Thrive after go Live: Continuous Business Evolution with SAP R/3

1. Thrive after go Live:Continuous Business Evolution with SAP R/3 Michael Doane Vice President and Research Director META Group, Inc.

2. Protecting Your SAP Investment 80% of SAP installed base clients express disappointment in: Benefits attained Measurability of benefits User competency 20% created post-ERP IT/Business organizations (CoE)

3. The Fog of SAP War • A Business Case justifies the endeavor (was it measurable?) • Software and SI are selected • Project begins – client grows ‘cost conscious’ • Benefits are forgotten/training is reduced • “We didn’t get what we expected”

4. Few Firms Planned for the Full ERP Experience Day1: The End of the Beginning Vendor/SI View: the ERP wedding • Vendor/SI improvements centered on implementation • Acceleration • Knowledge Transfer • Avoiding customization • Business units underwent organizational change, but not IT units • Project teams were “finite” Client Reality: the ERP marriage 15-22 Years 1-3 Years Investment scope ERP has a 25 year life-span; investments took a much shorter (and myopic) view

5. During implementation, level of attention paid to post implementation After Day 1 (Days 2 – 7000) • SI methodologies end at Day 1- Go Live • How do organizations plan for continual business improvement? • Implementation teams are disbanded • Business cedes its role in evolution • To Be Vision is static rather than evolutionary To Be Vision Renewals (by Project Team type after implementation) Small/Mid Large ERP is treated like traditional IT once Go Live occurs

6. B Transfer of SAP Knowledge A Overview of an SAP Implementation Project 0 Vision & Strategy Help Desk Interface Support Benefits Monitor Process Improvement Integration Testing Data Migration Interfacing User Testing User Training Project Charter Funding Commitment R/3 Configuration Reporting Interfacing Data Cleansing Enterprise Model Definition Process Design Data Analysis Scoping Staffing Benefits Targeting Production Platform Project Installation Sizing Client Ownership IT Transition

7. Pre-SAP Life Cycle Information Systems Life Cycle The perception of a need Degradation Project Planning Acquisition/ Development Maintenance/ Enhancement Utilization Testing & Training Implementation

8. The SAP Life Cycle Continuous Business Improvement Cycle Enterprise Vision Extended Applications Opportunity New Software Release Business Process Design Configuration Implementation Business Process Refined Configuration Expected life-span of an SAP installation=15+ years

9. Business/IT Alignment Is Still Lacking Business side fortune cookie • A wasted opportunity • Implementation: combined business & IT • Post-implementation: business reverted • IT alone cannot drive business improvement • Support, not a driver • Business is disillusioned • Assumed driver SAP is implemented. Game’s over. Go home. Business Contribution: Veni, Vidi, Vici, gone

10. Bring Business Back to the ERP Table Put the Business Foot to the Info Pedal Business Need/Opportunity (pick one) • Business staff resists becoming IT • IT is tech • ERP is business • The subject is not IT competency alone • Who runs a business process? (hint: not IT) • Continuity is continuity • Permanent not project Path B: Request Change Negotiate Change Review Change Integration Go Get on with it Path A: Configure to Meet Integration Go Get on with it immediate sloth-slow IT must surrender; business must step up. Senior management must make it so. For keeps.

11. Bottom Line Defining an approach leading to “Thrive after go live” • Give business process ownership to business • This includes responsibility, not simply the right to order up new code. • Place IT in a support role for business process • Retains integration controls & disciplines • Retains customization role • Perpetuate these roles and the urge for change • Continual refresh of “To Be” vision • All measured, all monitored Business Impact: ERP becomes an engine for benefit, not a cost center.

12. Why an ERP Center of Excellence? • An optimization of business processes that drive business benefit continually • An optimization of end user competency and employee fulfillment of business processes • Continued coherence and integration of functionality and data through all process chains. AS IS TO BE

13. Center of Excellence Functions Prepare the company for transformational change (all the time). To Be Continuous business improvement Optimization of current system usage As Is Maintenance and support of ERP and related functions (ERP/CRM/SCM) Parameters: Business Applications Span (ERP is the backbone)

14. The SAP Life Cycle Continuous Business Improvement Cycle Enterprise Vision Extended Applications Opportunity New Software Release Business Process Design Configuration Implementation Business Process Refined Configuration Expected life-span of an SAP installation=15+ years

15. Continuous Business Improvement Beyond Day One ROI, Extended Applications, e-Commerce Extensions toward SCM and CRM Yes Core ERP Implementation CoE? Go Live Incremental Improvement TO BE No AS IS Performance The “TO BE” vision established during core ERP implementation is limited to near and mid-term planning and is targeted for achievement at the point of Go Live. At Go Live, a new “TO BE” must be established or business improvements will only be incremental relative to the initial To Be vision. Clients need to simultaneously a) maintain and support existing ERP functionality and b) provide the engine to seize new benefits.

16. CIO IT Steering Committee Change Management Sourcing & IT Financials IT Human Resources Quality & Measurement Security IT Architecture/ Planning Program Management Continuous Education Application Management Business Groups Integration Mgmt Center of Excellence Operational Services Infrastructure Development/ Engineering/ Technical Support • Technology • Domains • Database • Host • Middleware • Network • Desktop • etc. Technical Support Operations

17. Business Domain Line of Business Domain Enterprise Program Management • Process Owners: • Respond to Enterprise Program Management (top) and user feedback (bottom) • Cross Lines of Business • Drive applications agenda • Users: • Provides feedback to process owners • Taps Help Desk for resolution • Receives continuous training from applications domain. Process Owners Users Users Users Users Help Desk Continuous Education Production Logistics Finance Sales Applications agenda Software Configuration & Support Custom Applications Integration Management (Functional, Cross-Application) Integration Management (Technical) Production Control/Change Management LOBs must have day-to-day control of their destiny.

18. IT Domain IT Domain Enterprise Program Management • Custom Applications: • Fill configuration void • Reporting • Integration Management: • Assure functional configuration integration – red/green light • Assure cross-app integration/interfacing • Production Control • Instance management • Change management Process Owners Users Users Users Users Help Desk Continuous Education Production Logistics Finance Sales Applications agenda Software Configuration & Support Custom Applications Integration Management (Functional, Cross-Application) Integration Management (Technical) Production Control/Change Management IT governs integration quality & efficiency

19. Building an SAP CoE: Planning • Create a high-level vision for a post-implementation Center of Excellence. This vision will address: • The scope of the center of competence: Will it support just the ERP installation, or also legacy systems, bolt-ons, and interfaces? • Organization/structure: There are at minimum four basic variants for a CoE organization depending upon a client’s size, geographic locations, and support requirements. • Transition Plan (High Level): defining the calendar for migration of legacy systems to ERP as well as the migration of legacy IT staff to new roles in the Center of Excellence.

20. Building an SAP CoE Development/Realization • Create a Straw Roster for the Application Management team:   • Establish role definitions for the post-Go Live for Enterprise Program Management, Application Management, and Integration Management. • Determine which CoE functions will be outsourced • Launch outsourcing negotiations with chosen vendors • Create a staff transition plan

21. Realization to Final Preparation • Complete transition education for CoE staff. • Integration and orientation of outsourced CoE functions should commence as the build phase reaches the final preparation phase. • Initial end user training should include an introduction to CoE user support functions and the Help Desk should be in place.

22. Go Live + • The Center of Excellence is operational, with all elements in place for continuous business evolution. • After Go Live, the balance of legacy IT staff will be a) transitioned to the new SAP-centric organization, b) re-assigned with the organization, or c) terminated.

23. Gaining Measurable Value with ERP • Bottom Line Profit & Loss Key Performance Indicators • Sample Business Performance KPI’s • Return on sales • Return on assets • Net sales per employee • Ratio of Assets/Liabilities • Identify critical Key Performance Indicators (business) • Target KPI improvements • Identify which business processes drive performance for those KPIs • Reconfigure SAP accordingly • Go to step 2. Business Process Drivers Sample Major Business Processes Order Fulfillment Process Procurement Process Production Process SAP Business Impact: Continuous business improvement

24. Bottom Line • ROI should be measured from the beginning of the project and carried through time • Cost is only half of the equation • ROI has no ceiling (nor does a To Be Vision) • Continuous business evolution is the goal, not just implementation