I often meet with executives from our clients and prospects to discuss implementing a new SAP system or upgrading an existing one. In many cases, they’ve already decided to move forward with the enterprise resource planning (ERP) project and now it’s a question of when and how.
When I ask the executives to share their benefits case for new ERP initiatives, the answer is usually some version of:
Our system is old (and its extension: Our system is heavily customized by two guys who have been with the company for many years, and if they leave, we’re in trouble).
We don’t have good visibility. It takes us too long to generate any reports, we run our business on spreadsheets, and we can’t see which client orders are profitable.
From time to time I get a more tangible reason that highlights a specific deficiency the company is trying to overcome so it can better serve its market (meeting service levels, stock availability, cycle times, and so on). But when I hear one of the above two reasons, I politely try to pick the rationale apart. The conversation usually goes something like this:
Do you have a benefits case for this
(new SAP) initiative?
Yes. We know we have to do it,
and we’re doing it.
Great. Please can you share a few key business drivers of your benefits case?
As you know, our business is very projects and services oriented. Our current system is old, and we have a lot of custom development that we really can’t maintain.
Yes, this is a fairly common and significant risk. Would you mind giving me a little more detail: besides the custom elements you would like to eliminate and standards you want to
adopt, are there any specific areas of the business you intend to improve?
Yes. We have very poor visibility today. It takes our accounting department over 15 days and roughly 30 cobbled-together spreadsheets just to get the month closed.
That does seem onerous. How else does poor visibility show up at your company? In other words, what other issues does that cause?
We’re often flying blind about the effectiveness of our projects. We can’t see that things are going wrong or that profitability is declining until weeks after the fact.
If you had more real-time visibility, what elements do you wish you had access to, and what impact would
If there was a way to see real-time and projected profitability as we deployed resources on projects, I presume my project managers would get an early warning and potentially make different (better) decisions than the ones they’re making under the current circumstances.
If you had those indicators readily available, and they led to better decisions, what impact could that have on the profitability of projects and the company as a whole?
Not sure. Maybe 2 to 3 percent improvement per project?
Since your revenue is roughly
$1 billion a year, that would result in as much as $20 to $30 million in increased contribution!
Wow – I didn’t look at it that way but you’re right – we would have a fairly substantial impact to our bottom line
if we do this project right!
Even though I have oversimplified the impact to the bottom line, the conversation went from “old system and poor visibility” to a $20- to $30-million increased contribution per year! How can that be realized? By enabling better decisions (fewer mistakes) – in other words, by making the client Smarter!