SAP & ERP Consulting from the Customer Point of View

SAP Business Convergence

I only have a couple more posts in my series on overcoming vendor sales tactics so I thought I would provide a brief distraction and look at a few key areas for SAP organizations to move to “excellence.”  This post focuses on some of the considerations for SAP Total Cost of Ownership (TCO) and SAP Return on Investment (ROI).

One key to achieving SAP ROI is through convergence or integration of the SAP staff into the business.  I’ve started down this path as part of a follow-up to the recent ASUG Atlanta conference presentation I did on “Beyond Business to IT Alignment – Creating Convergence in the SAP Enterprise.”  Those materials are now available online.  The first part of them consists of a two-piece resource kit, and the Roadmap Builder, can help to transform your enterprise and business prospects.

• ASUG Presentation on SAP / IT Convergence @ http://bit.ly/kLei7S
• Beyond Technology Alignment – Building a Center of Excellence @ http://bit.ly/jJefxP

Preparing the SAP and IT Organization for a Center of Excellence

This post will provide an overview of ways to achieve business benefit, reduce costs, and achieve ROI.  While I would like to go into detail for each of these components it is best to leave them in a list format.  To expand on them would create a 20 or 30 page document.

Your goal is to drive business innovation and marketplace differentiation

So, to keep things simple I will condense this down into a bullet-point list covering the 3 key topic areas of

1) Engaging the Business,

2) Reducing Complexity, and

3) Delivering Excellence.

The SAP Organization Must Engage the Business

• Converge IT and Business efforts
  • Regularly convene a senior business representative steering committee
  • Facilitate business and IT planning sessions
  • Use business resources to help manage the project
• Develop dotted line IT staff to business organization relationships
  • Assign one or more IT staff to each business area
  • Have IT / SAP resources work in the business areas on a regular basis
  • Ensure they perform some of the routine tasks in the business area
  • Develop improvements, solutions, or ideas in conjunction with business users
• Create Service Level Agreements (SLAs) for post production activities
  • New feature or functionality requests
  • System performance and uptime
  • Issue escalation and resolution
• Build Technology Solution Roadmaps
  • Define and prioritize technology requests
    • Need
    • Want
    • Market impact
    • Strategy impact
    • Business area(s) impacted
  • Perform cost / benefit analysis
  • Evaluate alternatives

The IT and SAP Staff Must Reduce Complexity

• Consolidate
  • Hardware
  • Applications
  • Network infrastructure
  • Application delivery infrastructure
  • Interfaces
• Decommission legacy systems
  • Reduce license management
  • Reduce technical support costs
  • Reduce interfaces
  • Improve data consistency
• Reduce custom solutions – clear custom development

The SAP and IT Organization Need to Deliver Excellence

• Lean implementation
  • Use SAP Solution Composer
  • Use SAP Solution Manager
  • Employ ASAP methodology
  • Leverage vendor templates where they are useful
• Optimize performance
  • Make use of automated batch jobs for repetitive transaction tasks
  • Use performance and monitoring tools
  • Create additional database indexes where useful
• Use QA processes to ensure Quality results
  • Ensure all project code is QA checked
  • Perform project QA’s at key milestones
  • Ensure deliverables are complete and useful (if they are not value added they are a waste of time)
    • An example of a wasted deliverable is something that serves only administrative “reporting” functions.
  • Ensure testing is thorough and challenge testing is performed
• Employ proper IT Governance Principles
  • Ensure proper standards are created and then followed
  • Evaluate, review, and escalate as necessary
  • Ensure key decisions are time bound
  • Be prepared to transition to support at go-live
  • Create issue and risk management processes
• Ensure knowledge transfer
  • Make sure that company IT or business staff can support the solution
  • Ensure end user training is thorough
  • Send IT or business support staff to SAP courses (pay now or you will pay far more later)
  • Use post production learning and improvement sessions

Conclusion on Reducing SAP TCO While Realizing SAP ROI

Customers who are either considering or undergoing an SAP project must perform due diligence to ensure they get what they are paying for.  Not only do you have to evaluate cost savings, but the cost of ownership (software, ongoing support, and maintenance costs).  Together with that it is important to ensure you get some business value from your SAP investment.  More than just promises it is important to define, develop, and then measure success criteria after the SAP implementation.

To make things even more complicated your SAP and IT support staff must work to become directly integrated into the business.  Your goal is to drive business innovation and marketplace differentiation.

Related Posts:

• Using Your SAP Steering Committee for Business Transformation
• SAP Offshore Development Project Experience
• Industry Specific SAP Consulting vs Deep SAP Application Experience
• More on Stupid SAP Vendor – Partner Selection RFI-RFP Processes
• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP

SAP project success

The “need” for industry-specific SAP configuration experience is probably one of the most over-rated ideas in the SAP consulting field.

The most successful SAP implementations require integration of the business requirements with application functionality.  To do this well requires three separate domains of expertise–, industry expertise, application expertise and consulting skills.  One of those domains — consulting skills — requires a skill with change management, communication, process engineering, people skills, and other factors.

The need for industry specific SAP consulting is often oversold

In a single domain of expertise, rather than 3 separate domains (industry, SAP application, and consulting), research indicates it takes at least 10 years to achieve “expert performance” levels.  For more background on the expertise required see Successful SAP Project Team Composition – Technicians or Experts? where this extract was taken from:

“[E]ven the most ‘talented’ need 10 years or more of intense involvement before they reach a level where they can consistently demonstrate superior performance in international adult competitions in sports, sciences and the arts… Even in cases of famous legends, such as prodigies like Bobby Fischer, the required time to reach grandmaster status was still around nine years, and it took another two decades before Fischer played for the world championship.  In many domains of expertise, most elite individuals take considerably longer than 10 years of intensive practice to win international competitions consistently.  Further, outstanding scientists and authors normally publish their first work at around age 25 after an extended preparation, and their best work takes an additional 10 years…[E]ngaging in particular practice activities produces dramatically elevated levels of performance over an extended period of time.” (Ericsson, K., et. al. 2007, ppg. 16, 17)

Just how talented is someone who has to understand an industry AND the SAP software AND solid consulting skills?  Put this in context of Chess Master Bobby Fisher’s game.  The Chess set has a board with 64 squares and each person plays with 16 pieces (32 pieces total).  SAP software settings combined with master data options provides more possibilities than that for a single stage of a business process chain with multiple stages.  Is an “industry specific” consultant with 3 or 4 years, and possibly 2 or 3 SAP implementations going to make much of a difference for your business?

Then there are the critical consulting skills necessary for a successful project, see Expert SAP Consulting to Reduce SAP TCO and Improve SAP ROI.  These skills can take several years and several SAP projects to gain competence with as well.  Long before I started doing SAP consulting I had numerous corporate training and education courses on managing conflict, facilitation, project planning, negotiation, communication, managing people, organizational change, etc.  Along with this training I had several years to put this training into practice before ever being exposed to SAP.  The expectation that you are going to see significant business-centered results from a “consultant” with a few years of SAP experience is optimistic at best but disastrous in practice.

As an SAP software customer what can you do to ensure the greatest possibility of success?  Focus on bringing in those with deep SAP business software experience and strong consulting skills.  That should be the key focus of your search for a consultant or for a system integrator.

Where does the industry experience come from then?

Integration of Industry and Business Experience in the SAP Software

Industry experience comes from you as a customer.  That is why it is so important to bring the best you can from the ranks of your business to the SAP project.  These are usually the people in departments or organizations that are depended on or have the answers for the difficult issues that arise.

The key to success in your SAP project is to combine your business and industry experience with the most seasoned SAP consultants you can budget for.

Those within your own company know that is usually takes 8-10 years to really start to know the industry.  Often it may take 15-20 years or more to become skilled within a particular industry. You need industry expertise from within your own company when you are trying to decide on strategic corporate direction, plan for the future, or determine new marketing and sales opportunities.

An SAP consultant with many years of SAP configuration can successfully translate your business requirements into more of the standard application functionality. What I have personally discovered is my broad industry and solution exposure in SAP has provided me insight into new ways to solve nagging industry problems in unrelated industries.

The Ivey Business Journal recently offered a great, insightful post about gaining value from consultants noting:

Clearly, a key ingredient in enabling a consultant to meet or exceed expectations is to avoid diluting value-adding expertise with the consulting firm’s unskilled or inexperienced resources. Consulting firms are too quick to dismiss the capabilities of client personnel, when in fact such personnel can orient the consultants, navigate political minefields, get to the data more quickly (as they understand the company and the industry), and facilitate the buy-in process. Companies must demonstrate leadership not by simply accepting a consulting firm’s proposal, but by applying their own considered perspective as to the best approach for embedding maximum, value-adding expertise in the project, while cost-effectively filling non-expert roles with resources from other sources…

Assessing whether a consulting firm can deliver the necessary expertise can be difficult if the company itself does not already have the particular expertise. Consultant credentials and resumes are carefully crafted to make the consultant appear to be the perfect fit for the role called for in the proposal.  But just because assessing consultants’ capabilities can be challenging, companies should not simply take refuge in a favorite or familiar brand.  Rather they need to invest the time to verify that the proposed team can deliver.

http://www.iveybusinessjournal.com/article.asp?intArticle_ID=927

Many of the larger consulting firms recruit smart graduates directly form college.  How much business experience do these smart grads have?  How much practical work experience do they have?  What do they have to draw upon?  The extent of their industry experience usually consists of the 1, 2, or 3 SAP projects they participated in.

To gain real value from your SAP implementation project hire the best possible SAP consultants you can find and bring the strongest employees you have to the project.  Set the expectation that the consultants are supposed to help the employees learn the software setup, and that the employees are to be relied upon for key business direction.  Let the employees know that they have been empowered to make the key decisions.  After this have weekly meetings with your internal employees to talk about lessons learned on dealing with consultants and how to ensure the company gets what they need from the SAP vendor.

Related Posts:

• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• Using SAP to Improve Revenue and Profitability
• More on Stupid SAP Vendor – Partner Selection RFI-RFP Processes
• SAP Offshore Development Project Experience
• SAP Consultants for High Speed SAP Projects

SAP Best Business Practices

Over the last couple months I’ve seen a few posts developing a debate around the use of software “best business practices.”  The basic takeaway is that if everyone uses the standard delivered “practices” there is no competitive advantage.  While this may be true for many software applications there are two things with SAP which causes this idea to be misleading.

Many of these commentators fail to recognize that SAP refers to different things as “best business practices.”  The key types of SAP best business practices involve the processes included in the SAP software itself– software supported business processes.   Then there is the management and integration practices around software alignment to business — or the whole Business to IT Alignment dynamic which focuses on business value. [FN1]

The posts and comments complaining about “best business practices” I refer to are the ones where the authors complain about software supported business processes.  The common denominator I find in all of these authors’ complaints is they have little or no exposure (let alone experience) with SAP.  Their commentary is a bit misleading because of the depth and breadth of options available to any SAP customer.

SAP Best Business Practices for Business Software Integration

Few of the “best business practice” detractors are aware that SAP best business practices are far more than just the software business processes you put in scope and implement.  SAP’s best business practices include structured decision making and governance around applying software solutions to business (shocking isn’t it!) [FN2].  The whole idea behind these types of “best business practices” are to find ways to gain tangible benefits from the application of technology.  By identifying value based governance and project criteria you can achieve measurable Return on Investment (ROI).

Use of SAP’s Best Practices for Speeding Time to Benefit [FN3]

Best-practice value identification, transformation, and measurement approaches include:

- Incorporation of business case objectives throughout the project lifecycle
- Communication and documentation of process objectives and project success criteria
- Use of both existing and new program-specific financial and operational key performance indicators, based on the business case objectives, to measure project success.

The points above come from the SAP literature.  If you look at what SAP is proposing in those points you will see a company that is encouraging accountability to the business in the implementation and integration of its software.  Unfortunately few of the SAP implementation vendors or partners encourage this type of accountability.

SAP as a business software company spends over $1 BILLION Euros a year on Research and Development (R&D) (or over $1 Billion US).  That is to support both types of “best business practices” and is more than nearly all of SAP’s competitors generate in gross revenue each year [FN4].  Is it any real surprise that most of these complainers do not work with SAP?  Many of them are from competitors.

SAP Software Supported Best Business Practice Process Design and Setup

The SAP software supported best business practice processes generally refers to a broad type of functionality that the application contains.  For example, in the automotive sector, on the materials management side, it means that you have special functionality for JIT (Just in Time) or Forecast schedule agreements.  Along with that it also includes “sequencing” for automotive manufacturers and suppliers to guarantee that components and assemblies are delivered to the production line in exactly the order the OEM manufacturer builds them.  This is industry specific business process functionality.

In that one small example, what is not “understood” by many of the best business practice software process detractors is that there are literally dozens, if not hundreds of individual and granular system setup options for how each step of that process works.  On top of that there are also dozens, if not hundreds of master data points between the vendor, materials, pricing, and other possibilities that directly influence how the steps of that process are carried out.  So in a generic sense you have SAP “best business practices” processes in the form of industry accepted JIT and Forecasting along with automotive specific sequencing.  The details of how you execute that functionality can be finely controlled along the way without custom coding.

Conclusion on SAP Best Practices for Business Processes

The example just provided above is one small processing example of hundreds of processing options, within one single industry vertical.  SAP supports over 20 major industry verticals covering industries as diverse as Chemicals, Public Sector (government), Retail, Pharmaceuticals, Consumer Goods, Healthcare operations, Hi-Tech, Services, Aerospace and Defense, etc.

Even though SAP offers a “best practice” setup library with documentation on system settings to support specific business processes, they are a starting point.  The SAP documentation and resources do not cover all of the fine details of setup that only experience brings.

The ability to finely tailor or “tweak” system settings to meet a particular need or requirement, with hundreds, and in some cases thousands of variations, means that two companies using the exact same functionality can create entirely different processes to support different business strategies.  Together with that you have dozens or even hundreds of master data settings which rely on this system setup to create a virtually unlimited set of options.  And then before building some completely separate, stand-alone application there are user exits (or enhancement points in ECC versions) to program very specific requirements.

In the end an experienced consultant can guide you through the process of making the finely detailed adjustments to handle nearly any requirement with a minimal amount of custom coding.  And that is where true “best business practices” intersect with IT. Combine the right consultants with proper project or task governance and you have an optimal solution for the least Total Cost of Ownership (TCO).  Together with reduced TCO you gain real Return on Investment (ROI) with the application of “best business practices” surrounding good governance to create business solutions with IT (rather than IT solutions for business).

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[FN1] This site focuses more on “best business practices” related to business and technology alignment. There are any number of great resources for the business process related topics so another site would add little benefit.  In fact I’m not sure anyone could compete with SAP’s own “SAP Community Network” (or SCN, http://scn.sap.com ).

[FN2] SAP Executive Insight Series (September 7, 2009).  Accelerate Value Creation: The Virtuous Cycle of Using Technology to Maximize Business Value.  http://www.sdn.sap.com/irj/scn/index?rid=/library/uuid/70fa08b0-cf81-2b10-a396-89d18932fbd0&overridelayout=true (retrieved 4/23/2010).

[FN3] SAP Executive Insight Series, pg. 6, 2009.

[FN4] SAP Annual Report for 2009.  Review of R&D Operations.  http://www.sapannualreport.com/2009/en/annual-report-2009/review-of-operations/research-and-development.html (retrieved 3/05/2011).

Related Posts:

• Tactics, Strategy, ROI, TCO and Realizing Business Benefit from SAP
• Using SAP to Improve Revenue and Profitability
• SAP Implementation is an Investment NOT an Event
• Competitive Pressures and Value Propositions, Is Lean the Answer?
• Where do you Start with SAP Return on Investment or SAP ROI?