Planning an SAP project? Make sure of the business benefits first!
Are you aiming for a new SAP S/4 HANA solution but finding it difficult to evaluate the project’s benefits and profitability? Do you have grounds for a change project but the upfront costs make you wonder? We have put together guidelines to get you started in assessing the business benefits before you start a project.
Several industrial companies are planning to change their business model – at the same time major IT system changes need to be made. Deloitte can link new IT systems to support business change and bring new business benefits
- Sami Laine, Deloitte
With respect to SAP implementation, we can split projects into two types:
1) large business change projects in which an information system plays a supporting role or 2) renewal projects driven by information systems.
The common factor between these is the extreme importance of being able to identify the project’s overall benefits and savings during the project planning phase to determine the expected returns for the material investments made for the project; and to secure the project’s approval when it is compared with other investment options.
In practice, the two project types are usually brought under a single project because operating models, processes, capabilities, and their supporting systems are so intertwined in modern business that progress must be made on both fronts at the same time. This means that SAP implementation must be viewed holistically and from a business perspective. Rather than investing first and only reaping the benefits years later, when the system is fully deployed, it is more profitable to build a “whole” that delivers incidental benefits during the project.
An example would be a situation involving the re-evaluation of a company's logistics model and warehouse network. The necessary organizational changes and streamlining of the network could be done as part of the change project, creating savings before the SAP project’s completion. These savings could be used to finance the SAP project and to directly implement changes in the new system.
When viewing SAP projects from a business perspective, two technological issues that are important during the system’s life cycle must be taken into account. We recommend minimal customization of the new system (clean ERP), in order to reduce the costs of system maintenance and subsequent changes. Secondly, the new system must be able to support digitalization and other new business capabilities required for growth.. This can be done on the basis of minor additional work such as new customer portals; mobile applications connected to back-end systems; or light applications, created with agile methods, that utilize data from an existing SAP system.
It is crucial to avoid copying old ways of working, but rather re-imagine how the business could be run in the future. For example, re-designing roles and building new SAP Fiori user interfaces accordingly can be a highly effective way to unleash benefits and lift user experience to a new level.
The hard truth is that technology renewal on its own nigh ever results in material business benefits – you need to transform to achieve it. Clarity on this saves time, money and nerves.
- JP Suortti, Deloitte
But how do you get started?
What is the goal of the change project? Does it involve a simple system replacement or upgrade, or a comprehensive change – supported by the system – in the business? The next step is to examine the issue one level at a time from the business strategy perspective: What are the change project’s goals at the highest level? These may include gaining a clearer overview of the business operation, reducing costs, or growing the business. We then take one step down from the top-level goals, embedding them into business processes. This is followed by another step down towards capabilities – what would you like to change, improve, or bring in as new? Only then can we map out the ways in which technology can help us to realize these capabilities.
The four step model
To help its clients to get started with transformation program, Deloitte has created a four step model for the S/4 HANA roadmap and business case project journey. The intention is to assist clients in evaluating and defining their business processes and capabilities, and in conducting a cost-benefit analysis of a project. The four stages are as follows:
1. The first stage involves preparation, in which management team members are interviewed about their strategy and the envisaged end state.
2. The next step, strategic direction, involves a workshop in which business processes and capability sub-areas are examined. Where is change worth doing in order to maximize the business benefits? The company’s IT architecture is also evaluated to see what changes are needed. At the same time, cost-benefit analysis sub-areas are prepared on the basis of processes and capabilities. For example, are they related to procurement, logistics, or financial management? This provides a framework for calculating return on investment.
3. Thirdly, thought must be given to the precise end state. Based on a shareholder value analysis, a detailed evaluation is performed of what capabilities can contribute, for example, in terms of cost savings. These results are reviewed in detail and combined with the cost-benefit analysis. Regarding the system, a list is drawn up of which capabilities are best implemented in the SAP S/4 HANA system and which in the supporting systems in order to meet the set goals.
4. The final step involves creating a road map for the implementation phase – what is the project timetable and its required roles and staff numbers? And what workloads are needed in each project sub-area? In addition, a set of indicators is defined, i.e., how implementations can be linked to the cost-benefit analysis so as to monitor the achievement of benefits after the project is defined.
The typical end result of this roughly three-month process consists of both a comprehensive cost-benefit analysis, which is the basis for the SAP project, and an implementation plan. When the green light is given, the actual implementation project begins at the point where the change process is initiated.
Industrial Products Leader,
Deloitte North and South Europe
Managing Partner, Consulting,
Deloitte will assist in the transformation
As well as a business strategy goal, the success of an SAP S/4 HANA project depends on having the right tools and practices, and a knowledgeable, expert team. With 330,000 specialists covering all business areas, at Deloitte we can place world-leading competencies at the disposal of our customers. Due to our 25,000 SAP specialists worldwide and our numerous innovations – including industry-specific process models and pre-configured core components – we are faster and better at delivering SAP solutions than any other vendor.
Don’t hesitate to get in touch!