The First Question in Implementing SAP

I have participated in a couple SAP implementations and there is something that strikes at the core of the value proposition of SAP.

Do you use the vanilla SAP business processes with configuration or do you customize  SAP(and how much do you customize SAP), and finally, does implementing SAP simplify your business system architecture?

You might ask why does this question strike at the value proposition of SAP?

SAP to start off is a fairly expensive piece of software.  When all is completed a business will be adding staff (basis, programmers, managers, potentially a DBA).  When all is completed you will have added a lot of fairly expensive hardware that will have a limited lifetime.  There will be a lot of training and at the end a complex architecture will be in place, consisting at a minimum of DEV (development), QAS (Quality Assurance), (sometimes a TST Test system), and PRD (Production) instances of SAP.

SAP consultants for functional configuration, SAP consulting for project management, and SAP consulting developers – if sourced from SAP would be hundreds of dollars per hour per consultant.  Suffice it to say that while you might buy SAP from SAP, you will be using a third party to provide the installation and customization expertise.  Even so, SAP is not a universal skill like programming in Microsoft T-SQL and therefore the restricted supply means that these people will be more expensive than your typical IT consultants.

The original value proposition of SAP is that it would be a one-stop software.  You could install it and expand it with different modules and the integration between the modules would reflect changes in the other modules immediately.

Perform a goods issue in WM and IM and it is reflected in the Cost Center immediately.  Need an estimate of how much all the stock you have on hand is valued – the information is available, either through custom code, SAP transaction or reporting solution.

When SAP first rose to popularity there were lots of home grown systems, large companies with multiple systems that had to be manually integrated and different staff to maintain each system – so SAP represented a value, a savings and even a ROI.

However, in today’s world there are many best of breed applications that are business area centered – for example, in the medical world there is Epic, Carefusion carousel systems, Carefusion packagers, Carefusion Pyxis units, asset management software like Four Rivers, and many more systems seemingly endless in number.

So a large business like a hospital cannot run the entire business on SAP.  Already out of the gate you are obligated to interface many different softwares together in order to perform daily operations such as order supplies, perform fundamental business processes, supply chain for drugs, and etc.

The second nail in to an SAP System is the premium costs often exceed the costs of a best-of-breed application.

At one customer we are faced with a decision – implement asset management in SAP or use a software that had been purchased by an individual department to perform asset tracking.

When all was said and done there were two solutions with two sets of costs.

Option 1: Configure and use Asset Management in SAP – consulting costs over $300K, and would have to be supported by internal personnel that already have a full place.  So, potentially a new FTE.

Option 2: Use existing asset management software which was already purchased for $100K, with support fees of around $10K a year and reasonable hourly rates for customization of software (certainly less than 1/4 SAP direct consulting rate).  Included in this software was also mobile applications that worked with the asset management software.

Anyone picking Option 1 over Option 2 would have to either have an agenda or a dedication to the SAP solution that overrides cost concerns.  You could select Option 2 and spend $100K on integration and Option 2 would still look good.

In addition, there are many dangers in over-customizing SAP.  Periodic upgrades to core functionality (although greatly delayed at present) and the application of service packs and enhancement packs expose over-customized SAP instances to risk any time there are changes.

That being said, there are many good attributes to SAP software, but if you are using it for an all-in-one solution that will show a ROI after installation, you might need to look elsewhere.

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