Users scaling the cliff-face of SAP implementation are starting to
find the gradient more bearable. Antony Adshead reports
Enterprise resource planning (ERP) software has looked in grave
danger of gaining a reputation as a dinosaur in recent few years.
High-profile implementation glitches hit the headlines of the IT
press as many ITmanagers began to find that these difficult and
costly projects were impossible to deliver. No software company has
been in this particular spotlight more than the German ERP
specialist SAP.
Problems with SAP implementations reported in Computer Weekly
included difficulties with data conversion and synchronisation
which led to delivery delays from vehicle manufacturer Volkwagen's
Kassel distribution centre; delivery problems at retailer WH Smith
as it encountered glitches in its year 2000 SAP roll-out; delays at
Cadbury Schweppes as it attempted to integrate 27 instances of SAP
into one; and missed targets at Rolls-Royce as the company tried to
harmonise data from multiple sites in a £4m SAP programme.
But in the past 18 months SAP has tried to rectify these negative
perceptions. Its share price has followed the downward trend of the
rest of the technology sector but the supplier has remained
bullish, with its faith bolstered by an impressive set of customers
such as Nestlé, BMW, Daimler-Chrysler, Caterpillar and Siemens.
Analyst Mark Atherton, of Datamonitor, points out that with such an
impressive customer list, SAP must be doing something right. "It is
traditional to consider SAP implementations as long and difficult -
'as flexible as concrete' as one user put it once," he says. "But
with the current requirement for fast-to-market, short cycle times,
fast payback and return on investment, you can see that if the
generally accepted faults with SAP implementations are indeed true,
then it would not be long before SAP was in real trouble."
Far from being in trouble, research shows a boom in demand for SAP
skills. In last week's Computer Weekly/SSP survey of job
advertisements, demand for SAP analysts, developers and programmers
- and the salaries they can expect - is bucking the trend of a
stagnant IT jobs market. Analyst/programmers can command salaries
of about 38% more than a year ago. And SAP skills is the only
application-level skill to register in the top 20 league table of
skills in demand and the only one to register an increase in
year-on-year demand.
Yet, according to the survey, SAP consultancy is not in demand.
There's a good reason for this, says, Philip Virgo, strategic
adviser at the Institute for the Management of Information Systems.
"It's simple. The SAP customer base is engaged not in big new
contracts but in the incremental roll-out of existing
implementations. Comparing SAP with other ERP suppliers Baan and
PeopleSoft, which do not figure in the top 100 skills table, demand
for SAP does seem to reflect its market leadership and that it is
still being implemented, still being rolled out."
There is evidence that the implementation process for SAP is not as
difficult as it used to be. "The company has worked pretty hard to
make its software easier to implement," says Simon Bragg, an
analyst with ARC Consulting, "In 1996, a user could expect to pay
six to 10 times the licence cost in consulting charges. These days
the external consulting cost has dropped to typically one to
two-and-a-half times the software costs, depending on how much
process re-engineering the user does."
"SAP has built templates and developed implementation
methodologies," he says. "Consultants have learnt on the job, and
it is now relatively easy to find people with three years'
experience.
"Users have worked out that they need a clear picture of their new
business processes, organisational structure, and performance
measures, before the consultants set parameters. Senior managers
realise they need to sponsor the project and be available to make
rapid decisions," Bragg adds.
One recent SAP project illustrates this point. Optical component
manufacturer Bookham Technology recently went live with a
multi-module SAP installation across numerous sites linked to its
shopfloor manufacturing execution system.
The fast-moving business environment that Bookham works in is
subject to large rises and falls in demand, according to chief
executive officer Giorgio Anania. The company has had to cope with
a 50% increase in business in one quarter followed by a shrinkage
of the same figure the next. Bookham has gone through a hectic
period of acquisitive growth, which has meant it needs to maintain
close customer relations and high levels of visibility and speed
even though 75% of the product lifecycle is taken up by research
and development.
Bookham's workforce has increased from 750 employees to 2,000; it
had seven different bills of materials at seven manufacturing
sites; and month-end accounts took 25 days to resolve. In the space
of 10-12 months the company has installed a single ERP system that
is far easier to back up and maintain and has reduced the month-end
accounting period to three days. Bookham achieved this with a
largely out-of-the-box approach and with a confidence that future
changes in the SAP configuration can be taken in its stride.
John Barton, vice-president for information systems at Bookham,
says, "Our systems were not capable of allowing the company to
grow. We had many different systems and manual links between
databases. Our logistics and financial systems could not be backed
up without being taken down and so were not available 24x7."
Barton knew the complexities involved in implementing SAP, having
overseen such tasks in former jobs. "We did not want to go down the
old way of doing things - redesigning our business processes and
getting consultants in to develop the solution," he says. "If you
can buy an off-the-shelf package, it makes sound business sense as
long as you have expertise inside the organisation. [The
consultancy which helped in the implementation] Ascent came along
and said, 'here's best practice, what can't you live with?'"
Is Barton worried about the software "setting like concrete"? No he
does not envisage best practice changing substantially and is
confident that the systems integrator can help introduce any tweaks
necessary to update business processes.
Malcolm Jones, marketing director of Ascent, concurs, "Best
practice is not likely to change massively. Many of the established
best practice business processes that are recognised and supported
within SAP have been honed over years."
He admits that new, or variant, practices may emerge, and says
there are two routes that users like Bookham could take to include
them. "If best practice changes within an industry or business area
and SAP incorporates it, we would expect to incorporate it within
the template and make it available to the customer. Second, there
may be some additional existing best practice functionality that
the customer has not yet introduced in phase one. We can add
pre-defined extensions to the original solution," Jones adds.
But while Bookham's story illustrates the benefits that can be
gained from a box-standard ERP implementation, it must be pointed
out that the company is a small- to medium-sized enterprise and
working from a baseline of zero since it was replacing legacy
systems from the ground up. In many instances the picture is not as
straightforward, especially if one considers the complex
marshalling of resources needed to implement and roll out SAP at
large multinationals such as Cadbury-Schweppes or Nestlé.
"Any manager implementing SAP still expects sympathy," says Bragg,
as the pitfalls are many.
What the Bookham example shows is that the collective experience of
SAP implementers has allowed such ready-made solutions. Where the
situation does not allow such a clear-cut approach, at least a set
of guidelines has begun to emerge into the body of knowledge in the
field.
Philip Carnelly, an analyst with Ovum, sums up the must-avoid
scenarios. "Don't try to make the product fit exactly the way you
would ideally like to work or on the other hand assume that people
will completely change their processes to meet the package. The
first takes many years and costs loads, the second meets big
resistance. Also be very aware of likely problems of integrating a
new system with legacy systems and don't assume that you have got
it all right when you switch over to the new system," he says.
But with SAP, businesses are getting enough of it right to make it
worth continued investment in these projects, and give the IT jobs
market its only star performer of 2002.
How to roll out an ERP implementation
Sanjay Patel is
senior systems accountant at satellite communications company
Inmarsat and he recently led an SAP implementation at the company.
Here he passes on the lessons he learned from the experience.
- Software Selection - identify the "best fit" software for the
organisation. It is unlikely that one particular software will meet
100% of the organisation's requirements therefore the software
which meets the majority of the requirements should be
identified
- Consultant Selection - it is important to meet with potential
implementers and get to know the way in which they work best.
Interrogate their pricing structure, ie fixed-contract or time- and
materials-based or a hybrid of the two? Find out the steps they
take to hire knowledgeable consultants. The size of the
organisation may be a factor, for example: can a consultant working
on the project be replaced with reasonable speed if he
leaves?
- Detailed Blueprint and Design Phase - collate both senior
management and operational staff requirements in detail and define
the process that is to be adopted once the implementation is over.
The exercise involves documenting the "as is" process and mapping
to the "to be" set-up in detail
- Realisation Phase - once the blueprint phase has been signed
off, the configuration of the system, testing, report defining,
documenting, training and data conversion are put into place
- Pre-Go live preparation - further testing on the almost
complete system, second level (more advanced) training, developing
detailed interfaces, carrying out dry runs, parallel testing and
report refining
- Go Live phase - actual introduction of the new systems and
process, usually phased into the organisation.
- Go Live Support - monitoring issues/bugs raised, system
tweaking and general "hand-holding" of end-users of the new
system
- Project Review - review of the project and documenting the
lessons learned.
What are the pitfalls to avoid in ERP implementations?
- Package selection - don't choose a package based on demos.
Suppliers show functionality which can be misleading ie no standard
functionality. Ask specific questions about the package no matter
how irrelevant you think the question is. The same goes for
selecting the implementation partner
- Get management commitment - this is often very high at start of
the project but starts to diminish quickly. A possible solution to
counteract this is to have targets for staff/managers demonstrating
commitment. You could link the success of the project to key
managers who are not part of the project team but whose
co-operation and sign-off will be needed
- No heavy customisation - it is easy to customise from standard
SAP. The problems come later as maintenance costs rise sharply
every time the customisation needs to be tweaked
- Don't underestimate training - very often end-users are given a
couple of training sessions and the next time they see the package
is two months later when they have forgotten it all. The best thing
to do is involve the end-users in the system testing.