Continuous business evolution with SAP R3_ Michael Doane

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

Michael Doane
Vice President and Research Director
META Group, Inc.
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  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)
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    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”
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Few Firms Planned for the Full ERP
Experience                        Day 1: The End of the Beginning

                                      Vendor/SI View: the ERP wedding

 Vendor/SI improvements centered
  on implementation
    • Acceleration
    • Knowledge Transfer
    • Avoiding customization          Client Reality: the ERP marriage
 Business units underwent
  organizational change, but not IT
                                      1-3 Years              15-22 Years
  units

 Project teams were “finite”
                                      Investment scope



 ERP has a 25 year life-span; investments took a much shorter
                       (and myopic) view
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After Day 1 (Days 2 – 7000) Duringpaid to post implementation
                          attention
                                    implementation, level of
                                      During your ERP implementation, what level of attention was given
                                      to your firm's post implementation support organization.

                                      Total answ ering                                                           246
                                                                                                             100.0%

 SI methodologies end at Day         FULL attention - including staff transition planning, reorganization
                                      of IT and business alignment
                                                                                                              35.8%

  1- Go Live                          SOME attention w as given - though more changes w ere needed
                                      after Go Live
                                                                                                              37.0%

    • How do organizations plan for   SLIGHT attention - w e w ere focused primarily on getting to Go
                                      Live
                                                                                                              20.3%

       continual business             We gave LITTLE attention to post-implementation issues until after
                                                                                                               6.9%
                                      Go Live
       improvement?
                                                 To Be Vision Renewals
 Implementation teams are             (by Project Team type after implementation)
  disbanded                            Team & Vision Continuity             Small/Mid          Large
                                                            Im plem entation Majority         Ongoing
    • Business cedes its role in                                Project Team Disbanded        Program        Total
                                       Post Im plem entation Vision              100.0%          100.0%       100.0%
       evolution                       We fulfilled our initial vision and
                                       have a renew ed vision that w e are         56%               78%        62%
 To Be Vision is static rather        pursuing
                                       We fulfilled our initial vision but have
  than evolutionary                    not come up w ith a new vision
                                                                                       44%           22%        38%



  ERP is treated like traditional IT once Go Live occurs
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Overview of an SAP Implementation Project

    0
  Vision
& Strategy



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


                                       IT Transition
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Pre-SAP Life Cycle
                                                Information Systems Life Cycle
                   The perception of a need


           Degradation               Project Planning



        Maintenance/                       Acquisition/
        Enhancement                        Development



           Utilization               Testing & Training



                         Implementation
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   The SAP Life Cycle
            Continuous Business Improvement Cycle


                          Enterprise Vision



       Extended Applications                  Business Process Design
            Opportunity                            Configuration
       New Software Release                       Implementation




                         Business Process Refined
                              Configuration




Expected life-span of an SAP installation=15+ years
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Business/IT Alignment Is Still Lacking
  A wasted opportunity                           Business side fortune cookie
     • Implementation: combined business &
         IT
     •   Post-implementation: business reverted

  IT alone cannot drive business
   improvement
     • Support, not a driver
  Business is disillusioned
    • Assumed driver


      Business Contribution: Veni, Vidi, Vici, gone
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Bring Business Back to the ERP Table
                                    Put the Business Foot to the Info Pedal

  Business staff resists               Business Need/Opportunity
   becoming IT                                   (pick one)
    • IT is tech                  Path A:              Path B:
    • ERP is business             Configure to Meet Request Change
  The subject is not IT          Integration Go       Negotiate Change
   competency alone               Get on with it       Review Change
                                                       Integration Go
     • Who runs a business
        process? (hint: not IT)                        Get on with it

  Continuity is continuity          immediate                sloth-slow
    • Permanent not project

    IT must surrender; business must step up.
  Senior management must make it so. For keeps.
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                                                                    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.
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        Why an ERP Center of Excellence?
 An optimization of business
  processes that drive business
  benefit continually
                                       AS IS
 An optimization of end user
  competency and employee
  fulfillment of business processes
                                      TO BE
 Continued coherence and
  integration of functionality and
  data through all process chains.
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         Center of Excellence Functions


                     Prepare the company for
                     transformational change
To Be                      (all the time).
                           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)
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   The SAP Life Cycle
            Continuous Business Improvement Cycle


                          Enterprise Vision



       Extended Applications                  Business Process Design
            Opportunity                            Configuration
       New Software Release                       Implementation




                         Business Process Refined
                              Configuration




Expected life-span of an SAP installation=15+ years
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                                                     Continuous Business Improvement


  Beyond Day One                                 ROI, Extended Applications, e-Commerce
                                                    Extensions toward SCM and CRM


                                                            Yes

Core ERP Implementation
                                                Go                                     Incremental
      TO BE                                                CoE?     No
                                                Live                                   Improvement



      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.
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           IT Steering
           Committee
                                                                   CIO
                                             Sourcing &                       IT Human                Change
                                            IT Financials                     Resources             Management

                                             Quality &
         IT                                                                      Security
                                            Measurement
    Architecture/
                                                                  Program
      Planning
                                                                 Management


                                                            Application             Continuous
                         Business
                                                            Management              Education
                          Groups

                                                              Integration Mgmt


                                                                           Center of
    Technology             Infrastructure          Operational            Excellence
     Domains               Development/             Services
•   Database
•   Host
                            Engineering/
•   Middleware               Technical
•   Network
                              Support
•   Desktop
•   etc.
                                                      Technical           Operations
                                                       Support
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                                                      Business Domain
Line of Business Domain
                                                   Enterprise Program Management

Process Owners:                                           Process Owners
    Respond to Enterprise Program
    Management (top) and user                 Users           Users      Users     Users
    feedback (bottom)
    Cross Lines of Business                                      Help Desk

    Drive applications agenda                            Continuous Education

Users:                                  Finance       Sales      Logistics    Production
                                                                                           Applications
    Provides feedback to process            Software Configuration & Support
                                                                                             agenda
    owners                                             Custom Applications
    Taps Help Desk for resolution                    Integration Management
                                                  (Functional, Cross-Application)
    Receives continuous training from
    applications domain.                    Integration Management (Technical)
                                         Production Control/Change Management


  LOBs must have day-to-day control of their destiny.
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   IT Domain                                                IT Domain
                                                 Enterprise Program Management


Custom Applications:                                    Process Owners

    Fill configuration void                 Users           Users      Users     Users
    Reporting
Integration Management:                                        Help Desk
    Assure functional configuration                    Continuous Education
    integration – red/green light
                                      Finance       Sales      Logistics    Production
    Assure cross-app                                                                     Applications
                                          Software Configuration & Support
    integration/interfacing                                                                agenda
                                                     Custom Applications
Production Control
                                                   Integration Management
    Instance management                         (Functional, Cross-Application)
    Change management                     Integration Management (Technical)
                                       Production Control/Change Management


         IT governs integration quality & efficiency
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  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.
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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
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   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.
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   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.
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 Gaining Measurable Value with ERP
                                                                     Bottom Line
                                                       Profit & Loss
                                                 Key Performance Indicators

1.   Identify critical Key Performance       Sample Business Performance KPI’s
                                                 Return on sales
     Indicators (business)                       Return on assets
                                                 Net sales per employee
2.   Target KPI improvements                     Ratio of Assets/Liabilities


3.   Identify which business                       Business Process Drivers

     processes drive performance for      Sample Major Business Processes
     those KPIs                    Order Fulfillment Procurement  Production
                                             Process       Process       Process
4.   Reconfigure SAP accordingly

5.   Go to step 2.
                                                           SAP


Business Impact: Continuous business improvement
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   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