Building a Strong Business Case for SAP HANA

© Copyright 2014
Wellesley Information Services, Inc.
All rights reserved.
A Step-by-Step Action
Plan for Building and
Proving a Business
Case for SAP HANA
Tony Guetersloh
TekLink

2
In This Session
• Understand elements and approaches of a strong business case
• Learn the critical inputs that must be defined and quantified to
build a financial model for your business case
• Learn specific methodologies for identifying, evaluating, and
prioritizing the most critical business processes
• Understand the various use cases and applications of SAP HANA
and which business processes they support
• See examples of how a Proof-of-Concept (POC) can greatly
reduce risk and increase probability of a successful project
• Acquire knowledge of how to set up an NPV calculator to evaluate
the value and ROI of your business case

3
What We’ll Cover
• Defining a strong business case
• Identifying and Evaluating critical processes
• Understanding various uses and benefits of SAP HANA
• Creating a HANA Value Wheel™
• Predicting the future with a POC
• Putting the numbers together
• Wrap-up

4
Fundamentals of Building a Business Case
• Business case evaluates whether value/benefit will exceed the
costs to implement project
 If benefits > cost, then business case exists
 If benefits < cost, there is no business case
• Best approach for evaluating investment is to use project finance
models
 Traditionally used for industrial projects, but principles can
apply to IT projects as well
 Asks whether capital investment provides net positive returns
over life of asset
 NPV (Net Present Value)
 ROI (Return on Investment)
 Payback Period

5
Inputs for Building a Business Case
• Solid financial model to build a business case requires knowing Net
Present Value (NPV):
NPV = -C0 + C1/(1+r) + C2/(1+r)2
+ … + CT/(1+r)T
 Benefit/Value = CN
 Initial benefit and value solution will provide
 Long-term ongoing value provided
 Cost = C0
 Initial hardware, software, and resource costs to deploy
solution
 Ongoing costs to support and maintain solution
 Time = T
 Expected lifespan of solution
 Risk = r
 Likelihood of deploying solution successfully within budget

6
Common Challenges of SAP HANA Business Cases
• Many of the required inputs are very difficult to quantify
 Benefit and Value
 What are the business benefits of implementing SAP HANA?
 How to put a $ amount on efficiency, speed, or improved processes?
 Costs
 Hard Costs – hardware, software, and labor required based on type of
HANA deployment
 Soft Costs – intangible costs such as downtime during a migration or
drop in productivity as users learn new application
 Time
 Expected lifespan for new technology is uncertain
 Depreciation schedule for software is typically 3-5 years
 Critical legacy systems can live on for 10+ years
 Risk
 How to put a number on probability of realizing expected benefits?

7
Addressing the Challenges of SAP HANA
Business Cases
• Proven steps and methodologies to determine numbers for inputs
 Benefit and Value
 Identify and evaluate critical business processes
 Build a “Value Wheel” to understand value contributions by
area and process into total business case
 Map critical processes to HANA uses cases and applications
 Costs
 Understand different HANA applications and use cases
 Scope project for both immediate deployment and longer-
term rollouts and enhancements

8
Addressing the Challenges of SAP HANA
Business Cases (cont.)
• Proven steps and methodologies to determine numbers for inputs
(cont.)
 Time
 Start with traditional lifespan based on software depreciation
schedule; ~ 5 years
 Adjust based on scope of deployment, criticality of system
 Risk
 Start with WACC (Weighted Average Cost of Capital) as initial
discount rate
 Conduct a proof-of-concept to better understand likelihood of
success and ability to fully realize expected benefits
 Successful POC will greatly reduce risk, allow for lower
discount rate

9
What We’ll Cover
• Wrap-up

10
Identifying Critical Business Processes
• Start by conducting interviews with process area owners
 Executive interviews
 Understand strategic vision
 Business team interviews
 Collect critical processes and understand pain points
• Sample interview map:
Sales
• John Doe (EVP Sales)
• Jane Doe (CCOE Sales)
• John Doe, Sr. (SVP Sales
National Accts)
• Jim Doe, Jr. (SVP Regional
Sales)
Transportation
• Bob Doe (VP
Transportation)
• Jack Doe (Inbound Freight
Manager
• Jessie Doe (CCOE Ops)
Operations
• Bob Jay (EVP Operations)
• Sam A. Paul, Sr. (SVP
Operations)
• Jessie Doe (CCOE Ops)
• John Doe, Jr. (CCOE PP)
• Janet Doe (GM Plant Ops)
HR
• James Doe (EVP HR)
• Joan Doe (CCOE HR)
• John A. Doe (Comp/Benefits
Manager)
Finance
• John Doe (CFO)
• Bill Smith (Controller)
• Sam A. Paul (AP Manager)
• Mary Christmas (Budget
Manager)
• Jim Doe (CCOE FI)
• Jane Doe (Financial Analysis
Manager)
Promotional Accounting
• Jane Doe (Promotional
Accounting Manager)
• Bill Smith (Controller)

11
Interviewing Business Process Owners
• Ask open-ended questions framed by capabilities HANA can
provide
 How would your department improve or operate better if you
could …
 See and report on data in (near) real-time?
 Speed up transactions, interfaces, and reports?
 Bring in external “Big Data” sources such as POS or social
media to join with internal data?
 Quickly make changes to existing models and
reports with minimum turn-around time?
 Accelerate complex and cumbersome business
processes?

12
Capturing Results of Interviews
• Capture answers provided during interviews to identify:
 Business drivers
 Critical processes
 KPIs and Metrics
 Pain points
 Existing gaps and shortcomings

13
Evaluating Results of Interviews
• Capture business drivers and evaluate each critical process or
pain point against drivers
 Use “Harvey Ball” methodology to evaluate degree to which
each meets a criteria
Very Low
Low
Medium
High
Very High
Revenue Generation
Cost Reduction
Operational Efficiency
New Capabilities
Customer Satisfaction

14
Evaluating Results of Interviews – Example
• Capture business drivers and evaluate each critical process or
pain point against drivers
 Use “Harvey Ball” methodology to evaluate degree in which
each meets a criteria
Pain Point Drivers Benefits Realized Impact
Difficult to analyze pricing by region,
leading to potential lost opportunities
to optimize pricing regionally
Increase Customer Loyalty
Increase Brand Awareness & Perceptions
Improve Productivity
Improve Service Efficiency
Reduce Customer Support Dependency
Increase Revenue
Improve Purchasing Decisions
Increase Profitability
Improve Operational Efficiencies
Increase Operating Profits
Timeliness of Reporting
Minimize Unprofitable Customers
Optimize Customer Incentives
Enable Product Line Analysis
Improve Reporting
Inability to look at granular-level detail
due to the sheer volume of data (i.e.,
an account for a month with drill-down
capability)
Cross New Products and Services
Increase Customer Satisfaction
Improve Operational Efficiencies
Increase Accessibility to Information
Facilitate Closing Processes
Reduce Errors
Improve Reporting
Inventory write-offs common due to
not having real-time visibility to current
stock levels of perishable raw
materials
Reduce cost
Eliminate waste
Improve inventory turnover
Reduce working capital
One of the largest challenges for
finance is getting the books closed
due to lengthy ETL jobs between FI
systems
Increase Accessibility to Information
Facilitate Closing Processes
Enable Exception Processes
Improve Reporting

15
What We’ll Cover
• Wrap-up

16
Different “Flavors” of HANA
• SAP HANA has multiple uses; SAP is continuing to roll out new
capabilities and applications rapidly
 Go to SAP Marketplace and SAPHANA.com for more
information on new use cases and HANA solutions
• To build a business case, one must first understand different uses
of HANA and how they map to critical processes

17
Understanding HANA Use Cases
• Most common current HANA solutions and use cases based on
client experience
 Enterprise HANA as ECC “side-car”
 Replicates data from ECC in real-time
 Accelerates ECC reports & transactions
 Can be used to host and integrate non-SAP data as well
 BW on HANA
 Accelerates entire BW system
 Enables virtualization of data mart layers to eliminate
redundancy and improve speed to reporting
 Allows easier integration of large “Big Data” data sets into
existing enterprise data warehouse
 BW is not “dead.” Many new innovations to change data
modeling paradigms with BW on HANA.

18
Understanding HANA Use Cases (cont.)
• Most common current HANA solutions and use cases based on client
experience (cont.)
 EPM/BPC 10 on HANA
 Accelerates financial planning and consolidation processes
 Significantly improves speed of plan data uploads and allocation
processing
 Accelerated TPM (Trade Promotion Management) on HANA
 Speeds up reporting and plan uploads for trade promotions
 Enables near-real-time integration of trade and event data with
sales to more accurately track marketing effectiveness
 SAP Predictive Analysis powered by SAP HANA
 Build predictive models on real-time data coming from SAP HANA
 Increase forecast accuracy and identify trends before they impact
operations

19
Mapping HANA Applications to Value Drivers
SAP HANA Application
Enterprise HANA (ECC side-car)
BW on HANA
EPM/BPC 10 on HANA
Accelerated TPM
Predictive Analysis on HANA
Value Drivers
Improved Service
Cost Reductions
Operational Efficiency
Revenue Generation
Innovation & New Capabilities

20
What We’ll Cover
• Wrap-up

21
Building a HANA Value Wheel™
• With our HANA Value Wheel™, you
can learn how to build business cases
for SAP HANA
• Take identified business drivers
 Map to HANA Capabilities to
determine possible values
 Give $ values to both savings and
new capabilities wherever possible
 Assign discount rate to each
account for probability of achieving
forecasted $
 Document assumptions and
success criteria

22
Examples of Mapping Processes to Value Wheel
Current State/Limitation SAP HANA
Capability
Opportunity
Investment in Enterprise data
warehouse not leveraged for
operational reporting
Strategic, Analytical, Tactical, & Operational
reporting from varied sources from a single
reporting platform
Only “canned” reports/
dashboards built by IT
Co-creation of reports using Agile
methodology; more end users empowered for
self-service and ad hoc reporting
SAP application/s-centric (ECC,
CRM, BPC) reporting
Prototype flexible reporting scenarios using
Enterprise AND Local/Offline/External data on
the reporting platform itself
Static Reports/Dashboards Predictive analysis and “what if” scenarios
Predominantly desktop-based
solutions
Mobile Analytical solution can be a reality with
fast response times
Data Explorer/Ad hoc
analysis
Near real-time,
Transaction level data
Predictive Analytics *
BW Workspaces
Fast Response Times
Innovation
& New
Capabilities

23
Details of Calculations for Value Wheel
• Use below template to capture each identified critical process by
department and value driver for SAP HANA
• Estimate ROI based on highest possible “best guess” value
Expected
Project
Lifespan: 5 Years
Business
Driver
Process
Area Description
Estimated
ROI
Prob-
ability
Discount
Rate
Recurre-
nce
Net Present
Value
IT Cost
Savings
IT
Eliminate
Oracle DB
Maintenance
Costs $20,000.00 95% 5%Annually $86,589.53
Enter the probability that the estimated
ROI can be fully achieved. This will
drive the discount rate.

24
• Each critical process or identified value area
Description
Estimated
ROI
Probability
Discount
Rate
Recurrence
Net Present
Value (5 Yrs)
Eliminate Oracle DB Maintenance Costs – 3 Env. $XXX,000 95% 5% Annually $XXX,XXX
Eliminate Oracle DB Hardware Maintenance Costs
– 3 Env.
$15,000 95% 5% Annually $76,135
Eliminate BWA Maintenance Costs $XXX,000 95% 5% Annually $XXX,XXX
Eliminate BWA Hardware Maintenance Costs – 3
Env.
$XX,000 95% 5% Annually $25,378
Reduce time to market of new BI Development – 5 Active
Developers, 25% time reduction, $600/day rate
$187,500 50% 50% Annually $342,078
BW 7.3 Upgrade Cost savings with Side-by-Side
BW-on-HANA Implementation *
$250,000 100% 0% One-Time $250,000
Lower occurrences SLA breaches $25,000 80% 20% Annually $83,138
Total $ X,XXX,028
Examples of Calculations for Value Wheel
Cost
Reduction

25
Value Wheel to Show Priority and Share
• Value Wheel used to prioritize departments that will receive most
value
 Share of value can also be used for allocating cost of
investment

26
Technical Roadmap Evaluation
• Future BI-State Vision to be evaluated against factors of:
 Technical feasibility and complexity
 Ability to achieve objectives and value drivers identified in Value Wheel
 Compatibility with current landscape
 New technologies, innovations, and updates from SAP and other providers

27
Plotting Projects for Future Deployment
• In conjunction with business case, projects and initiatives plotted against future timeline
• Prioritization of projects driven by:
 IRR and NPV delivered (identified in Business Case)
 Cost and complexity to implement
 Dependencies on other projects or technologies required
• Roadmap to include timelines, resource estimates, and hardware / licensing requirements and
cost estimates
• Roadmap will provide recommendations of best approaches and platforms for deploying the
projects and proposed funding sources (identified in Value Wheel)
2015 2016
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Install BW on HANA instance
Technical validation and go-
live of BW on HANA
Harmonize
Master Data
Migrate SPM
Migrate MTI
Migrate PTC
Migrate Sales & Trade
Migrate
Transportation Migrate STP
Migrate RTR
Migrate Remaining Areas
New enhancements and development on HANA
Retire Legacy
BW
IT Funded Business Funded

28
What We’ll Cover
• Wrap-up

29
How to Address Risk
• Most scrutiny for business case will focus on the probability of
achieving estimated value benefits
• If probability is too uncertain, it will lead to higher discount rate
 Higher discount rate will lower total NPV of project
 Puts entire business case at risk
• Simplest way to reduce uncertainty and raise probability of
success is to conduct a Proof of Concept (POC)
 Allows testing of solution before full deployment
 Requires minimal initial investment before making larger
commitment
 Develops early learnings and experience of resource to ensure
less issues during full deployment

30
Options for Conducting a POC
• Proof-of-Concept can be conducted multiple ways
 Partner with technology services firm to host solution within
internal labs
 Requires no hardware purchase or asset commitment
 Enables rapid deployment of POC working directly with
partner
 Purchase SAP HANA in Cloud to deploy small POC
 Cloud hosting requires no hardware or asset commitment
 Option to convert POC into production system if cloud
hosting is permanent approach
 Purchase HANA “sandbox” for POC and prototyping
 Allows for additional POCs and testing after initial use case
is proven out
 Requires larger initial investment

31
Examples of HANA Proof of Concept – Case
Study
• Background
 Client uses BPC 7.5 NW primarily for Financial Planning and
Reporting for P&L and Balance Sheet
• Objective of POC
 Client is looking to upgrade the current BPC applications to
BPC v10
 Performance boost is a key consideration for the upgrade
 A Performance Analysis of 7.5 versus 10.0 (with and without
HANA) is required as part of a Proof of Concept (POC) to
analyze the potential performance gains
 Due to the unavailability of the required infrastructure in-house,
client utilizing separate environment to conduct the POC
off site

32
Study (cont.)
• Scope of POC
 In order to gain clear understanding of performance gain, a
series of tests was performed on 3 different systems
 System 1 – BPC NW 7.5 on Oracle
 System 2 – BPC NW 10.0 on Oracle
 System 3 – BPC NW 10.0 on HANA
 We tested
 Data Loads
 Ad Hoc Reporting (various sizes)
 Formatted Reporting
 Data Input
 Book of Reports
 Logic Calculations

33
Study (cont.)
• Results of the POC
Performance Gain vs. 7.5
Activity BPC v10 BPC v10 HANA
Ad Hoc Reporting 65% 85%
Report Refresh 46% 72%
Data Input 64% 82%
Book Publishing 68% 92%
Calculation Logic 52% 74%
Data Loads 63% 92%

34
Study (cont.)
• Results

35
What We’ll Cover
• Wrap-up

36
Finalizing the Business Case
• Numbers now collected for each of the variables required for
building the case:
 Benefit/Value = Net total of values identified during interviews
 Cost = Hardware, software, and resources based on chosen
HANA application(s)
 Time = Expected lifespan of solution – typically 5 years
 Risk = Probability of achieving the full value expected
 This value can be adjusted and reduced through a POC

37
Putting Numbers into NPV “Calculator”
Project: BPC 10 on HANA Deployment
Timeframe: 5 Years
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total
Investment $ (1,000,000) $ (1,000,000)
POC Costs $ (150,000) $     (150,000)
Operational Efficiencies $ 50,000 $ 75,000 $ 100,000 $ 100,000 $ 100,000 $       425,000
Innovation and New Capabilities $ 100,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 $   1,100,000
Improved Service $ 50,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 $       350,000
Cost Savings $ 150,000 $ 150,000 $ 100,000 $ 75,000 $ 50,000 $       525,000
$                   -
Total: $       (1,150,000) $    350,000 $        550,000  $        525,000 $  500,000 $  475,000 $   1,250,000

Risk Level
Low Moderate High
Discount Factor (WACC + Risk Factor): 5.0% 10.0% 15.0%- Note, low is WACC from treasury
Net Present Value (NPV): $875,467 $594,193 $380,399
Return on Investment (ROI): 209%
Payback in months                            29

38
What We’ll Cover
• Wrap-up

39
Where to Find More Information
• www.saphana.com
 SAP’s Web site which outlines all HANA solutions and use
cases
• www.financeformulas.net/Net_Present_Value.html
 Web site providing financial formulas and explanations for NPV,
IRR, WACC, and other financial terms

40
7 Key Points to Take Home
• Building a solid business case requires building a financial model
to determine NPV, ROI, and payback period
• Four critical inputs for financial model that must be quantified are
Benefit, Cost, Time, and Risk
• Conduct interviews with department heads and process owners to
identify and evaluate value drivers and critical business
processes
• Learn and understand the different uses and applications of SAP
HANA to know which capabilities can map to the critical business
processes

41
7 Key Points to Take Home (cont.)
• Build a HANA Value Wheel™ by grouping processes by value
driver and department then assigning $ values to them
• Define “risk” by assessing probability of realizing expected values
• Mitigate risk and improve probability of success by conducting a
POC

42
Your Turn!
How to contact me:
Tony Guetersloh
Tony.guetersloh@tli-usa.com
Please remember to complete your session evaluation

43
Disclaimer
SAP, R/3, mySAP, mySAP.com, SAP NetWeaver®
, Duet®
, PartnerEdge, and other SAP products and services mentioned herein as well as their
respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product
and service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor controlled by
SAP.

Building a Strong Business Case for SAP HANA

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