03 Mar Will a cloud strategy solve the SAP-ERP conundrum?
How to make ERP deliveries more successful
By Dominic Lyne
For those working in the industry, you will know how complex SAP-ERP deliveries can be.
Over the 5 years from 2013-2018, several press releases reported that large SAP-ERP failures continued to happen, such as Deutche Post-DHL (2015) and also, as recently as 2018, LIDL [ii] where 500m Euro was written off due to huge accrued liabilities and few tangible benefits. A recent LinkedIn article [iii] discussed how a number of other significant firms like Haribo/HP/Hersheys/Nike have all failed to deliver large scale SAP ERP in recent years for exactly the same reasons, where the project either fails completely or the project goes live but the business fails to have any gains and little or no return on investment (ROI).
This is the ERP conundrum: how, with all the collective knowledge and experience, does the industry still have such failures and what can be done to make ERP deliveries better? This is what we will discuss, in detail, in this article.
Roll forward to the present day and the Gartner ERP Primer 2019 report states that: “ERP is rapidly changing. Cloud adoption, emerging technologies and evolving digital business requirements are affecting the very definition of ERP. CIOs must work with application leaders and business leaders to formulate a flexible and adaptable ERP strategy to improve business outcomes”.
Some obvious challenges stand out:
- Companies over-engineer or customise their ERP making systems too similar to Legacy (the opposite of what
ERP was intended for)
- Executives do not always set clear achievable business objectives or identify major benefits
- Programmes are not setup correctly to plan and manage scope properly
- On Premise SAP solutions are cumbersome and costly
- Migration from On Promise to Cloud is in early adoption phase
Cloud Strategy (SAP Partnership with Google)
A Cloud ERP strategy may help an organisation deliver benefits far more quickly and reduce the risk associated with the longer, requirements based, on-premise ERP programmes. Cloud ERP is not requirements based (processes are out of the box [or rather in the cloud] and therefore avoid recreating most legacy issues, although a number of cloud offerings are not fully established in some areas. Cloud deployments offer rapid design and config, normally via templates, to implement std rules, std integrations and std data migrations, so clients can be up and running with core modules in less time.
A Cloud strategy may also offer better TCO/ROI and has different pricing models, but careful consideration is needed to assess the costs savings and optimisation opportunities and what can be capitalised or expensed (there are many articles available in this area). Cloud solutions will make it easier to stay up to date with latest versions and upgrades.
Whilst Cloud solutions may offer quicker core deployments, clients (especially those with complex technical landscapes) should not underestimate the effort required their side to integrate and adopt [vi]. Back in 2016, Gartner also suggested that most Cloud ERP projects will ‘fail’ by 2018 – Mainly due to lack of preparation leading to integration woes and lack of suitable skills, the online article concluded [vii].
SAP have just released the latest S/4HANA 2002 Cloud offering (Feb 2020) but SAP S/4HANA Cloud is only available in two of SAP’s verticals according to the Gartner report; however, many organisations considering hybrid deployments. Those with on premise can also move to a cloud solution.
Google Cloud has a strong partnership with SAP to provide SAP-certified infrastructure for all SAP systems. It is also possible to deploy SAP’s own cloud offerings, like SAP S/4HANA Cloud, SAP Ariba, SAP HANA Enterprise Cloud, and the SAP Cloud Platform itself to the Google Cloud. Google Cloud can help you leverage your SAP data all while running your SAP applications more reliably, securely, and cost-effectively.
So, adopting a Cloud ERP strategy may solve one part of the conundrum. How does the post Modern ERP programme succeed? The various articles mentioned already give insight, but it needs to be expanded:
For SAP ERP Certainty, Setup the Programme correctly
ERP Certainty is a risk avoidance engagement model and a framework of activities that brings together Key Critical Success Factors (CSFs) by owner and phase, with a methodology to apply them across the three dimensions from a Programme perspective. By investing more time in setup at the outset and laying out certain activities and disciplines, you can increase the certainty of a desired outcome.
What links all these together is an overall Business Vision/Strategy and Business case. Set a clear business vision and path for the future corporate landscape and indicate new roles that are needed to deliver radical transformation, enabled by the correct ERP platform(s).
- Strategy & Vision (Steering Group/Exec Team)
- Create Business Case and Strategy
- Define Transformation benefits – Central functions/new groups?
- Bus model/TOM – Central services/Performance team/Analytics
- Types of roles/departments/skills
- SAP – ERP Strategy
With a clear strategy and benefits the choice of ERP should become easier. Your business case must stack up to justify the overall spend across 10 years!!
This is, of course, the start of the journey. The programme must be setup from the outset to incorporate critical success factors and the correct project disciplines and governance
Strategy needs to combine all three areas for delivery and future BAU.
A Cloud ERP strategy could help your organisation avoid some of the pitfalls with on premise solutions but you need to research, plan and choose carefully according to your organisation. It may prevent you over-engineering and recreating legacy, but you should consider the other areas mentioned above and develop a full Business Vision/Strategy and identify transformation benefits or you may only succeed in delivering something does not improve your business operations.
All the discussions and articles lead to the conclusion that clients need to prepare and plan far more before embarking on any ERP programme and carefully consider:
- Where they want to get to
- What is needed to take them there
- Who they need to deliver it, both internally and externally
Believe it or not, vendors can sometimes oversell and SI/Implementation Partners can over engineer to meet the expectation set by the vendor – clients are not always sure what they want from the long term and programme teams can adopt poor governance and control, given that time is of the essence and the pressure to deliver.
Business benefits may not be banked on day 1 – It could take 3-5 years to embed/Stabilise but you need to have a clear roadmap of transformation benefits that provide ROI!
Recommendations for SAP programmes:
- Clearly analyse, define and communicate your Organisations’ vision/strategy/business model for next 5-10
years. What is the business case? Centralised functions – what roles are needed to push the business
forward, what functions are required etc? What are the long term goals and objectives
- Review Google Cloud platform benefits and SAP cloud offerings
- Avoid risk where possible from the outset – execute the above tasks and then spend time to setup the programme correctly, follow an implementation approach like ERP Certainty. Be ready to start. Choose a competent Business Programme manager to guide you on your journey to success with the right internal team to guide Implementation partners.
- Don’t underestimate the amount of skills and effort required business side that System Integrators will not cover (ie Data Extract/Transformations and Integration design). Allow a little more time for the Programme team to plan and execute – this will pay dividends – clients often want more, for less and quicker but this does not work.
- Don’t just Change – Transform! So many programmes talk about transformation but you need an imaginative and far reaching strategy to enable this, or all you will have is an expensive way of doing the same thing you have been doing for the last 10 years. Improve peoples jobs and skills. Some roles may, of course, disappear but there are opportunities for staff to take on new roles and to up-skill to the new world. Don’t settle for mediocrity, get the best from your team. Be bold!
- Choose the Partner/SI carefully and other 3rd parties! (Maybe consider a Testing partner and carefully consider any reporting solution 3rd parties). And check your internal suppliers and their capabilities and governance – especially if on the critical path.
- And finally, the client should lead from the start to the end and provide Top Management Support, business skills and business engagement in order to succeed.
Choose your ERP carefully based on your specific needs following a feasibility study. Whatever you decide to choose, whether cloud or on premise or a combination, there is no real short cut to ERP success and proper preparation must be carried out. Cloud solutions will likely offer a shorter timeline, lower maintenance costs and future proofing, but no less complex integrations and business change activities. Organisations should not begin any programme without understanding the complexities and skills needed, with a full ERP strategy and transformation benefits defined to enable correct planning and budgeting. Business Vision and ERP strategy must align. Leverage the power of ERP to make true business gains or why bother at all?
Van Marle, G, 2015 . DeutchePost-DHL finally abandons its ill-fated NFE IT project
[iv] Gartner 2019 primer
[v] Gartner – Magic Quadrant for Cloud ERP
[vii] Post Modern ERP Disaster