Tag: ERP

Sizing up Your SAP S/4 HANA Implementation – Key Considerations to Estimating Your Effort Right | Blog

Incorrectly estimating the size of your team and effort in implementing SAP S/4 HANA can be a costly mistake that can be avoided by carefully reviewing the activities in each stage of greenfield and brownfield deals. To learn how to make a smart measurement of what it will take to successfully adopt this intelligent Enterprise Resource Planning (ERP) system solution in your enterprise, read on. 

Enterprises embarking on the digital transformation path often kickstart the journey by modernizing their Enterprise Resource Planning (ERP) systems, which form the backbone of any application landscape. Although multiple options are available in the market, SAP has become the primary choice for many customers over the last few decades.

SAP revamped its offering in 2015 by launching S/4 HANA suite as an enhanced version of its highly successful ERP Business suite – SAP ECC. Over the last few years, it also changed the product positioning of S/4 HANA from a “Future-ready ERP” to an “Intelligent ERP,” leading to increased traction in the SAP S/4 HANA implementation market.

However, despite being in the market for quite some time now, we often see effort and cost overruns, and project delays in SAP S/4 HANA implementation deals. Inaccurate solution estimation is one of the major reasons for this occurring in most scenarios.

Seven considerations to forecasting project magnitude better

To avoid miscalculations of the total project, the following criteria should be considered at the start when evaluating the overall effort, team size, and associated cost across various phases and activities in SAP S/4 HANA greenfield and brownfield implementations:

  • Discovery and impact assessment: Studying the existing processes and technology landscape to assess the impact due to S/4 HANA implementation is critical and can be explored by using design thinking workshops, accelerators, and interviews with Subject Matter Experts (SMEs). The associated effort will vary significantly depending on the implementation strategy for these two types of deals:
    • Brownfield: Major activities should include identifying existing customizations, reviewing S/4 HANA readiness checks and Business Scenario Recommendations (BSRs), and identifying the business process impact and delta design or configuration required
    • Greenfield deals: Among the factors to evaluate are the number of processes to be included in the solution, implementation complexity that the solution architect foresees for each process, customization or the number of development objects included as part of the solution, and the data migration complexity involved
  • Build phase: Review the following carefully as this stage constitutes a major part of the overall implementation effort, and oversizing or under-sizing can significantly impact the overall effort and cost:
    • Functional configurations: To accurately estimate the associated effort, take into account not only the number of processes to be configured or modified but also their complexity
    • Technical customization: Having a clear view of the extent of customization involved is critical. This is depicted by the number of newly created or remediated technical objects during the solution implementation. Greenfield implementations require a fresh development of objects. As a result, the effort is higher compared to a brownfield scenario, where the undertaking depends on the number of violations in the existing objects, as identified by tools such as ABAP Test Cockpit (ATC)
    • Fiori apps activation: This may require a dedicated team involvement depending on the number of standard Fiori apps to be activated and/or the number of custom apps to be developed afresh
  • Testing: The testing team is responsible for functional and non-functional testing of the implemented solution. When forecasting the associated effort, consideration should be given to the build effort that has gone into implementation, the automation maturity, and the availability of test documentation and collateral materials
  • Data migration: This activity primarily applies in greenfield implementation and the associated effort depends on the approach followed (such as “Load only” or “Data Transform and load”), the number of data objects and their complexity, and the number of mock cutovers
  • Basis and security: The technical basis and security support required during implementation should not be overlooked. We recommend having a core team for the entire implementation that is augmented by a flexible pool of resources depending on the increase in requirement
    • The basis effort is dependent primarily on two factors – the number of environments (development, quality assurance, pre-production, production, etc.) and the complexity of non-production environments. The role of basis support is even more important in brownfield implementations because of its technical focus. Basis resources are responsible for monitoring Software Update Manager (SUM) and Database Migration Option (DMO) work, installation of systems, client creations, establishing connectivity, patching, High Availability (HA)/Disaster Recovery (DR) activities, etc.
    • The SAP security effort can vary based on the number of roles created or remediated for end-users across various workstreams. The effort also should consider testing whether the roles and authorizations granted to the users meet policies
  • Organization change management (OCM): While this is a critical activity, especially in greenfield implementation, it does not typically get a great deal of organizational effort. This layer is responsible for key activities such as business process harmonization, educating clients, and training core users, which are mainly driven internally. Don’t overlook its importance since any miscalculation can have a huge bearing on the cost
  • Deployment and hyper-care support: The number of mock cutovers along with the duration of hyper-care support planned are the key factors that influence the associated effort. In many cases, we have observed the effort to be taken as a certain percentage of the core implementation effort, which is the combined effort for build and testing phases

In sum, no one size fits all for estimating S/4 HANA implementation deals. With the lack of standardization, the probability of making a miscalculation during the eventual implementation can be high. By carefully calculating, enterprises and service providers can more accurately predict the total price and cost, resulting in more successful implementations.

To share your experiences with S/4 HANA implementation, please reach out to [email protected] or [email protected].

Existing ERP and IT Systems Constrain Collaboration and Productivity | Blog

The world’s businesses are moving into a deeper level of competitiveness and productivity. In the past, when we introduced sailing into the oceans, it improved trade, which resulted in a huge explosion in wealth. When we introduced the telegraph and phones into the world, it dramatically changed communication. When we introduced common accounting practices where we could professionalize the accounting function and rely upon a consistent way of record keeping, we thereby improved productivity. The next wave is where companies will share information across countries and organizational boundaries. However, this transition necessitates moving away from current IT architecture.

Read more in my blog on Forbes

Koch Industries’ Takeover of Infor Signals Key Bet on Cloud ERP Market | Blog

Infor – a global leader in business cloud software specialized by industry – announced on February 4, 2020, that Koch Equity Development (KED) LLC, the private investment arm of Koch Industries, Inc., has entered into a definitive agreement to acquire Golden Gate Capital’s equity stake to take 100 percent ownership of Infor. Before the agreement, Koch Industries owned about 70 percent of Infor. While the official figures are not out, public sources peg the deal at close to US$13 billion, including preferred shares.

Why did Koch do this? Here’s our analysis of the key reasons.

  1. Riding the ERP demand bandwagon: Our recent analysis indicates that ERP-focused process transformation and modernization drove over 30 percent of all digital transformation initiatives in 2019. While Oracle and SAP are the largest players in this space, more than 35 percent of the market is still comprised of a long tail of bespoke ERP, where there is likely to be huge churn and consolidation. Infor promoters wanted to ride this growth opportunity through an IPO.
  2. SAP/Oracle in the equation: SAP is the largest player in the ERP market, and its current licenses are reaching end of life in 2025. Also, it’s well known that SAP is currently offering significant incentives to nudge enterprises to accelerate their move to S/4HANA, especially its cloud version. Oracle is using a similar incentive-oriented approach for its cloud-based applications. Promoters of Infor probably saw how this competitive dynamic would play out.
  3. Taking the private route instead of IPO: In a market driven by incentives, a privately-owned organization backed by a diversified cash rich promoter probably gives Infor a better shot at competing with its much larger competitors. For a listed firm, navigating a growth-oriented strategy (by de-emphasizing margins) would have been a tough nut to crack. Plus, competing with larger peers will require a significant investment in product modernization.
  4. The Koch portfolio companies: The jury is still out on whether Infor can credibly compete with SAP and Oracle in the broader ERP market. However, as the second largest privately-owned conglomerate in America (Cargill is the largest), the parent Koch Industries can enable a captive market for Infor to start with.

Deal implications

For Infor – potential growth through synergies: As we’ve already noted, this acquisition may give Infor access to a captive customer base in Koch Industries’ subsidiary and partner network. Given Koch’s presence in more than 60 countries, this may also allow Infor to expand the geographic footprint of its client base, especially in markets outside of North America where it has limited presence. This is coming at a time when enterprises in Europe and APAC are beginning to embrace SaaS offerings.

For Koch – potential RoI: We see this takeover as a typical private equity play to improve the value of an existing asset by riding the ERP demand wave. While Koch Industries has been making investments in its portfolio on the technology sector, we do not see this tweak in ownership as a sign of change in Koch’s portfolio mix. Given that a large chunk of Infor’s client base is still struggling with aging on-premises applications, Infor will need strong investment backing to convince its existing user base of its long-term cloud ERP vision.

For systems integrators – potential opportunities: Koch industries generated over US$100 billion in annual revenues in FY19. While we do not have estimates for the ERP transformation opportunities within Koch portfolio companies, it is likely to be a significant opportunity for systems integrators to focus on, using an Infor playbook.

For enterprises – better incentives, more supply-side investments: If Koch backs its investment with a large innovation fund, enterprises may gain on the following parameters:

  • Better incentives: Due to intensifying competition, enterprises may see more creative financial solutions and incentives around cloud-based ERP
  • Verticalized product offerings: Industry-focus and verticalization is gaining traction in the ERP space. Koch’s expertise in industries including manufacturing, chemicals, energy, petroleum, finance, and commodities may lead Infor to accelerate micro-vertical solutions faster than its competition.

The path forward

Infor has seen almost flat growth of around 3 percent over the past five years, due primarily to its long-term focus on SaaS revenues, which directly cannibalized its existing license revenues from on-premises offerings. In FY19, Infor’s SaaS revenue – which is about 20 percent of its overall revenue base of US$3.2 billion – grew at approximately 21 percent, while its licensing fees declined at about 12 percent. Given this strong focus on SaaS, Infor is well positioned in the manufacturing and allied verticals to overcome some of the critical cloud migration challenges and cater to some industries’ process-specific demands.

However, over the past year, there have been multiple big-ticket acquisitions in the enterprise platform market, geared to improving product capabilities – especially in areas related to cloud and analytics. In this hyper-competitive space, it will be challenging for Infor to compete credibly at scale based only on promoter-backed cash flow. Watch this space for more on how this move pans out.

Everest Group Identifies Pharmaceutical Firms Leading the Way in Digital Effectiveness | Press Release

Adoption of digital is creating a new pecking order of technology savvy life sciences firms led by Astra Zeneca, Johnson & Johnson, Novartis, Pfizer, Roche and Sanofi.

Fewer than 15 percent of all life sciences transactions signed in 2015 had an element of digital services in their scope; nevertheless, digital technologies are the pivotal driver for life sciences companies as they restructure to become leaner and pursue agility in operations to drive new product development, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.

To illustrate this point, Everest Group profiled 15 global pharmaceutical companies regarding their digital functionality and business impact. In “Life Sciences IT Industry: An Assessment of the Market Opportunity and APEX MatrixAssessment,” Everest Group identifies Astra Zeneca, Johnson & Johnson, Novartis, Pfizer, Roche, and Sanofi as industry leaders.

This new research from Everest Group indicates that the key market trends driving digital adoption include the rising number of “born digital” healthcare consumers, the need for operational efficiencies and cost optimization, and the movement towards data-driven, personalized, evidence-based medicine.

The life sciences industry’s data-rich environment (including scientific, clinical and operational data) coupled with its many market challenges make analytics a key lever to provide real-time, actionable insights and improve operational efficiency. Analytics presents value in three key areas for life sciences organizations: cost reduction, top-line growth, and risk and compliance management.

Driven by the focus on analytics and infrastructure services, recent life sciences ITO deals focus on datacenter, end-user computing, and databases/middleware services, as well as application, development and maintenance (ADM) and enterprise resource planning (ERP).

“Most of the 2015 IT outsourcing contracts in the life sciences that did include digital services, did so as an add on to existing contracts, with a focus on remodeling existing ADM agreements,” said Jimit Arora, partner at Everest Group. “Digitally native contracts in life sciences are still a rarity, but we will see an increase in these contracts in the future. In fact, the adoption of digital is creating a new pecking order of technology savvy firms, with those that successfully use digital technology to both drive internal operations and customer-focused channels—i.e., digital for efficiency and digital for growth—leading the way.”

Other key findings:

  • Market imperatives to drive 12 percent CAGR growth till 2020. The life sciences industry is in a “recovery phase” as it grapples with a multitude of challenges that are stifling R&D efficiency, changing the portfolio mix and increasing M&A/restructuring. To address the challenges, market participants are adopting technology as a means to enable quicker product development, better consumer connections and significantly improved time-to-value.
  • Growth is a key driver of digital investment. While efficiency and enablement of digital are aspects gaining primacy, the life sciences industry is focused on driving growth via digital channels, consumer engagement, and healthcare ecosystem collaboration.
  • Analytics and cloud are aspects that will drive most digital investments in the short term. When it comes to enabling a cohesive digital strategy, organizations are going to extensively leverage hybrid cloud models and focus on analytics (both prescriptive and predictive) to get to outcomes quicker

*** Download Complimentary, Publication-Quality Graphics Here ***
High-resolution graphics illustrating key takeaways from this research can be included in news coverage, with attribution to Everest Group. Graphics include:

  • The changing value proposition in life sciences global services
  • On- and nearshore delivery on the rise in life sciences IT
  • IT opportunity in the life sciences industry
  • Digitization in life sciences IT contracts

ERP Hits the Wall | Sherpas in Blue Shirts

The services industry is facing a big issue. The market for ERP implementation cycle and corresponding transformation projects has matured and is coming to an end.

We can see the ERP decline in the reported results from IBM and Accenture and HCL. These three providers have had very big SI practices around large-scale ERP implementations. I’m not saying there are no more ERP implementations or transformation projects; it’s just that this market is in decline.

Factors driving the market decline

One of the contributors of the decline is maturity. Most large companies that need ERP now have ERP. Furthermore, they are now in their second or third generation of their ERP and are much smarter about how they use ERP. So there is much less transformation.

The green field is gone. Much of the ERP market it now add-ons to the existing base. And companies have learned how to implement ERP within the guidelines of ERP manufacturers, SAP and Oracle, which enables less costly implementation when new releases come out. Further, moving into an as-a-service or cloud future will continue to erode or diminish the re-implementation markets driven by software upgrades because they become a monthly occurrence via SaaS products.

So ERP implementations and its associated SI and transformation projects is hitting a wall, and we’re going to see far less of it in the future.

What will drive future growth?

The decline is a big issue for the industry because much of the discretionary spend used to be captured by the ERP implementation and renewal cycle. It has been one of the big secular drivers of growth in the services space since the mid-1990s, but we’re now seeing its decline as a primary driver for growth.

Many SI consultants, shared services consulting companies and BPO firms that ride the ERP wave have, wittingly or unwittingly, linked their growth engines to the dislocation and transformation activities that happen around ERP implementations.

So the current decline has very significant implications in terms of where these service providers will find growth in the future services market.

What we know about technology is that, given enough time, there is always another big technology disruption that will drive large integration services. Right now the best case for this is the digital revolution and the huge company-wide implications that embrace the digital marketplace for large organizations. Much like ERP, digital affects everything and requires significant transformation for alignment.

So the open question is: will digital take up the mantle that ERP is shedding?

Why the Avon – SAP News is Important for Your Business | Sherpas in Blue Shirts

Did you see the news earlier this week about the Avon – SAP relationship in Canada? The eye-grabbing headline, “Avon halts work on big SAP implementation, cites lack of ROI,” thrusts the deal to the attention of both service providers and enterprises planning or in the midst of business transformation deals. The services industry has decades of piercingly clear evidence that large-scale implementations can be problematic and disruptive, and Avon stated that its decision to halt the further roll-out was to stop further disruption to its business.  But I believe we can conclude much more than that from this news. In short, this action by Avon suggests that a good deal of change is happening in the services market.

In uncovering what is behind the headlines in the Avon – SAP relationship, let’s start with the fact that both Avon and SAP affirmed that the products company will continue using the SAP system in Canada, the system is working as designed, and their relationship “remains solid.” And they had experienced an earlier successful pilot of the project. So what sparked this recent decision to end the full-scale implementation?

As the saying goes, often what you don’t know will cost you. Here’s what you need to know about this deal.

We see this as a shining example of a phenomenon we are observing in the marketplace. The SAP implementation was part of a broad-based business transformation Avon was trying to drive. But in today’s market companies now are skewing away from the $100 million-plus or large-scale ERP implementations and instead look to buy outcomes and functionality or capability on as as-needed basis.

Fundamentally companies don’t want to spend hundreds of millions of dollars on transformative IT implementations because it’s too expensive, takes too long, and usually the return isn’t there. However, they still need new functionality or capability for competitive advantage so they can drive their businesses forward. This is where the as-a-service models come in; these models allow them to get the new capability without replacing their entire ERP system.

We see a significant movement in this direction. It manifests itself sometimes by companies asking for outcomes. (“We need these results.” “Just give us the insight from the analytics.” “Give us this new market access.” “Allow our retail business to deal with stock-outs.”) They are willing to pay good money for these capabilities, but they want to pay for it in this manner:

  • On a consumption basis, paying for it as they use it
  • In a phased adoption or in incremental phases where they experiment with it and then drive more into it in subsequent phases
  • As a way to avoid buying huge server farms and signing up for licenses, many of which they don’t use
  • As a tactic for loosely coupling the solution with their existing ERP or IT systems.

We find that the as-a-service models open opportunities for a different kind of sale. It allows a new breed of vendor or new breed of offering to get the customer out of the complexity of buying the component parts of a solution and focuses purely on the outcome of what the company is trying to accomplish.

Avon is happy with its existing ERP vendor, SAP; but it no longer wants the cost and time of the large-scale transformation project and replacement of its ERP system. We see the Avon decision as important.

Buyer and providers, take note: Avon’s action heralds a new set of industry offers that allow organizations to buy parts of ERP as a service and layer it on top of existing ERP implementations. How will the as-a-service models impact your business?


Photo credit: Marlon Malabanan

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