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SAP Service Delivery versus Value Delivery

April 30th, 2012 by
SAP Value Delivery

SAP Value Delivery

In my review of academic literature around SAP or ERP implementations I find some thought provoking items.  Recently I reviewed a study which helped me to form a more complete picture of important issues in IT delivery.  Even though I’ve been writing about it for years I gained a new clarity around evaluating some of the existing delivery models [FN1].  What it comes down to is are you looking for service delivery or business results for your SAP project?

SAP Service Delivery or Business Value Delivery – You Determine Your Future

Because my career started in business and later was exposed to SAP as part of the client core team, and then finally moved on to consulting, I have always recognized the importance of business value.  At the same time much of the System Integrator marketplace has been promoting the same old service delivery model they are familiar with. The biggest reason so many system integrators struggle with business value delivery is because they often focus on hiring a lot of really smart college graduates with little or no business experience.  Fresh out of college and heads filled with textbook ideas about how business works. 

If you just want services delivered then no matter what the sales pitch, all of the system integrators are the same

SAP, ERP, or Enterprise Application customers are looking for something more.  As a recent article I read noted, CIOs do not command the respect of the other key disciplines within the enterprise.  In fact, many of their “C” suite peers question whether or not the technology organization serves much of a useful purpose at all.  That my friends is a frightening and shocking perspective to me.  Stop and think about that a minute, many organizations question whether IT organizations serve a useful purpose in the enterprise.  Is it any wonder outsourcing and off-shoring have become so popular?

What Does This Mean for SAP Projects?

At the end of your SAP project are you satisfied that a project was delivered?  Hopefully on time and on budget, but delivered nonetheless?  If you are satisfied that your SAP project was delivered on time and on budget then you are focused almost exclusively on service delivery

Many senior level IT leaders and delivery folks just want something to get in as quickly as possible.  This is exclusively a service delivery oriented project.  The only thing you are concerned about are the skills needed to address the particular technology / application / solution need right now.  This will not however provide you any type of ROI (Return on Investment) or ROE (Return on Equity) because ROI and ROE (along with other measures) are pure business metrics.  These are not IT metrics and do not measure things like uptime, response time, # of service tickets closed, etc.  The idea of ROI, ROE, or Asset Turns are reflections of business activity and investor / owner value.  Although they may be seen as irrelevant by many in IT they are still useful to understand if any value was delivered for the investment that is made.

Do you want services delivered or business value delivered?

Truth is, if you just want services delivered then no matter what the sales pitch, all of the system integrators are the same.  For that matter, why even bother with a system integrator or SAP consultants at all?  Why not just go to your nearest college and recruit a bunch of really smart graduates for a temporary project and pay them about half what the system integrators charge for a temporary contract? 

Seriously, why even bother with experienced consultants at all? 

If SAP service delivery is your focus and not business results it is just a game of who can best make it through the sales process.  Whether it is IBM and their premium rates or Rajakrishna’s Consultant Shack and their all you can eat offshore rates.  If they can’t speak the local language it really doesn’t matter.  On the other hand if you are looking for business results that is entirely different.

If your only focus is on time and on budget then you are only looking for service delivery.  You are not looking for results, or business change, or IT transformation, or business strategy.

Let me make clear I am not suggesting on time and on budget projects should be ignored.  What I am suggesting is that if your only focus is on time and on budget then you are only looking for service delivery.  You are not looking for results, or business change, or IT transformation, or business strategy.  You are merely looking for resources to deliver services to get you to some date at some budget amount.  Any offshore or consulting shack fake will get you to a dollar amount (that is the brutal truth but they will deliver “services”).

Where is the SAP Value Proposition Focus on Business Results?

While SAP Implementation is an Investment NOT an Event many organizations fail to consider their enterprise application deployments as strategic assets designed to produce business results.  The good news is that is changing.  So the next question is Where do you Start with SAP Return on Investment or SAP ROI?  This goes right back to the basics, you must focus on the WHY of Achieving Business Value from SAP Investment.  Is the effort about technology replacement or is there some business reason behind the initiative?

A recent IBM study under the heading of “The CIO as change catalyst” noted:

As the executive working at the nexus of business and technology, CIOs are uniquely qualified to help their companies leverage available tools to meet current economic challenges and to exploit the opportunities that will arise during this crisis—and opportunity will arise for those businesses bold enough to disrupt competition and restructure their industries. CIOs can help transform their companies by better capitalizing on the value of information assets.  They can help manage and mitigate business risk through better, more timely information. They can improve service management. They can lower enterprise-wide operational costs—including IT’s—through automation. [FN2]

SAP and IT organization heads are gaining insight and experience but at the same time they are being squeezed to cut costs and find value.

Focusing on value entails cutting discretionary spending, deploying resources for the highest return, bolstering core competencies and redefining relationships. Cash flow is central to survival and strategic flexibility, which means businesses and business units need to do more with less. Corporations must conserve capital and cut spending where it produces minimal return. Funds must then be redeployed to activities, products and markets that generate growth, improve margins and truly differentiate one business from another. [FN3]

Make Sure You Are Headed Down the Right SAP Path

To make the transition your SAP project must begin with Creating a Knowledge Centered Learning Organization for Business Transformation for IT Leadership.  Whether you are already live with SAP, in the middle of a project, or just starting out, I would strongly encourage you to get serious about Organizational Change Management Inside the SAP IT Support Organization

What most customers do not know is that SAP has offered the “Value Delivery” methodology as part of the ASAP Methodology for many years

If you want to know Why Use the SAP ASAP Methodology? for your SAP project consider the fact that SAP has offered the “Value Delivery” methodology as part of the ASAP Methodology for many years.  Over the years it has taken many forms, all the way back to the early versions of the ASAP Methodology with the old “KPI” lists.  Today it is integrated into the ASAP Methodology structure. 

Isn’t it time to pursue the value delivery method regardless of whether your system integrator is capable of this or not?

====================

[FN1]  Kieninger, A. and Satzger, G., Risk-Reward Sharing in IT Service Contracts – A Service System View, 2011 Proceedings of the 44th Hawaii International Conference on System Sciences.

[FN2]  From fear to value: CIO strategies for propelling business through the economic crisis, pg. 5.  Retrieved 4/24/2012 ftp://ftp.software.ibm.com/common/ssi/sa/wh/n/ciw03057usen/CIW03057USEN.PDF

[FN3] Ibid. pg. 6.




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Achieving Business Value from SAP Investment

February 27th, 2012 by
SAP Business Value & ROI

SAP Business Value & ROI

As a follow up to last week’s post on Sustained Business Value from SAP Business Software I did a little research on the study authors and discovered their continued focus on this issue.

Recently Peppard (one of the authors) and a couple of other colleagues provided real business value success findings in an upcoming journal article called “Factors Affecting the Successful Realization of Benefits from Systems Development Projects: Findings From Three Case Studies” [FN1].

While I read through and reviewed the draft 35 page study I couldn’t help but notice the striking similarity to my nearly 5 year old post on the subject of SAP as a Change Enabler. What SAP as a Change Enabler summarized in a few pages appears to have been empirically tested by comparing and contrasting a few case studies of live software implementations.

Following my personal experience around SAP since 1994 I’ve added additional insight on how to gain SAP ROI through Strategic Business Transformation by also Using SAP to Improve Revenue and Profitability.  The “how-to” instructions, and detailed guidance is starting to gain some traction. To amplify their initial research I’ve cross-linked many posts throughout this one.

Changing from SAP System Delivery to Business Benefit Delivery

Before anything else a benefits focus must be the guiding framework for your SAP project. Every major business software project must begin with some clear guidance on the “why” of the project.

Business Centered SAP Change Management is Required

The authors highlighted several key observations around organizational change management and the need for user participation but missed one of the key areas of success–, knowledge transfer (see Change Management and Knowledge Transfer Part 1, and Part 2). Not just end user training, but more holistic knowledge transfer about the new system, its capabilities, and how to maintain them.

SAP business transformation is an ongoing effort. To achieve this one of the goals of SAP projects has got to be to create a learning organization. An organization where knowledge exchange and benefits centered collaboration is key to SAP program success (see ERP III – Is the Integration of Collaboration the Future of Enterprise Applications).

WHY do an SAP Project?

So, what is the basic idea here? Their findings indicate that a large scale software program requires a business benefits focused approach. An approach which addresses the “WHY?” of the project.

[A] project might be successful in meeting its internal targets, yet not deliver beneficial business outcomes. [FN2]

For too long enterprise software vendors and SAP system integrators have focused on everything but the genuine business “WHY?” of the 5 W’s and the H of SAP projects. For too long companies have addressed:

  • “WHO” (who will implement, who will support, who will the core team be, etc.)
  • “WHAT” (what is the scope, what technology, etc.)
  • “WHERE” (both project logistics as well as the organization structure that is impacted)
  • “WHEN” (project timeline, business timelines, milestones, etc.)
  • “HOW” (use our custom methodology [i.e. make it up as we go], or use ASAP)

Few companies get down into the details of the “WHY?”

WHY is Management Engagement and User Participation Lacking?

It is the “WHY” which will engage the larger business community and senior leadership and that is The Real Reason Executive Participation Creates IT Project Success. It is the “WHY” that will bring about badly needed business process changes from the user community. Unfortunately it is my opinion that because the compelling “WHY” part of the business case has been missing for so long senior leadership and ultimately the user community is generally disengaged from the project delivery process.

Think about it, how many multimillion dollar investments, with such wide organizational impact, do management stakeholders and end users take such as “hands off” approach to?

If you want your SAP project to be a business project, GET THE BUSINESS ENGAGED! If you want it to be a technology project, nothing else is required. Just put the system in and when people complain tell them to shut up. It was never really about the business anyway!

Do Your SAP System Integrator Consultants Have Business Knowledge or ANY SAP Experience?

This leads to the next issue. If the business is engaged and you decide to bring in a system integrator then define BUSINESS expectations from your system integrator up front. If they only speak to the business in techie terms then get rid of them because do no one  needs “consultants” who can’t consult? (see Screening and Interview Methods to Find the Right Consultant – Part 2).

Think about this a minute and let it sink in. If you hired a system integrator for an SAP business application project then shouldn’t they be focusing on the business? If they can’t speak to you in business terms then why again did you hire them?  Are they really consultants? To gain real competitive advantage in the business marketplace you must Change How You Look at SAP to Create ROI because SAP Implementation is an Investment NOT an Event.

During the sales cycle you as an SAP prospective customer have GOT to ensure there is a clear business vision. Again I ask, if not, then why are you even doing this?

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[FN1] Doherty, N., Ashurst, C., and Peppard, J. (2011) Factors Affecting the Successful Realization of Benefits from Systems Development Projects: Findings from Three Case Studies. Journal of Information Technology (upcoming).

[FN2] Sauer, C. and Davis, G. B. (2010) – Information Systems Failure, Encyclopedia of Library & Information Sciences, Third Edition, pp 2643-2652.

Additional Resources for Successful SAP Implementation

Check out these posts for specific ideas, thoughts, and experience on achieving real results from your SAP project or other enterprise software projects:

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Key Design Considerations for SAP Reimplementation

February 6th, 2012 by
SAP RE-implementation

SAP RE-implementation

Whether you are doing a single instance reimplementation, a system consolidation, or an upgrade rollout you will need to blueprint the differences between your current state and what needs to change for your future state.  Depending on your SAP reimplementation approach there are several key considerations in the SAP reimplementation blueprint. 

All three approaches require a few key steps: 

  1. rationalize your landscape,
  2. consolidate your functionality scope,
  3. evaluate data differences and consolidate custom field requirements,
  4. inventory and eliminate as much custom code as you can,
  5. design for usability

SAP System of Record

Probably the first decision will be the SAP system of record.  This simple concept seems to escape many consultants, clients, and project managers.  Deciding which system will be the “source of truth” for any particular processing stream is critical.  That decision determines landscape architecture, how data conversion decisions are made, interfaces, and how to reconcile data.  I’ve seen so many meetings and discussions which spin forever because there is no clearly defined “system of record” for a particular processing stream.

If you have a single instance of SAP and are looking to undo some of the prior custom coding then this decision is easy.  If you have a diverse SAP landscape it would be hard to imagine that you do not have one of them that you do financial consolidations or house a central chart of accounts.  That system would most likely be the candidate for the “system of record”.

Depending on how fragmented your SAP landscape is with multiple SAP instances in various locations the decision may not be so easy.  Even with a central system where you do financial consolidations or official reporting it may not be the best candidate if there has been a lot of custom development work.  One of the “satellite” SAP instances may be a better starting point if it has remained fairly close to standard.  You will have to carefully evaluate which system works best for your needs.  Ideally this system would be the one which has the least amount of custom coded requirements.

SAP Organization Structure

You will want to take a hard look at reconciling and adjusting your SAP organization structure.  Whether it is a system consolidation, a rollout, or a single system reimplementation the organization structure is the base you build the system on.  The organization structure becomes the foundation for your master data requirements, reporting requirements, and key functionality decisions. 

A properly done organization structure can enhance reporting functionality without dramatically increasing the amount of master data maintenance.  However when it is poorly designed, as you may have discovered, it can create a data maintenance nightmare and still not provide key actionable information.  This raises another consideration for a re-implementation –, if you have a significant investment in custom developed reports they will need to be revisited.

In some cases, even the extra expense of the additional reporting requirements may be justified if the new organization structure provides you with enhanced reporting capabilities or simplifies some of your processes.  The key to remember here is to look past the short term to the TCO (Total Cost of Ownership).  If the changes might have a 3 – 5 year payback horizon it may be justified.  Especially when you consider any future upgrades with the more “stable” organization structure, quicker turnaround, lower cost, less regression testing, outside talent which can come up to speed quicker, etc.




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