, system integrators, and consultants who persist in delivering only solutions narrowly tailored to address operational concerns will find a shrinking landscape of customers to sell to, and the competition for the market space will drive prices down to commodity status.  Together with this, the CIO, IT Director, or IT Decision Maker who focuses on the operational side of the equation, or the lagging indicators will continue to face greater and greater cost containment requirements no matter how well the business or economy performs.  As the CFO and COO continue to press for getting more for less from the IT department to cover the cost side of the lagging indicator equation the senior level IT decision makers will find their career prospects more limited.

The way to propel an IT career forward in the years ahead will require a demonstration of business value within the overall organization.  The CIO will need to carry the torch for bridging the business gap between the business lagging and leading indicators of business health.  The important focus both now and in the coming years is on the demand side of the business equation.  That demand side is a focus on customer acquisition, customer retention, sales conversions, up-selling, cross-selling, and customer centered innovation.

A New Wave Technology Model for IT Decision Maker Success

This is a technology alignment model, it shows one possible method for CIO, IT Director, or other IT decision maker to achieve success in the demands to advance the business.  Keep in mind, this is NOT an organizational model, it is a technology alignment model or a business to technology map. 

This model represents the role of the CIO as the bridge between the lagging side of the business (finance, people, process) and the leading side of the business (strategy and sales).  In this model, although the CIO position appears above the CFO and COO organizationally they are generally more equally aligned, or, in many organizations the CIO may answer to the CFO.  The correct CIO role is one of technology integration between the lagging and leading sides of the business.  The CIO role with the use of technology is the “glue” between the two sides.  For the CFO who has responsibility for the CIO and technology spend the surest way to ensure company health and to promote business needs is to encourage the adaptation of the CIO role as a bridge between the CEO and CFO.  As is often the case, success here will cause the company ship to “rise” in the marketplace and a rising ship benefits all participants.

CIO Alignment and Key Responsibilities of the Future Business Aligned Technology Organization

The unfortunate reality is the CIO alignment in most modern organizations is almost exclusively housed in the lagging indicator category (see Part 2 and Part 3 of this series listed at the end).  The zealous focus on only lagging indicators, with its heavy reliance on cost cutting (through automation, performance improvement, etc) leads to cost cutting in the IT department itself. 

After things are working and then automated the IT department is pressed into maintenance mode because the business does not see the revenue generation prospects of technology–, they fail to see the possibilities of promoting customer retention, customer acquisition, innovation, and marketplace analytics. 

The technology map of the future will focus much more aggressively on the customer integration into the business process.  And collaboration activities will occur across the entire value chain, on both the lagging and leading indicator side of the business.  Future collaborative integration will produce new market intelligence, product or service innovation, early defect detection and correction, and other business possibilities which help to retain and acquire new customers.

The future of the successful technology application is going to depend heavily on the ability to drive innovation and process improvement around customer retention, acquisition, and product or service innovation.  There are already signs this is beginning to occur in some of the leading edge companies that this is the future of business technology.

Part 1:  What is the Proper Relationship for the CIO, CEO, and CFO?

In the first part of this series we looked at the changing business landscape and what it means to the CIO, IT Director, IT Manager, or other key technology decision makers.  From a high level the current global business competition, as well as economic issues are directly affecting the C-level executive requirements and the CIO – CFO – CEO dynamic.  This article reviewed how and where the CIO role is coming under tremendous pressure and how to change the current dynamic by more appropriately partnering with the CFO and the CEO.  This partnership is a critical business bridge between lagging business indicators of business financial and process health on the CFO – COO side of the business house and the leading indicators of sales and product or service pipelines on the CEO side of the business house. 

Part 2:  CIO, CFO, and CEO Alignment – Why ROI is Lacking from Today’s System Landscape

The second part was an overview of the current system landscape and its focus on business processes and the emerging trend of trying to focus on the customer.  This piece also looked at the future business landscape and how the technology focus and direction will be permanently changed no matter what happens with the economy and global competition.  Because the technology marketplace (business consumer) is becoming more sophisticated and more attuned to business / technology alignment, the IT dynamic is going through a structural change.  The whole technology sector is slowly moving away from the “operational excellence” value proposition to the “customer focus” and “innovation” areas of the business.  Very few of the consulting companies and few of the application vendors see this sea change and are doing little to address it.  This is the area of technology market winners and losers of the next 20 years.

Part 3:  Changing the Direction of SAP, ERP, and IT Applications to Focus on the Customer and Innovation

The third part in the series looked at current technology landscapes and how they are aligned and then looked at future technology landscapes.  A brief review of the supply side and the demand side of business shows that unless you have lots of customers (demand) to fill a bigger and bigger pipeline (supply) then your business model collapses.  While it is hidden during good economic climates, any disruption in those economic conditions which fails to fill the capacity pipeline points out the glaring insufficiency of the “operational focus” to technology.  During any economic disruption, or any reduction in demand from customers for your products or services the current technology model falls apart. 

Part 4:  Future Technology Landscape Alignment for the CIO, IT Director, or Key IT Decision Maker

The final part of the series looks at the emerging technology landscape and what the future holds.  It lays out an emerging technology landscape model which has some re-alignment and some components already in use by some of the world’s most successful companies.  A new alignment of technology with the customer facing processes, and the use of social or collaboration tools across the enterprise with a clear business objective is explored.  The driver for the future change will be because the business does not see the revenue generation prospects of technology–, they fail to see the possibilities of promoting customer retention, customer acquisition, innovation, and marketplace analytics.  The new technology model looks to change that dynamic.

Related Posts:

• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• Using SAP to Improve Revenue and Profitability
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• The Real Reason Executive Participation Creates IT Project Success
• Why SAP Projects Fail to Deliver ROI and How to Change IT