A SAP ERP system requires a lot of support and pre-planning
The SAP ERP system was developed by SAP AG, a company founded by five former IBM employees in 1972 who wanted to create a real-time “Systems, Applications and Products" business system.
SAP was one of the first major enterprise resource planning software companies to develop the concept of individual programs that can be purchased, installed, and run separately while extracting data from a common database.
In 2005 SAP launched its ERP Central Component (ECC) 6.0 to redefine enterprise resource planning – delivering role-based access to crucial data, applications, and analytical tools.
The SAP ERP system is traditionally implemented by very large corporations or growing midsized companies. They have, however, introduced the “SAP Starter Pack” for small businesses.
The implementation project can be very expensive. In 2009, several UK sources reported that "for a Fortune 500 company, software, hardware, and consulting costs can easily exceed $100 million (around $50 million to $500 million). Large companies can also spend $50 million to $100 million on upgrades. Full implementation of all modules can take years," which also adds to the end price. Midsized companies (fewer than 1,000 employees) are more likely to spend around $10 million to $20 million at most.
The SAP ERP system website has the slogan “the best run businesses run SAP” and there is a lot of truth in the saying. However, it has to be a “best run business” in terms of operating as a group of cohesive units before implementing a SAP ERP system in order for the implementation to be successful.
I have said this many times to many different companies - the problems that arise in an implementation project are related to people and process, not software issues.
If a company has not fully defined the objectives for their operation and if there is not a strong commitment or a positive approach to change, the project will founder.
Extensive pre-planning is essential
Systems such as SAP ERP are designed to integrate all departments and functions across a company onto a single computer system to serve all those different departments’ particular needs.
This is such a major undertaking that it may need months or even years of pre-planning and extensive ERP implementation support, especially if there are a number of organizational differences.
I worked on the pre planning process for six months with one very large corporation and at the end of six months they cancelled the SAP ERP project to focus on dealing with their internal organizational issues.
This was a wise decision on their part. The company recognized that they were unlikely to realize a return on such a large investment unless internally they had their house in order.
Here is my advice as a consultant who has managed many ERP projects from the initial planning to the implementation.
When evaluating the features of SAP ERP, do it with your organization firmly in mind. As a first step, examine the following core functions (as described by SAP) and assess how difficult it would be to fully implement each of them:
Financials – Ensure compliance and predictability of business performance – so your organization can gain a deeper financial insight across the enterprise and tighten control of finances. SAP ERP Financials automates financial and management accounting and financial supply chain management. The solution also provides rigorous support for corporate-governance mandates such as Basel II and Sarbanes-Oxley.
Human Capital Management – Optimize your HR processes with a complete, integrated, and global human capital management (HCM) solution. SAP ERP provides this HCM solution for organizations of all sizes and in all industries. You can maximize the potential of your workforce, while supporting innovation, growth, and flexibility. The SAP ERP HCM solution automates talent management, core HR processes, and workforce deployment – enabling increased efficiency and better compliance with changing global and local regulations.
Operations – Manage end-to-end procurement and logistics business processes for complete business cycles – from self-service requisitioning to flexible invoicing and payment – optimizing the flow of materials. SAP ERP Operations also helps discrete and process manufacturers manage the entire life cycle of product development and manufacturing. The solution automates the entire manufacturing process and reduces costs by controlling and adapting the manufacturing process in real time – and increases customer satisfaction by delivering higher-quality products.
Corporate services – Helps organizations manage their most cost-intensive corporate functions by supporting and streamlining administrative processes in the areas of real estate; enterprise assets; project portfolios; corporate travel; environment, health, and safety compliance; quality; and global trade services. SAP ERP Corporate Services is a complete and integrated solution that maximizes transparency and control, while reducing financial and environmental risks and enhancing safety of employees.
Are you ready for SAP ERP?
Given the above, are you confident that your project planners will be able to articulate how to execute a SAP ERP implementation for your organization? If the answer is yes, then this will be a worthwhile undertaking with a measurable ROI.
If the answer is no, your organization has some work to do before contemplating a SAP ERP investment.
Would you like some help or free advice? Call, write or e-mail me via my contact page
Box 433, Enderby, British Columbia, Canada V0E 1V0.
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