How tea company Tetley avoided a potential multimillion-pound consultancy fee by keeping project management in-house when standardising its global ERP.
If you want to compete with big boys, you had better be doing something smarter than them.
In terms of enterprise resource planning projects, the largest global players, such as Unilever, can afford to pay specialist consultants to overhaul their systems. But when tea company Tetley was looking to upgrade and expand its SAP system to enable business plans to double turnover in five years, it could not reach for such resources.
Paul Kay, group business systems manager at Tetley, said, "Tetley is large in the UK and in some places outside the UK, but it is no Unilever. We have to be very focused to be able to operate and compete in the larger environments."
To keep up while keeping costs down, Tetley has been using a 20-strong internal IT team to project manage an upgrade to its SAP systems that will enable the standardisation of business processes across its operations in the US, Canada, Poland, Australia and Russia. Since acquisitions could provide much of the firm's growth, the project will also enable newly merged companies to plug into the central SAP hub, run in the UK.
The use of external specialists throughout the SAP upgrade and expansion could have cost £4m, but by only using consultants in a piecemeal fashion, Kay believes he can halve these costs.
As reported in Computer Weekly last week, the company has already completed an upgrade from R/3 to SAP ERP Central Component 5 to support the roll-out of new SAP modules to its global businesses from a hub in the UK. SAP Business Warehouse Integrated Planning will be the first application module to go live later this month.
Tetley has so far spent £100,000 on the upgrade to SAP Central Component, working with UK-based SAP specialist Diagonal Consulting when its internal team required support. To allow Tetley to do more internally, Diagonal not only worked on the upgrade, but ensured that it transferred the necessary skills to Tetley's IT staff.
Jim Shepherd, senior vice-president at AMR Research, said this approach could prove cheaper than traditional ways of upgrading ERP systems. "It is viable. It depends on the availability of internal resources and the skill level. There is a certain amount of work that needs to be done and if you do it internally, it is less expensive," he said.
Shepherd said new technology was also making ERP projects easier. "One of the things about the move from R/3 to MySAP is that the new software makes it much easier for customers to do things themselves."
The first task for the new system was ensuring Tetley could measure its performance against its plan. "We will review it as acquisitions come along, but we must be able to go back to the plan and see how we are performing against it," said Kay.
This meant creating clear performance definitions for all Tetley's businesses across the globe, said Kay. Here, IT took the lead.
"I was responsible for organising the piece of work. I saw it as essential to have common reporting definitions because of the situation of IT. Historically, different countries did it themselves.
"I worked with a commercial insight person with the sponsorship of the managing director for commercial business. That was important because without the managing director's support it is difficult to get agreement. He is able to make sure everyone is in alignment."
Shepherd said these challenges were common to all projects aiming to create a single, global instance of an ERP system.
"There is enormous cultural resistance and the change management requirements are daunting. Individual organisations and countries do not like to give up control. There is always a sense that 'we do things differently here'. That tends to be the biggest pitfall," he said.
"Then there are the problems of standardising processes and the data. It is very difficult. It requires continual insistence from senior management that this be done and a set of incentives put in place."
Fortunately, such top-level sponsorship of big ERP projects is becoming easier to come by, according to Glynn Lowth, chairman of the SAP UK & Ireland User Group.
"Senior managers understand that the investment is going to pay off if they buy into and support these projects," he said.
But when SAP Business Warehouse Integrated Planning comes online, other modules will become more straightforward to implement, Kay said. "Our business processes are not fundamentally different around the world: they need planning, they need sales and distribution, they need reporting and need accounting. Then it comes down to the political will," he said.
With business becoming increasingly global, the necessary will should not be lacking, said Shepherd. "As Unilever and Procter & Gamble become a single global organisation in the way they work with retailers and deal with suppliers, they will force everyone else to do the same."
Although its business is not on the same scale as these multinational giants, Tetley's pragmatic approach to consultancy and single-instance ERP should give it a good chance of competing with them.
SAP user conference: the knowledge matrix
The SAP UK & Ireland User Group has announced the line up for its biggest ever conference, to be held on 20 and 21 November at the Hilton Metropole at Birmingham's NEC.
The conference, entitled The Knowledge Matrix - Adding Value Through Collaboration, will be attended by SAP users from all industry sectors, who can hear about current issues and best practice methods, attend workshops and presentations, and learn from, and share in, others' experiences.
Further information www.sapusers.org/conference2006/