Stories of failed or complicated SAP ERP implementations are less common than they used to be, but that doesn’t mean these massive software projects have become a breeze to pull off.
At SIMposium 2014, a conference for CIOs and IT leaders hosted by the Society for Information Management held in Denver earlier this month, an audience member asked a panel of veteran IT leaders about their experiences with SAP implementations. He, for one, hadn’t seen many companies make returns on SAP. How about them?
The short answer? It’s complicated.
“I think it really comes down to [two] key components,” said John Shellenberger, vice presidentand CIO at Johns Manville, a manufacturer of insulation, roofing materials and engineered products.
First, IT professionals must determine if there is a “case for change,” he said. In other words, is there a clear reason why and how SAP ERP would benefit the company?
“In our situation we had some very old legacy technology that was very expensive to run but really didn’t position us where we wanted to go strategically from a business perspective,” Shellenberger said. “And I felt firmly that unless we made some … modernization, we would not be able to run the business. So that was a pretty significant case for change.”
Patricia Coffey, senior vice presidentat auto, life and home insurer Allstate Insurance Co., said that Allstate’s implementation of SAP was driven by a need to have a comprehensive view of its spending. “We were inefficient in that we weren’t using the power of volume buying to get discounts,” Coffey explained in an email exchange after the session. In fact, the company couldn’t even answer the question of whether they had multiple contracts of the same technology from the same vendors or multiple contracts with multiple vendors, she said. So, the need was there.
Still, SAP implementations are big ticket items and sometimes companies need to get creative in order to find the money to be able to do it, Coffey said.
At the SIM session, Coffey shared the story of how the CFO of Allstate at the time, now chairman of the company,found the funding for an SAP implementation, which was geared towards financials. (It’s “not what I would call a traditional ERP,” Coffey said in an email, since Allstate doesn’t deal with supply chain, logistics etc. like a manufacturing company would.)
The CFO decided to centralize Allstate’s procurement organization, a necessary change that provided enough of a cost savings to offset the company’s investment in new SAP technology.
“Since the mechanizing and consolidating of financials was more of a ‘must do’ than ‘value add’ he found a way to pay for it by consolidating procurement and capturing those savings to offset the cost of the implementation,” Coffey explained in an email. “In other words, he found a way to get additional benefit in order to create maximum value. Sometimes you have to look hard to find the value.”
Focus on business values
But once SAP is installed, how does a CIO figure out whether that implementation was justified and is benefiting the company?
Shellenberger said he did a thorough appraisal after their deployment to answer that question.
“I will tell you we got benefits in all the areas we didn’t expect and the areas where we expected to get benefits we didn’t get as much,” Shellenberger said. “But in total it was still pretty strong.”
A final piece of advice? If you’re thinking of implementing SAP, do not embark on the journey without your business partner by your side, urged Ian Patterson, CIO at Scottrade, an investment company that offers brokerage and banking services. CIOs don’t want to get stuck holding the bag for problems that are due to the business, not the technical requirements.
“If you don’t have your business partner with you, it’s your project. And why is SAP your project? Or why is any of it your project? Because delays aren’t always technical delays,” Patterson said. “You have to make sure that [you and your] business partner [are] defining the metrics up front together.”
Added Coffey: “The point is there should be [focus on the] business values… it’s up to [CIOs] to shift the conversation.”