Implementing SAP Successfully- Best Practices
What could be more damaging to a company and its stakeholders than a multi-million dollar project failure, especially if it’s an ERP implementation, where the losses are not only financial but also of reputational?
ERP or Enterprise Resource Planning is a software system or package that supports automation of core business processes such as Finance, Marketing & Sales, Production and Logistics.
As the businesses grow and become complex it is difficult, almost impossible for the employees to carry out the day-today tasks without errors and putting in massive effort to get the information and making right decisions. An ERP system provides the users a structured approach to store, retrieve and edit information and supports the flow of information by automation of the business processes. SAP is the market leader and the largest selling ERP package in the world with 121,000 installations in 120 countries. In this series of articles we will see the best practices in implementing this system in a organization.
Before we discuss the topic further, let’s understand what a Project is:
A project is a temporary endeavor with a defined beginning and end (usually time-constrained, and often constrained by funding or deliverables), undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value.
Understanding Project Failure to Make it a Success
In light of project’s definition, a project is considered a failure when it has not delivered what was required, in line with expectations. Large projects such as an ERP implementation not only fail more often, they deliver lesser than expected. According to the McKinsey/Oxford study “half of IT projects with budgets of over $15 million dollars run 45% over budget, are 7% behind schedule and deliver 56% less functionality than predicted.”
So, for a project to be called a success it must deliver:
- To cost
- To quality
- On time; and
- It must deliver the benefits presented in the business case.
Research firm Standish Group has been doing surveys on all types of IT projects since 1994. Their research, published under the title CHAOS, reveals some surprising facts. The CHAOS research and database shows:
- A staggering 31.1 percent of projects being cancelled before completion.
- The results also illustrate 52.7 percent of projects cost 189% of their original estimates.
The cost of these failures are just the tip of the proverbial iceberg. The lost opportunity costs are not measurable, but could clearly exceed the out of pocket expenses. However, recognizing the repeated causes of failure permits understanding, preventative occurrence and proactive risk mitigation strategies.
Causes of Project Failure:
- The wrong business requirements have been addressed
- It’s not possible to deliver the business case
- Governance is poor
- Implementation is poor
- People lose focus on the project’s benefits
- The environment and requirements change (Scope Creep)
Scope Creep is among the biggest causes of project failures, to understand the concept of Scope Creep lets understand what Scope of a Project means:
We can define project scope as work that needs to be completed to deliver a product or service with the specified features or functions. Scope creep in a project is caused by uncontrolled changes and results in continuous growth/changes in the project’s scope.
Scope Creep can occur when the scope of the project is not properly defined and extra requirements are added overtime as Business starts to understand the features and functionality in case of a packaged product. Typically you may see the scope increase consists of new modules or features of already approved product designs. This has a negative impact on the project, especially without an increase in resources, schedule or budget. Scope Creep can cause the project team to drift away from its original purpose and embark on an unplanned journey. As the scope of project grows, more tasks must be completed within a predefined budget- cost and time.
True stories from the Print Media:
Doing it right can be rewarding; failing can be devastating. For example, one company went millions into the red as a result of technical problems with the rollout of a supply chain system, leading to inventory shortages and incomplete orders filled. Another company took several million dollar hit on profits as a result of a product oversupply related to problems with an ERP system. The software itself is rarely the cause of big problems. The root cause is often the huge business, culture and process change required with ERP implementations.
Deliveringa Successful Project
ERP success definition notes projects are done within budget and time while meeting all the preset implementation goals as measured by ROI etc. A 2007 Gartner study showed only 60% of the projects achieve this success definition. Gartner also estimates that 55% to 75% of all projects fail to meet their objectives.
What the companies want to do in a SAP Project:
- Standardize business processes
- Leverage business-driven design of SAP solutions
- Upgrade their SAP systems
- Enable SAP’s strategy towards BPM and service orientation (SOA)
- Unify federated and complex SAP landscapes
There are multiple pain points to be overcome for a successful project
|Business Driver||Pain Points|
|Streamlined & Standardized Business Process||
|Managing Process Performance& Integration||
|Continuous Process Improvement||
|IT Driver||Pain Points|
|Addressing Business Value||Technology does not directly impact business value … processes doProcess is the common-ground between services (application capabilities) and business operations (what people do). By focusing only on functional apps, and with no visibility into operational KPIs, IT has no chance of maximizing business value.|
|Application Portfolio Management||Which new SAP ERP & SRM components do we have to deploy to achieve the Procurement’s strategy?How can we consolidate our IT applications portfolio?If a SAP Server goes down, how do I know which business processes & units are impacted?How can we architect our SAP Process & IT Roadmap to prepare for SOA?|
Common Critical Success Factors (CSF’s) identified for successful SAP ERP implementations:
Sustained executive management support and their ownership of the implementation.
- Adopting Industry best-practices.
- Effectively managing Cultural change.
- Adopt instead of Adapt SAP.
- Project team composition.
- Good project management& Governance Practices.
- Tools to support implementation.
- Structured system testing.
- Training of the end users.
We will discuss these topics in detail, technical deep-dive in the next edition of this topic @ Think Science.
Yet to come, sneak-peak: Process Driven SAP Implementation using Industry Best Practices and Tools following SAP’s ASAP methodology: