A tip to CIO's: Select the Right SAP Consulting Partners

Mandeep S. Oberoi*

March 08, 2010

Overview

Often the question is asked why should businesses choose to pay more and engage highly experienced SAP consultants instead of hiring less experienced people and paying less?

SAP software has so many functionalities inbred in itself, so it becomes very important to identify the right processes on the context to meet specific business requirements. On a broader note, 90 out the fortune 100 companies and 75% of fortune 500 companies run SAP. These companies are so diverse such as the shoe manufacturers Nike and Reebok; electronics manufacturers Sony and Intel, Johns Hopkins Medical School, automotive manufacturers GM and Toyota, Food manufacturers Kraft?s Foods and Barry Callebaut, top pharmaceutical manufacturers, and software manufacturer Microsoft, among others run SAP to efficiently streamline their business processes. These business processes relate to finance, production, materials management, human resources, sales and so on. These diverse business processes are integrated on a single information technology (IT) platform within SAP to share common data, to interact within the enterprise, and to interact with extended business partners such as the vendors and the customers.

It becomes very challenging even for experienced consultants to identify and implement correct business processes, given the high complexity of the functional options offered by the SAP software; because of the complexity of the business processes themselves; and also because of the integration between different functional modules. Another issue of contention is that enterprise resource planning (ERP) can be done right in so many different ways. The challenge is to implement it most efficiently to improve operational efficiencies. And that is why it becomes so important for Chief Information Officers (CIOs) to partner with right consulting companies and with highly experienced SAP consultants.

Typically, it would take a smart consultant to have worked on four different customer templates to be able to design your ERP ?right? and eight templates to do it ?most efficiently?. Though, these numbers can always vary due to individual capabilities and experiences. Details are discussed in subsequent paragraphs.

The irony is that when you talk to SAP users, you comprehend that most companies have not realized their true ERP potentials. There is so much work that needs to be done, though the current economy is holding large businesses from spending their IT budgets.

Examples of fallouts

If not done correctly, ERP can be most fatal to a business. Things can go so drastically wrong. Even before the businesses realize, they would have already incurred impacts ranging up to millions of dollars. Most often, the dollar value of the SAP consulting project will be less than the value of the losses. And fixes can be very simple, but you need an expert carpenter who knows exactly where and how much torque to apply. Not all fixes need a hammer. Experienced SAP consultants can foresee the implications of business decisions early-on and can fix the software configuration accordingly.

Some well known examples of multi-million dollar ERP implementation failures include those of Hershey Foods, Whirlpool, Waste Management Inc., Nike (though the ERP in concern this time was not SAP, but the planning software from I2 Technologies), and American LaFrance, among others. FoxMeyer, a former $5 billion drug distribution company alleges that a botched implementation of SAP's R/3 software helped send FoxMeyer into bankruptcy in 1996.

Hershey Foods was among the most publicized cases in the Wall Street Journal during the September of 1999 that hit the company?s stocks temporarily. The positive side of the debacle is that today when a company declares a successful ERP implementation, it impacts its share value favorably to benefit the investors. But unfortunately, if things go wrong with the ERP, the gun is pointed on the CIO?s.

Talking from my own personal experiences, another example of ERP fallout would be of a very large refrigerator manufacturer based in the financial capital city of India. This is also an interesting example of reverse outsourcing to USA from India.  The company had hired a relatively less experienced SAP PP Consultant who configured the material requirements planning (MRP) procedure wrong that led to excess inventory worth USD one million on site. These parts were imported from Malaysia. So their IT Director got in touch with me through some personal connections. I remotely studied their bill of materials (BOMs) and MRP procedures to finally identify the problem with their system. Although it involved a simple fix of a nail, the study spanned for few weeks including a detailed analysis of their business procedures.

SAP Consulting overlaps with Business Transformation

SAP is a business software that directly impacts the operational efficiencies and profitability of large companies. SAP consultants often meet with road blocks that need to be addressed tactfully to steer the projects. There are times when consultants have to motivate the clients to make tough, but educated decisions. Most often, these decisions relate to business transformation. You need consultants who can involve CIOs and IT Line of Business (LOBs) to convince VP of manufacturing or Inventory to drastically change their current operational practices by educating them about the benefits of the related new processes. So often, it also involves tactical Change Management that these consultants need to address.

What do SAP Consultants do?

The work of a SAP consultant involves to studying the existing business processes relating to the current IT solutions, be it legacy software or earlier versions of SAP incase of functionality enhancement and version upgrade projects. The Consultant then maps this knowledge into a future state process that relates to SAP Best Practices scenario?s and provides possible options to the clients. At this point, the consultant also educates the client on the possible implications, pro?s, and con?s related to each of these selections. The clients then make educated decisions to select the finite end-state process that meets their business requirements and regulatory requirements such as those derived from Sarbanes?Oxley (SOX) audit, US Foods and Drug Administration (USFDA), Goods Manufacturing Practices (GMP), and so on.

All SAP end-users have their in-house SAP Analysts who have worked for years and are trained only on a few or sometimes on single templates. So it will be rewarding for the CIOs to rotate those personnel within different business units or with other friendly companies on tenures. Those SAP Analysts who get exposure to multiple templates will be more confident when new functionalities are added and to address Change Management.

What constitutes your best SAP Consultant?

I have always boasted that the best part of my job as a SAP Consultant is that I spend 65% of my billable time over conversations. Though, most of these conversations happen in corporate conference rooms while being locked with most successful people from the client?s management such as the Vice Presidents (VPs) of finance, procurement, manufacturing, sales, and so on.

Typically, a good SAP functional consultant?s profile constitutes 20% weighted average of work that is actually performed on the SAP software that includes configuration, demonstration, testing, training, and other activities. But the catch here is that a good consultant should score at least 19 out of these 20 points on configuration to be able to drive rest of the activities during the implementation. This 20% of weighted average of work constitutes the basic competency of a consultant and cannot be compromised.

Most CIOs in North America usually neglect to validate if their consultants possess academic and domain knowledge in their respective area of expertise such as manufacturing, inventory management, finance, and human resources. Your best SAP consultants must have domain experience to complement their software knowledge. The domain knowledge and the knowledge of business processes derived from Best Practices constitute another important 20% of weighted average of work that is expected from SAP consultants.

A large, 45% of the weighted average of work involves people management and interpersonal communications including oral and written communications. These soft skills help SAP consultants to design, implement, and test  solutions by involving everybody from the client?s business, IT LOBs, and extended SAP consulting team members from related cross-functional modules. The process would typically involve for everybody to agree on the proposed solutions, design, configured solutions, and the test results; depending on what phase the project is running into.

This 45% of weighted average of work also includes the client engagement skills because almost all clients typically become skeptical about the success of the project during different phases of implementation. So, a consultant tries to bring the confidence back by creating demo?s for individual process steps, and through other client engagement skills.

Rest 15% of the weighted average of work constitutes everything else that would be required to make a typical IT project successful.

What constitutes your best SAP Consulting Partner?

A good consulting partner typically has access to experienced SAP consultants and it has past experience in dealing with large businesses to help them achieve their ERP goals. Your consulting partner should be able to relate to your business through prior experience of successful implementations in your industry. If not in hand, they should have a mechanism handy to on-board and also to off-board resources from projects in short notice to constitute a winning team. It does not really matter whether the resources are on their own pay-roll or they are engaged on contracts as long as the company has prior experience in dealing with those resources.

There is an increasing trend to involve on-site as well as off-shore resources to control the cost of implementations. Your consulting partner should have both of these capabilities.

Project objectives and business requirements change during different phases of implementations. So your consulting partner should be flexible enough to change its course to meet your dynamic requirements throughout the duration of the implementation.

Conclusion

The process of implementing a true SAP based solution is complicated. Since the software impacts every segment of the business, it is more important to engage consulting partners who have a broader understanding of the end-state processes and have worked on multiple templates. Even though most businesses have witnessed turbulences during initial roll-outs, majority of the companies were able to address their impending concerns promptly. Streamlining your business into an ERP software is a slow process such as peeling an onion layer-by-layer. It needs to be addressed diligently and very patiently.

*Mandeep S. Oberoi works as Director & Principal Consultant with Dexteyra Consulting Group Inc. He has also worked with large consulting firms such as  Capgemini USA LLC, IBM, Wipro, and Le Groupe Createch (a Bell Canada company). He specializes in designing SAP Best Practices based banking, finance, and supply chain solutions. Mr. Oberoi has worked on multiple projects across North America, Caribbean, Europe, and Asia Pacific. He was awarded a Medallion by the Indian National Academy of Engineering (INAE) in 2001. 

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