When implementing or upgrading SAP, too often I encounter vendors and consultants who believe they are more qualified than they actually are. Think of backyard mechanics who changed the oil on someone’s cars and checked the tire pressure a few times, then somehow think that qualifies them to do engine overhauls on Formula 1 race cars.
Similarly, why do you expect old-style implementation vendors and consultants to transform your business into a competitive powerhouse by only addressing cost-focused ROI and TCO methods?
What about SAP and ERP Cost Savings for ROI and TCO?
Sure, cost savings and process improvements are critical today, and you cannot ignore or dismiss them on any ERP project, but they cannot be the key focus of the project either if you expect your company to gain any marketplace competitive advantage.
No wonder survey after survey shows C-level executives disappointed by the return on their ERP investments. If you want Formula 1 results in the marketplace, you need to use Formula 1 approaches, methodologies, vendors, and consultants on your SAP implementation or upgrade.
A cost-based ROI or TCO implementation or upgrade approach will never make you a winner in the marketplace.
You certainly should try to save a few bucks and reduce some of your overhead, but you can only squeeze so much out before something else has to give. Anything unique about your business can easily be copied by all of your other competitors in the marketplace. Worse still, when you are the first to implement new process improvements and automation methods, your competitors can get your lessons learned on what worked and what did not when they need to modify their own processes.[FN1] You pay the R&D premiums for the trial and error, and in turn, your competitors implement similar solutions with lower costs and reduced time. Sure, they may lag a little behind, but in today’s world I can assure you they are not that far behind.
With today’s globally competitive environment, focusing on cost-based metrics alone will not make you win in the market– unless that cost decrease is a game changer. Many of today’s modern companies are in the last few miles of business process improvement in system design, the last few miles of “better, faster, cheaper” ways of doing business.
Except for some game-changing process transformation (which is not likely), the last few miles of process improvement yield the smallest gains at the highest cost. All ROI and TCO methodologies use lagging indicators to measure success, which will not provide you with the forward business benefit you need to win in the marketplace.
Dusty Old Trails – Why ERP Implementations Are Focused on Cost
The herd mentality is alive and well with ERP implementation vendors, especially in terms of ROI and TCO. In the technology arena, which is known for innovation, cutting edge transformation, and forward thinking, this herd mentality is silly. Sure, these implementation vendors try to re-package their offerings and suggest a focus on ROI, but they only understand cost-based lagging indicators because they do not truly understand business.
The Perfect Lagging Indicator of Cost Control
Unless you see significant improvement in cost without a significant impact in operations or marketplace competitiveness, these methods can even be dangerous.
For instance, consider the “perfect” lagging indicator or accounting scenario: a set of perfectly balanced books, with no deviations, no discrepancies and no risks. It is the model of absolute simplicity. The books close immediately with no lag, and they always balance to the penny. The company has no employees, no inventory, no products, no services, no buildings, no assets, no expenditures, no shareholders, no nothing. It is an empty, hollow shell. However, many companies use this “perfect” yet improbable lagging indicator to measure accounting and financial performance.
Cost savings are an important part of any implementation or upgrade. However, unless the cost savings provide you with a major improvement in the operational excellence value proposition, they are often not worth the effort. Lagging indicators, such as cost-based measures of implementations or upgrades, do little to alter a company’s competitive landscape.
So why won’t it work? Unless you have huge process improvement gaps either as an industry, or compared to your competitors, you do not gain much from process improvement initiatives alone. Should you avoid it? Of course not– you should take on process improvement initiatives. But without dramatic changes, most process improvement initiatives are little more than tactics. Your business needs more than tactics; it needs strategies to address your competitive pressures and revitalize your value proposition. These strategies then need to be translated into your SAP ERP or CRM implementation.
SAP’s Rarely Used Tools and Techniques for Strategic ERP Implementation
Unfortunately, many vendors, consultants, and salespeople have no idea about the value, strategy tools, and resources SAP provides. Of the few that do, most of them do not know how to use them because they are not experts– they are merely technicians. Along the way, they have found or developed their one or two “wrenches” and they have found ways to convince you their tire pressure gauge is the best at working on your race car. Even so, they are not Formula 1 mechanics. They are oil changers.
With so many vendors and consultants who are not aware of the SAP value and strategy tools, or how to use them, how can SAP customers be aware of them? Few vendors or consultants understand business strategy, competitive pressures, or value propositions– much less how to integrate them into an SAP implementation of the ERP package or CRM. Sure, they have slick presentations to try to convince you of their wrench or pressure gauge, but if they were truly effective, fewer frustrated C-level executives would be frustrated over the lack of ERP results.
Now that SAP is a very mature product with significant market penetration, the focus of the conversation is changing. CIOs, CFOs, and CEOs are now starting to cut back on their SAP budgets, ignoring upgrade requirements, running to alternate support vendors, and generally having little or no desire to go through a painful upgrade process. Businesses are cutting back on SAP budgets because C-level executives are not seeing the return promised by all those implementation vendors.
Ironically, many of the tools and techniques that can provide effective solutions have been available freely to customers and vendors in one form or another. Even though they are not used nearly as often as they should be, SAP continues to develop and invest in them– but they keep getting missed.
Leading Indicators of Business Success: Customer Acquisition, Customer Retention, and Revenue Generation
Surveys of CIOs routinely show that their IT department primarily spends on business-related issues such as customer acquisition, customer retention, profitability, etc. However, implementation vendors struggle to articulate how an SAP implementation or upgrade can enable these priorities. SAP provides the tools and resources to make it happen, but no software company can change the skills, talents, and abilities of the implementation vendors or their consultants. Rather, the ERP consumer needs to ensure they are actually getting what they are paying for.
Removing Fakes and Frauds from the Marketplace
Business must become more savvy at evaluating their implementation vendors. Said vendors need to fully vet the skills of their consultants.
To this day, I’m still shocked by the number of resumes I see which show some five to ten years of experience, and three or more full lifecycle implementation projects, from an individual who struggles to communicate basic SAP concepts. Again I have to ask, how did they lead the requirements discussions sessions to know what needed to be set up? How did they lead meetings and discussions related to markets, company direction, or required processes to support your business? And who wrote their portion of the blueprint, or logged their issues, or resolved complex process and integration problems that came up during the project? How does someone who barely speaks the native language of the company they work at, take care of the communication-intensive knowledge transfer and change management activities? [FN2]
Underqualified consultants and vendors may replace your legacy transaction systems with future legacy transaction systems in the form of your SAP implementation. However, they have no idea on how to use the tools and techniques SAP provides to realize value based on a strategic implementation method.
Is it any wonder businesses lack genuine awareness on what tools and techniques SAP offers to take them to the next level?
SAP Tactics, Strategies, or Both?
While doing research for a book on using a strategy-based implementation or upgrade approach to SAP, I have read probably thousands of pages of academic articles, research information, and company websites about ROI with IT systems, and more directly, ROI with ERP implementations.
Some of the articles I read were plainly misplaced– marketing material for the backyard mechanics who claim they have the answer to working on your Formula 1 racer. For example, one research piece tried to make the case that just improving processes alone supports goals of revenue and profit growth. Sure, that’s a marginally true statement, but business doesn’t just need the support that process improvement offers (unless there are large improvements). Business needs a new IT focus.
That same research paper went on to explain that business should not be cutting back on ERP IT spend during tough economic times. And while I agree, I agree for an entirely different reason. ERP IT spend should be preserved, but with a new focus and direction. That direction is on strategic implementation and upgrade directed at business benefit, along with the tactical, cost-based process improvements. [FN3] In other words, IT spend should be focused on producing business centered solutions and results, not just replacing transaction systems with best practice processes.
Going back to my research, maybe one percent of the material I read contains any substance about strategic options for ERP. This seems to be a “mystical subject” where businesses cannot find the Formula 1 mechanics, so they continue to rely on tire checkers and oil changers to overhaul their race cars.
Companies undertaking an ERP implementation will continue to face disappointment until they demand the Formula 1 teams and accept they may cost more than the backyard mechanics. In other words, businesses need to demand real business consultants from the marketplace who can communicate about competitive pressures, value propositions, and change management about the SAP application in terms of the following:
- Knowledge transfer
- Change management
- Competitive pressures
- Marketplace performance
- Supply chain integration with the customer
- Customer experience
- Customer or sales conversion
- Product or service innovation
- Niche markets
- Joint venture opportunities
- Product or service portfolios
In addition, consultants need to communicate a whole host of other business issues that the application can enable.
The list I provided describes business issues, not application issues. How is a company going to achieve real breakthroughs in SAP or ERP implementations or upgrades without focusing on business reasons for the system? And even if the company does have a business focus, you still need to find the vendors and consultants who understand how to translate these business-centered strategic initiatives into application solutions.
Ultimately, if you want to properly address your business issues with an ERP system, you need an experienced, qualified SAP consultant, not just a system technician.
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[FN1] Change How You Look at SAP to create ROI
[FN2] Screening methods to find the right SAP consultant
[FN3] Why SAP Projects Fail to Deliver ROI (and how to change it)
