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Businesses have less than a 50% chance of an SAP implementation delivering what it is supposed to, according to a new study.
Given that SAP runs business processes that drive a company’s operations, failing to meet expectations can have a potentially devastating impact on the bottom line, and on the CEO’s effectiveness to push forward a business strategy.
Explaining the study’s findings, former Gartner SAP analyst Derek Prior said: “We are seeing that despite 20 years of implementing SAP, companies are spending millions and are still screwing up. It is hard for customers to admit they are doing things wrong.”
Prior said SAP’s function is to provide a back-office ERP (enterprise resource planning), which needs to link up with digital initiatives. To use Gartner terminology, it is the "Mode 2" back-office function that is essential for a seamless customer experience in "Mode 1" customer-facing applications.
SAP configurations are designed to support best practices and customers may have system integrators who help the business deploy these best practices to get projects in on time. But Prior said: “SAP is not a project – it is a lifecycle stream.” This means the CIO and IT management team need to ensure the right people from the business are involved throughout this lifecycle and the system integrator is acting in the best interest of the customer.
A survey of 113 individuals across 105 companies for the Uncovering the factors that drive success for SAP customers study from SAP advisory service Resulting IT, found that only 36% felt their SAP project kept to its original plan, and just under half (48%) said their project failed to achieve business objectives.
This figure is worryingly high, said Prior, because it points to a major stumbling block in IT’s ability to put into effect the systems that power a CEO’s business vision. He said: “It is gambling. You have 50-50 chance that the CEO will get the right outcome.”
Would you gamble?
In the study, 52% of the businesses surveyed said their project was over budget. “Would you gamble the future success of your business with these odds?” Prior warned in the report.
The research revealed a big gap between the expectations of the business and how well SAP experts felt the project had gone. Although 64% of executives felt their SAP project had met business expectations, 77% of business managers who were responsible for delivering benefits from the SAP project felt it had not.
Overall, 50% of all respondents felt the SAP project was not connected to their business strategy. Again, the odds are not in favour of an SAP implementation that delivers the benefits the business stakeholders originally expected.
Prior said a common theme among businesses that failed to realise benefits from their SAP implementation is that they fail to match up the SAP implementation with the business case. “They don’t have the right level of business engagement,” he said. “They do not have the right people to measure business outcomes and the business case is put on a shelf and never looked at again.”
In the past, businesses needed to have a big phase one in their SAP implementation, which tended to follow a “big bang” deployment and use a waterfall methodology. Companies then follow this up with incremental releases and functional enhancements using an agile approach, said Prior, who is a non-executive director at Resulting IT.
Read more about getting SAP right
As has been the case for many years of SAP implementations, standardisation is a key factor in a project’s success, and according to Prior’s study, this has the biggest positive impact.
A project’s bug count in terms of being defect-free is also regarded as significant to a project’s success and, not surprisingly, this is related to the third factor in successful SAP – close alignment to the business case.
Prior identified poor design governance as the most significant weakness in SAP project management, which has the potential to drag down an otherwise successful implementation. Poor data integration also has a negative effect on a project’s success, as does the business’s inability to distinguish between training and knowledge.
The report found companies attributed 43% of their success with SAP to high adoption of the application among employees, while poor employee adoption negatively impacted a project’s success by 25%.
“Successful companies make the connection that establishes SAP as a long-term lifecycle,” said Prior. This requires a fundamentally different approach to SAP implementation than the way projects have been rolled out before, he said. “Companies have a fundamental choice to make – either you rely on a high level of dependency with your system integrator or you create an SAP centre of excellence.”
Companies often rely too heavily on their system integrator to deliver the benefits of a SAP implementation. The study recommended that businesses select an SI based on cultural fit, which can also provide evidence that it has worked with similar companies before.
“Make sure they understand that it’s your SAP system and your business,” Prior noted in the report. “Their role is to advise and implement, but you have to live with the system for many years to come.”
Some companies also prefer to outsource the maintenance of their SAP system to an SI, but in Prior’s experience, they often face difficulties in outsourcing. “Many companies struggle with outsourcing basic application maintenance because they have not maintained the right level of in-house expertise to get the best out of their service provider,” he said.
Overall, there seems to be a case for developing strong in-house skills in a centre of excellence to support SAP once the initial implementation has been completed. Change management remains a core competency that can determine the success of a SAP implementation. But, as Prior has found, businesses must also ensure stakeholders strive to ensure that SAP is not a one-off implementation, and that its ongoing development remains aligned to the business case.