SAP: A Propensity For Failure

Ottawa, Canada
2008

SAP Procurement
for
Public Sector
White Paper

Jon W Hansen, Chief Architect
CATA Alliance

SAP Procurement for Public Sector

Table of Contents

OLD WINE IN NEW WINESKINS? ...........................................................................................3
SAP PPS – TRUE INNOVATION OR AN EXERCISE IN RE-BRANDING?........................4
SAP’S PROCUREMENT FOR PUBLIC SECTOR: THE PAST AND PRESENT ................5
SAP GLOBAL WEB SITE ............................................................................................................6
REPAIRS ON THE FLY – OVERCOMING PAST CHALLENGES ......................................8
A CASE FOR PPS? ........................................................................................................................9
SEATTLE PUBLIC SCHOOLS, UNITED STATES.............................................................................11
ERIE COUNTY, NEW YORK (PDF, 613 KB), UNITED STATES ....................................................11
SAN LUIS OBISPO COUNTY (PDF, 848 KB), UNITED STATES ....................................................11
CITY OF OTTAWA, ONTARIO (334 KB) ......................................................................................11
SAP – THE DARK SIDE OF THE MOON ...............................................................................11
HERSHEY FOOD CORP ................................................................................................................13
FOXMEYER DRUG ......................................................................................................................14
WHIRLPOOL, DOW CHEMICAL, BOEING, DELL COMPUTER AND WASTE MANAGEMENT .........14
THE ORIGINS OF A FAILED INITIATIVE? .........................................................................15
REVERSING THE TREND?......................................................................................................16
A BEACON OF WHAT IS POSSIBLE?....................................................................................18
LIKE DEEDS, RESULTS SPEAK!............................................................................................21
THE MICROSOFT CONNECTION .........................................................................................22
CLOSING SUMMARY ...............................................................................................................24
ABOUT THE AUTHOR..............................................................................................................28

Appendices

APPENDIX A ...............................................................................................................................30
ARAPAHOE COUNTY, COLORADO ..............................................................................................30
APPENDIX B................................................................................................................................34
EXTENDING THE ENTERPRISE.....................................................................................................34
MFI GETS CAUGHT IN SAP TRAP................................................................................................36
INVENTORY WOES LEAD TO PROFIT WARNING ...........................................................................36
BY JOHN OATES → MORE BY THIS AUTHOR ..............................................................................36
APPENDIX C ...............................................................................................................................37
(CASE REFERENCE) ....................................................................................................................37
HP users decry Itanium, SAP issues and bad English...........................................................37
The Shipping News ................................................................................................................37

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APPENDIX D ...............................................................................................................................39
(CASE REFERENCE) ....................................................................................................................39
Cadbury IT glitch takes £12m chunk out of profits................................................................39
APPENDIX E................................................................................................................................42
(GATE METHODOLOGY REFERENCE) ........................................................................................42
APPENDIX F................................................................................................................................46
(ARTICLE - DUET) ......................................................................................................................46
Steve Ballmer: Microsoft Business Summit 2005 ..................................................................48
School District Provides Web-based Access to SAP R/3 Financial Data with SharePoint
Portal Server..........................................................................................................................48
APPENDIX G ...............................................................................................................................49
(CASE STUDY INDEX – ADDITIONAL CASE REFERENCES) .........................................................49
Erie County works with IBM for enterprise-wide business transformation ..........................49
Erie County leads the way to shared citizen services with SAP and IBM .............................49
Nova Scotia Liquor Corporation builds a robust retail environment with IBM and SAP.....49

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Old Wine in New Wineskins?

“New Product Development and Introduction (NPDI) allow companies to
grow revenues and retain high margins by launching new products and
creating new customers in new markets. Even when a company’s top line
isn’t increasing, it needs NPDI to replace existing products that are reaching
the end of their life. Newer products typically command higher margins in
the market while older products are impacted by competitive challenges and
waning customer interest. Well executed, NPDI keeps a pipeline of new,
high-margin products flowing to the market.”

New Product Development and Introduction (NPDI)
SAP White Paper
December
2007

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SAP PPS – True Innovation or an Exercise in Re-Branding?

Albert Einstein once defined insanity as “doing the same thing over and
over again and expecting different results.” While mildly amusing, it is
nonetheless a thought provoking statement when applied to the evolution of
the enterprise software industry and in particular the introduction of supply
chain/e-procurement solutions.

The fact that awareness of the high-rate of ERP/IT-based initiative failure to
deliver the expected results is now entering mainstream consciousness,
vendors and those associated with the recommendation and implementation
of solutions find themselves in unfamiliar waters. Specifically, what do you
do to overcome the growing cynicism within the end-user community?

In this context, does the introduction of the Procurement for Public Sector
(PPS) modules/upgrades by SAP signal the introduction of new and
innovative technology that will reverse the generally negative results in the
market as a whole? More to the point concerning existing SAP clients will
the PPS modules pave the way for an enterprise-wide adoption of a broader
SAP centered e-procurement strategy?

The first step toward answering this question is determining if in fact the
PPS modules or upgrade is a true vehicle of transformation or if it is an
exercise in re-branding whereby the same “old” principles of
implementation and engagement are used.

The methodology used to make this determination centered on extensive
research of available case study history worldwide and in particular North
America and the United Kingdom.

As a point of cross referencing (and validating) the case study findings, we
also researched SAP implementing partners web sites to determine if there
were any references to the specific introduction of PPS “branded” offerings.
This activity was undertaken based on the fact that traditionally the

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marketing mechanism for vendors usually precedes the product introduction
curve. In the absence of verifiable case study references, the presence of
PPS-related marketing information on the partner sites would at least
provide a reasonable indication of the timelines associated with real-world
PPS availability and impact.

Finally, a detailed review of the America’s SAP Users’ Group (ASUG) site
was also undertaken in an effort to establish key developments in the area of
Public Sector Procurement practice within the SAP user community.

While we did not have access to all materials, and in particular those from a
December 19, 2007 Webcast highlighting PPS 2008 release information
including enhancements to the PPS Roadmap and SRM 6.0, the site did
provide us with another vehicle to engage additional resources.

Even though SAP can be seen as the firmly entrenched platform within the
organizations of their existing client base, the results of our research will
hopefully introduce a number of options that the SAP user community can
leverage to build upon the existing application’s foundation either
organically or through the introduction of new methodologies.

SAP’s Procurement for Public Sector: The Past and Present
“SAP Procurement for Public Sector provides Public Sector organizations a
capability to support a wide variety of government procurement practices.
The software is tailored to support simplified acquisition processes as well
as the complex processes managed by most government organizations. It
includes a document builder function to produce complex procurement
documents quickly and easily.”

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SAP Global Web Site

Given the above description of the PPS offering, the first thought that comes
immediately to mind is why adjunct modules to the main ERP application
were licensed by many organizations in the first place? The Material
Management (MM) application used by some organizations today is one
such example. It is a logical question in that the MM application’s primary
focus is on managing materials of which procurement is just one element.
Other functional features include inventory management, valuation and
assignment, batch management and classification. Combined with the fact
that the materials management program is designed to integrate with SAP
modules such as Sales and Distribution, Production Planning and Quality
Management (areas which do not commonly fall within the framework of a
public sector procurement practice) would lead one to reasonably conclude
that there are a great many clients whose existing platform is better suited to
a manufacturing environment instead of an organization operating within
the public sector. This could be a factor in the persistently high rate of
initiative failures.

It is important to note that this question is not intended to stimulate debate
pertaining to the internal decision-making process within the public sector
(although this is a subject worthy of closer review). Instead, and as it relates
specifically to this report, it does raise potentially disturbing questions
surrounding the vendor’s thought process and motivation in terms of
recommending a materials management solution in the first place.

Perhaps we can assume that one of the motivating factors that have led to
the prevalence of misaligned technology is linked to a desire for continuity
– the perceived importance of compatibility with a main ERP system.
Continuity or compatibility could certainly provide a plausible explanation
for sacrificing the functionality that would best serve the procurement
department’s needs. Regardless of the reasoning, this approach is
problematic on several levels.

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Specifically, the need to “shape” or “mold” a misaligned module to better
align with an organization’s procurement practice increases the frequency of
having to create “work arounds” or band-aide fixes on the fly.

In those instances where measures such as these are employed on a regular
basis, there is usually a substantial and incremental cost in both time and
resources (nee money) starting at the point of implementation (see Example
A below).

Example A
Technology-Centric Approach

Exacerbating this situation further is the negative impact the attempt to fit a
square peg into a round hole will have (or has already had) on any future
initiatives in terms of stakeholder adoption.

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This is usually demonstrated by varying degrees of cynicism at the
operational levels of an organization.

Taking this into account, many organizations may very well be embarking
on a new undertaking from one or two steps back. This is an important
factor that has to be both quantified and addressed prior to moving forward
with any strategy let alone a revised PPS strategy.

In an effort to bolster stakeholder confidence, one avenue that may be worth
pursuing is to clearly understand and outline the differences between the
existing module or modules, the PPS modules as well as possible third party
options. This approach would provide a platform for collaboration with key
stakeholders that would help to avoid the potential pitfalls of a perceived
“gravitational pull” towards a particular vendor (in this case SAP).

Along these lines I would recommend a nominal investment in additional
research material such as a book by Martin Murray titled SAP MM –
Functionality and Technical Configuration. Published in June of 2006, one
may find unrealized functionality within their current application (in this
case the MM module) that can assist in better quantifying the eventual
transition to a more appropriate e-procurement solution.

Repairs on the Fly – Overcoming Past Challenges
Historically, almost all e-procurement initiatives originate as a by-product
of either a Finance (ERP)-centric or IT-centric initiative in which any
meaningful engagement of the purchasing department is limited to the
narrowly defined framework of an externally mandated strategy. Henry
Ford’s comment that “people can have the Model T in any color – so long
as it’s black,” is a fair representation of how the majority of purchasing
departments “inherit” the technologies that ultimately (and erroneously)
define their practice.

One such example that is worth looking into further is the City of Houston’s
SAP-based 10 year, $30 million plus initiative announced in December
2005. Focused on standardizing the City’s administrative functions across

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all departments, the perception surrounding the e-procurement component
was one of being an adjunct option of the core program in which
implementation would take place down the road.

This approach ultimately saddles the purchasing department with a platform
that creates in a tug of war between operational requirements and
developmental capacity. Or as one senior public sector official lamented,
requires the dedication of already limited resources whereby full-time staff
is needed to make the ERP-based procurement module “fit” the practice.
Unfortunately, this has meant that the vast majority of purchasing
organizations are now in the software business as they attempt to adapt their
practice to an application they would not have chosen to use in the first
place. In this scenario, making the software “work” becomes the focal
point.

Recognizing the existence of these or similar-type challenges with pre-
existing modules, as well as the possible emergence of competing strategies
that originate at the departmental level, organizations have to be cognizant
of end-user reluctance to embrace what may initially be perceived as
another misaligned or inherited program. This means that a clear
understanding of how the PPS offering will actually work (re adapt) to real-
world practices is an essential requirement out of the gate.

To do this effectively, project champions have to review available case
history to gain additional insight into the success or failure of similar
programs with other public sector organizations.

Simultaneous to this exercise, is the need to build a Results Objective Table
which accurately reflects the interests and objectives of key stakeholders
both within and external to the practice itself.

A Case for PPS?
Based on an exhaustive research of available case history through a variety
of sources including SAP partner sites, it would appear that the PPS offering
is more of an exercise in re-branding than in technological innovation or
breakthrough. This assessment is based on the fact that outside of general
references within the SAP site itself, there was not a single or independent

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case history reference to a specific PPS “branded” module or product.
(Note: this does not imply that a PPS module does not represent an
improvement over existing modules. In fact, given that the MM example
clearly demonstrated that a materials management solution was not ideally
suited for a PS procurement practice - which again may go a long way
toward explaining present end-user skeptism; it would be surprising if there
wasn’t a reasonable degree of improvement with the PPS offerings in
whatever form or forms it may take.)

Arapahoe County in Colorado for example, implemented the SAP solution
as part of a broader ERP initiative. While there was a component of the
project that involved purchasing as demonstrated by a quote that “County
officials now enjoy online real-time visibility into financial, purchasing and
inventory reports – as well as transactional information,” there is no specific
reference to a PPS branded “purchasing” module.

The absence of a PPS reference notwithstanding, the operational benefits
according to an SAP produced case* study regarding the Arapahoe
implementation included the following:

 Purchase order cycle time reduced 80%
 Age of information in monthly reports reduced from six to eight
weeks to real-time
 Full-time equivalents in accounts payable and purchasing reduced
50%
 Financial close process time (annually) reduced by 150 hours

* A copy of the complete case study has been provided in (Appendix A)

The key question surrounding the above referenced results (as well as those
outlined in the following case studies) is whether or not they are a fair and
reliable indicator of success.

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Other case study references provided through the SAP site include:

Seattle Public Schools, United States

Examine how this large urban school district is using SAP SRM to buy
pencils, paper, computers, and custodial equipment – while generating large
savings of 50% to 75% of back-end processing costs – with the streamlined,
online procurement process.

Erie County, New York (PDF, 613 KB), United States

Consider how Erie County, which needed an integrated, automated ERP
system to manage payroll, procurement, budgeting, grants administration,
and accounting, chose SAP Business Suite solutions – and successfully
standardized and streamlined business processes.

San Luis Obispo County (PDF, 848 KB), United States

Read how San Luis Obispo County used the SAP ERP application to
accommodate an economic boom and mitigate the impact on county
services and operations.

City of Ottawa, Ontario (334 KB)

Read how Ottawa, reformed from 12 municipalities, uses the integrated
mySAP Business Suite family of business solutions to improve processes
such as centralized payroll and consolidated inventory, and to run faster
reports and responses -- anticipating 100% ROI in five years.

SAP – The Dark Side of the Moon
Often times it is the unknown that can create the greatest challenges.
Regardless of the vendor, the less than stellar results associated with the
majority of all e-procurement initiatives should give one pause for thought.

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That said it is not the intention of this study to either recommend or
dissuade the reader from actively pursuing an SAP-based strategy. The
primary objective is to provide decision-makers with an “objective lens”
through which they will be able to view all relevant data. For this reason,
our research was extended to include case histories in which the results of
an SAP program did not meet client expectations.
In a September 16th, 2004 article titled Extending the Enterprise – SAP: Are
its customers happy? (Appendix B), Dale Vile referenced a story in which
one of SAP’s major customers (MFI) “cited problems with an SAP supply
chain implementation as a reason for poorer than expected financial
results.”

Other similar stories including Hewlett-Packard’s “lost $400 million in
revenue from a failed SAP rollout” (Appendix C) and the £12 million hit
that Cadbury Scwheppes took in 2006 as a result of a “bad SAP supply
chain” project (Appendix D) are also worth noting. And not just because of
the apparent size and resources of the companies in question. Although the
HP case study should be somewhat disconcerting given that organization’s
level of sophistication and supposed expertise as an SAP integrator.

As RedMonk analyst James Governor put it, “HP is trying to build an
application management business to rival IBM’s. What better case study in
proving your R/3 and Netweaver capability” . . . by showing “everyone how
to merge two SAP systems.”

The analyst concluded by saying “Who would want to go to HP now for
large scale SAP integration? The CEO just publicly said HP can’t
effectively manage such a project.”

This being the case, if a high technology company who has extensive
experience with the product can’t succeed, what does this say in terms of
any organization’s chances for success?

Even the previously referenced City of Houston project appears to have run
into some difficulties if you are to believe a recent post on the Houblog
Blog site (http://www.houblog.com/wp/index.php/2007/506).

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The post’s author, who admitted that he wasn’t an SAP fan talked about a
news report regarding “HPD officers being up in arms over how badly the
SAP payroll implementation has gone.” According to the information, other
departments within the city’s infrastructure have reported similar
experiences with some employees reporting that they received “paychecks
with $0” amounts.

As a result, the writer observed that “A year ago, there was a lot of talk
about how the city’s operation would be converted to SAP. Now, not so
much (as in none).”

To stress once again, the Houston SAP program’s problems have not been
substantiated, hence the recommendation to follow-up with that
municipality directly. However this as well as other Blogs such as
blogHouston (http://www.bloghouston.com/) have reported similar
experiences which do warrant consideration. (Note: an interesting comment
regarding SAP in a blogHouston post claimed that the user had “never met
anyone in any department outside of accounting that likes it.”)

And while Vile indicated that for “every horror story,” there are “many
successes” his position that “other factors – such as the way these
implementation projects are managed – are the most likely causes of
failure” may actually help to empower organizations in terms of
understanding the management mechanisms that will be required to achieve
the desired and needed outcome.

Other case study references regarding the challenges associated with SAP
implementations:

Hershey Food Corp

Beginning in 1997 Hershey tried to integrate Manugistics, SAP and Siebel
applications to improve order processing. About 30 months and $112
million later, Hershey had to admit failure. With its order fulfillment
process broken, the company found itself having to call its customers to find
out how much candy they had received in shipments.

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While SAP calls Hershey’s experience a consolidation success story,
experienced SAP integrators would tell you that Hershey dramatically
underestimated the effort required to install and customize six SAP modules
(finance, purchasing, materials management, warehousing, order processing
and billing.)
http://www.intelligententerprise.com/showArticle.jhtml?articleID=1643011
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FoxMeyer Drug

The ultimate cautionary tale for any IT manager about to pull the trigger on
a new ERP implementation.

Following an SAP R/3 implementation in the mid-to late 1990s, the
company’s bankruptcy trustees filed a $500 million lawsuit in 1998 against
SAP, and another $500 million suit against co-implementer Anderson
Consulting, claiming the companies’ software and installation efforts had
contributed to the drug company’s demise.

On June 23, 2004, SAP reached a settlement agreement with FoxMeyer
pursuant to which SAP was required to pay a specified amount.
http://www.cio.com/special-reports/horror/erp

Whirlpool, Dow Chemical, Boeing, Dell Computer and Waste Management

In a January 2000 article in CFO magazine titled Blaming ERP by Andrew
Osterland (http://www.cfo.com/article.cfm/2987370), reference was made to
the ongoing struggles associated with SAP implementations and “to a lesser
extent,” as the story states, “competing products like those from PeopleSoft,
Oracle, Baan, and J.D. Edwards.”

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Referencing the Hershey nightmare, Osterland wrote,

“A week after Hershey’s disappointment, Whirlpool, a leading
manufacturer of household appliances, announced similar though less
severe problems with its SAP implementation. In fact, the two
companies are just the latest additions to a long list of companies that
include Dow Chemical, Boeing, Dell Computer, Apple Computer, and
Waste Management that have struggled in varying degrees with ERP
projects.”

The Origins of a Failed Initiative?
As indicated earlier, most purchasing departments inherit their software as
an adjunct downstream byproduct of either an original Finance (ERP) or IT-
centric initiative.

This has usually meant that their input has been relegated to the realm of the
afterthought versus providing decisive and proactive input when it matters
the most – prior to an actual decision being made.

Unless this “hierarchical” practice is changed, the majority of organizations
will end up banking on the SOA train linking disparate and inefficient
applications to deliver results in the emerging decentralized world of
procurement. Once again refer to the purported challenges faced by the
City of Houston in terms of its project, or those of Hershey Foods as a point
of reference.

Situations such as these demonstrate that the actual software itself (or in the
case of an upgrade from a pre-existing module) will have little relevance on
the success or failure of a program. The Commonwealth of Virginia’s eVA
system is a case in point.

In my October 23, 2007 post on the Procurement Insights Blog titled Yes
Virginia Revisited! Why some e-procurement initiatives succeed and others
don’t! (Note: this article also appeared in my regular column in Summit
Magazine - http://www.summitconnects.com/index.htm), I concluded that
stakeholder buy-in and the ultimate success of the program was not

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determined by the technological platform that was pursued and ultimately
selected. Instead, success was directly linked to the proper alignment of
technology with the way in which the organization operated in the real-
world.

Along the lines of Dale Vile’s suggestion that failures such as the ones
highlighted in this study, are directly linked to the flawed management of
the implementation process, I would take it a step further by stating that a
lack of collaboration between key stakeholders is where the success or
failure of an initiative originates.

Reversing the Trend?

It is not surprising that based on the persistent and some would suggest
steadily increasing number of ERP project failures, a methodology centered
on improving SAP implementations in the hopes of improving an
organization’s chance for success would exist.

Referred to as the SAP Gate Methodology (Appendix E), its creation was
driven by the “horror stories” everyone has heard regarding cost overruns
on SAP programs.

The following is an excerpt from that document including a brief outline of
the corresponding “Gates”

While there are a few factors which are outside the control of the program
managers’ (e.g. business change, funding withdrawn) the majority of the
responsibility lies at their door.

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From the program manager’s viewpoint it is essential to get early warning
that things are starting to slip. One of the quickest ways to lose your job is
to surprise your board 4 weeks from go-live with the message that the
program is 6 months late.

One of the best ways to get this early warning is through implementing a
gate methodology which forces a structured review of the program at pre-
defined checkpoints along the way. In essence you build gates at the exit
points of major phases of the program. Naturally these are also the
entrance points to the next major phase.

Let’s assume that you have five major phases as follows:

Scope and Plan, Design, Build, Test, Go-Live.

You would then have five major gates as well – each positioned at the exit
point of the five phases:

Gate 1 – Exit Scope and Plan
Gate 2 – Exit Design
Gate 3 – Exit Build
Gate 4 – Exit Test
Gate 5 – Go-Live

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The specific criterion for each Gate is available in the complete document in
the Appendices.

While the Gate concept is certainly creative, it is still based upon the
premise of working within the flawed confines of a traditional enterprise-
based project – admittedly a situation for which there may be no alternative
or opportunity to change.

Therefore, under the best circumstances it represents a methodology for
potentially reducing what will still turn out to be an unnecessarily expensive
and time consuming exercise which according to industry reports, is not
likely to reflect the way in which purchasing departments actually operate in
the real-world.

That said what is the alternative?

A Beacon of what is Possible?
In early October, I sat on a panel which reviewed e-procurement practice in
the public sector. Of the many topics that were presented for discussion, the
conversation surrounding stakeholder collaboration was by far the most
interesting and telling.

Responding to a question from the audience regarding the Government of
Canada’s (GoC) strategy for procurement reform, a comparison between the
success of the Commonwealth of Virginia’s eVA program and the GoC’s
Way Forward’s continuing struggles ensued. This of course shed some
much needed light on what ultimately determines the success or failure of a
public sector initiative. Interestingly enough, the respective outcomes
weren’t directly linked to the software that was implemented.

After providing an overview of the shared services or “one enterprise”
approach that is the hallmark of every ERP/IT-centric program, a panel
member from Virginia disclosed that the Commonwealth’s procurement
reform initiative had similar beginnings.

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Specifically, the Commonwealth’s original approach to driving procurement
reform was to establish a single standard across the board. This is probably
the reason why Way Forward proponents from the GoC had initially made
reference to eVA as a model they were going to emulate. However, the
Commonwealth’s thought leadership soon realized that the degree of
stakeholder resistance at the department or agency level towards what can
be referred to as a “monolithic undertaking” in which centralized control (or
the illusion thereof) is the driving force was untenable.

Developed outside of the framework of an existing Finance (ERP)-centric
strategy (an extremely important point of consideration), leadership
recognition of the fact that government is “not just a single business but is
actually comprised of many different lines of business,” was a crucial first
step towards what eventually became a highly successful program.

Through the acknowledgement that “government goes beyond a mere org
chart,” as the Virginia panel member stressed, enabled senior management
to both actively seek and ultimately understand the “special needs, special
rules and special challenges associated with the procurement practice of
each entity.”

Beside the recognition of the inherent flaws associated with a shared
services approach in which compatibility with an ERP platform is the
central consideration, the Virginia team had the courage and determination
to change course. As a result,

the Commonwealth avoided the trap of eVA becoming a software (IT)
project (along with the requirement for a Gate methodology), and shifted
emphasis from an exercise in ERP compliance and cost justification to one
of process understanding and refinement.

Now I do not want to mislead you into thinking that the Commonwealth did
not experience a certain degree of pushback from a variety of stakeholders.
The key differentiator however was that being unencumbered by ERP-
driven objectives, senior management focused on understanding stakeholder
concerns which enabled them to take the appropriate course of action to
remove barriers of resistance relating to their proposed strategy.

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As stated earlier, it is not the intent of this paper to take a position in terms
of whether or not a public sector organization should pursue a strategy
centered on an SAP-based solution. Dependent of the feedback that is
received from the case references in this study (both the good and the bad)
an organization may very well choose to move forward with the Vendor’s
application (or upgrade).

However, it should be recognized that the key to a successful program is not
dependent on the Vendor’s product - although I would be remiss if I did not
stress the importance of investigating opportunities to utilize the emerging
Software as a Solution (SaaS) pricing models or low-cost trial licensing
programs such as the one SAP offers – but is instead based on a program
which is capable of adapting to the processes that define its practice.

The benefits of taking this approach are well documented, with the eVA
framework acting as a beacon for other public sector organizations.

Once again it is important to note that the Commonwealth of Virginia’s
senior management truly believes that they would have been equally
successful with the product offering from any other vendor. The difference
with Ariba is that they were willing to base their remuneration under a SaaS
model – which at the time (2001) was not widely known.

SaaS, or On-Demand as it was originally called, was a relatively new
concept in 2001 whereby organizations would pay a “transaction” fee for
using the application versus making the usually significant and ongoing
investment in owning or licensing an enterprise solution.

Under SaaS, the vendor would absorb the lion’s share of the implementation
costs as well as the ongoing responsibility and expense of maintaining the
viability of the product including the introduction of upgrades (say good-
bye to costly maintenance fees). In turn the vendor would receive (usually
under a long-term agreement) transaction fees based on a percentage of the
total throughput – similar in concept to an Automated Banking Machine
(ABM) fee.

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The benefit under this model is that the vendor (Ariba) was motivated to
have the application up and running within the shortest period of time
possible. This meant that they were more “sensitive” to the true operational
requirements of the customer, which in turn resulted in a highly productive
outcome.

Like Deeds, Results Speak!
While initiatives such as the GoC’s Way Forward program struggle to gain
traction, it often seems as if the greatest effort with most programs is
expended on selling and enforcing compliance with the “new” direction.

By changing the methodology to one in which process understanding and
refinement were the cornerstones of their program, Virginia’s eVA has
consistently demonstrated strong growth and an increased level of
stakeholder acceptance that most public sector organizations can only dream
about.

There are several hard indicators or markers that confirm the veracity of the
Commonwealth’s approach including:

 An increase from 1% of the Commonwealth’s total $3.5 billion spend
being processed through the system in 2001 to over 80% in 2007

 An increase in the number of registered suppliers from 20,000 in
2001 to 34,000 in 2007

 An increase in the distribution of Commonwealth contract awards to
suppliers from 23% in 2001 to more than 40% of the total supply base
in 2007

Each of these results provides a clear indication of a dynamic and
productive supply practice that has consistently delivered savings to both
the Commonwealth and the taxpayers that support its infrastructure.

21


Referencing the same metrics, what would a similar assessment on the part
of SAP public sector clients reveal? Even more important, what
incremental and quantifiable improvements would be realized with the
introduction of a SAP Procurement for Public Sector (PPS) module?

One point of reference that may help to answer this question is the reported
success of the Canada Post SAP program. Like Virginia, Canada Post (CP)
had struggled with previous initiatives. Recently, seven employees from CP
(Buyers through to Directors) attended my Changing Face of Procurement
Conference in Ottawa. During the 2-Day session these individuals indicated
that based on past experience, rather than relying on the software vendor,
CP took control of the program from the beginning. This included the
utilization of a collaborative process strategy, in which stakeholders from
areas of the CP operation that would be impacted by the new program were
actively engaged in its development and implementation.

While the CP team operated within an implementation framework which
had been provided by a consultant (in this case Accenture), the defining
element of their program was that they took full ownership and
responsibility for its success. (Note: later this spring, a case study of the
Canada Post program will be published.)

The Microsoft Connection
I recently wrote an article on the purported acquisition of SAP by Microsoft.
This is not an entirely new story in that Microsoft had made a play for SAP
in the past (2004). And without going into all the machinations surrounding
such an occurrence from a business perspective, what was both interesting
and applicable to this study is the impact of what was originally called the
Mendocino project (Appendix F).

Now available under the Duet brand, this collaborative interface between
the two companies’ products (which was developed outside of the Merger
and Acquisition talks) might actually prove to be somewhat beneficial in
terms of an organization’s inclination towards an SAP-based initiative.

22


Recognizing that adoption or end-user compliance is one of the main
barriers to a successful program, the ability for project champions to
leverage user comfort with known applications such as Excel to access
certain functions within the SAP architecture could stimulate stakeholder
buy-in, at least internally.

By promoting the utilization of SAP through a familiar, easy-to-use interface
the overall level of possible resistance may diminish to the point of making
the SAP PPS offering more viable.

The key of course will be the degree of dynamic connectivity that Duet
offers between the MS software and the SAP application relative to an
organization’s procurement practice. Given that one of the many benefits of
Duet being advocated by Microsoft and SAP, is the purported short
implementation timelines and lower corresponding costs means that further
investigation would seem warranted.

Certainly the Microsoft SharePoint Portal Server success that was reported
in a June 2003 article demonstrate that Duet’s foundation is reasonably
sound, at least from a feasibility standpoint.

Titled School District Provides Web-base Access to SAP R/3 Financial Data
with SharePoint Portal Server, the article stated,

“When Seattle Public Schools needed to provide senior management
with self-service access to data contained in its SAP R/3 financial
system, the school district turned to Microsoft SharePoint Portal
Server. In less than two weeks, the district implemented a solution that
uses SharePoint Portal Server and a SharePoint plug-in from ERP-
Link to extract reports from SAP and present them to users through an
intuitive Web-based interface. Taking this approach has enabled
Seattle Public Schools to avoid purchasing SAP desktop licenses for
users who only need to view data and to reduce training costs by
eliminating the need to teach so many extra people how to use the SAP
desktop client.”

23


If the Duet offering extends this capacity beyond the realm of static data
access and retrieval to one in which a dynamic, real-world interchange
between diverse stakeholders can be easily facilitated and incorporated into
the procurement process, then they are on the threshold of major
breakthrough.

Closing Summary
Through this study, we were able to determine that the PPS offering seems
to represent an exercise in re-branding in which product enhancements or
modifications have come about as a result of evolutionary experience versus
an actual technological breakthrough.

Specifically, product improvements would likely be based upon SAP public
sector end-user experience and feedback. This being the case, the success
experienced by similar public sector organizations would go a long way
toward validating the decision to pursue a PPS strategy. (Note: in early
January 2008 I received a call from a senior manager at King County in
Washington indicating that after approximately 2 to 3 years and $38 million,
the County’s SAP initiative “blew up” creating a political maelstrom. What
is particularly interesting is that SAP used King County as a reference
account in December 2007.)

That said overall market experience within the private sector (i.e. Hershey,
Hewlett-Packard etc.) should not be discounted in that it is also a reliable
indicator of future success as it will identify the potential roadblocks or
obstacles these organizations faced with their programs.

To assist with the assessment process, I have included a number of
additional case references for which the program details (via URL link) are
available in the Appendices (Appendix G). It is strongly recommended that
a member of any proposed project team be assigned to follow-up on these as
well as the programs that have been referenced in this report’s main text.

I would also suggest that if your organization is not already a member, it
look at a possible America’s SAP Users Group (ASUG) membership.
While the venue may be somewhat slanted in favor of SAP (it is difficult

24


not to at least try and be positive about a product in which a significant
investment has already been made) ASUG will nonetheless provide ready
access to other users as well as important information that may prove
beneficial in the ultimate decision to pursue the PPS option.

In order to gain a “grassroots” perspective from an open community
standpoint, it would also be worthwhile to check out the various Blogs and
Social Networks as they will likely provide a somewhat different
assessment of the SAP experience.
However, given the absence of a moderator, it is particularly important to
remember to be careful in terms of filtering the information that is received
as you will want to separate personal opinion and “questionable facts” from
truly useful information.

As previously stressed, the application that is ultimately selected has very
little to do with the success of any initiative, let alone an SAP-based
program. Stakeholder response and acceptance are however critical
elements. This means that a failure to effectively engage key stakeholders
in a meaningful and productive way, ideally before a platform decision has
been made should be the top priority.

Following the lead of the Commonwealth of Virginia and Canada Post, I
would recommend that discussion forums with essential stakeholders be
scheduled, to collaborate on the construction of a Results Objective Table
(Example B).

Through this exercise valuable insight will be gained regarding the mindset
of those individuals for which the program has supposedly been designed
(or will be designed) to assist.

25


Example B

Economical Technological User Suppliers

Low Cost of Ease of Ease of Use Ease of Use
Ownership Integration with (Training &
Back-End ERP Support)

Good Budget Reliability Increased Non-Invasive
Fit (Responsiveness) Efficiency Technology

Achieve
Fast ROI Minimal Support Performance Convenience
(Productivity) Requirement Objectives and Speed
(Support) (Expedited
Delivery)
Quantifiable
Savings Re: Standardization Reliability Business
Best Value Intelligence
(Cost)*

Flexibility Best Real World Maintain or
“Value” Visibility Increase
Revenue

Standardization Enhanced Non-
Supplier Adversarial
Engagement

© Hansen Consulting and Seminars Inc.

26


In closing, it is our intention to provide both an informative and insightful
lens through which the challenges and opportunities associated with an
SAP-based public sector program can be objectively viewed. In reality,
many of the concepts and methodologies presented in this paper can be
easily adapted to any environment regardless of current vendor affiliation.

By providing a simultaneously broad yet focused assessment of the factors
that can and will influence the success of a public sector initiative we
believe that this objective has been met. We of course welcome any
feedback as well as questions.

27


About the Author
Jon W Hansen has been generating substantial savings for companies since
he entered the high technology sector in 1983. Featured on CBC’s Venture
program for his innovative Procurement Programs Jon continued his
innovation as President of Parts Logistics Management Corp. (PLM)
between 1997 and 2002. He sold PLM in 2001. He has also been honored
as an Ottawa finalist for the Ernst & Young Entrepreneur of the Year Award
in 2004 and 2005.

Recognized as a leading North America Authority on improving supply
chain management Jon is often retained by organizations such as the
Purchasing Management Association of Canada (PMAC), the National
Institute of Governmental Purchasing (NIGP) and the National Association
of Educational Procurement (NAEP) to provide either a 1-Day orientation
seminar or 2-Day accredited course based on his award winning Changing
Face of Procurement Conference Series. This 4-Part Series has successfully
provided both public and private sector organizations with the insights they
have needed to effectively evaluate the viability of their e-procurement
strategy (including RFP creation) or alternatively, to drive greater value
from an existing e-procurement program.

Linked In Profile: http://www.linkedin.com/in/jwhansen

© Hansen Consulting & Seminars Inc.

28


SAP Procurement for
Public Sector
White Paper
Appendices

29


APPENDIX A
(Arapahoe County – Reproduced from SAP Reference Brochure)

Arapahoe County, Colorado

With a population of more than 520,000, Arapahoe County’s 806 square
miles encompass nine school districts, 163 local improvement and service
districts, and 14 incorporated communities – including Littleton, its county
seat. Through efficient operations, Arapahoe County maintains a municipal
operating budget of just $293 million and a staff of 1,800. As a result, the
county boasts one of the lowest property tax rates in the Denver
metropolitan area.

Key Challenges
• Numerous separate, stand-alone financial systems
• Lack of visibility into financial operations
• Outdated information – six to eight weeks old
• Difficulty complying with new government reporting
regulations
• Inefficient procure-to-payment process
• Multiple reconciliations required to keep information in sync
• No vendor payment discounts taken
Why SAP Was Selected
• Best practices for state and local governments
• Strong customer references
• Positive customer site visits
• Low risk – stable company
• Significant investments in R & D
• Flexible choice of databases
• Excellent audit trail provided by SAP® application

Implementation Best Practices

• Strong management sponsorship
• Low integration requirements
• Low-cost infrastructure
• Minimal customizations

30


Low Total Cost of Ownership

• Nine-month implementation cycle
• On-time, on-budget implementation
• Ongoing support cost 50% to 66% lower than average

Financial and Strategic Benefits
• Elimination of redundant financial systems
• Improved timeliness and accuracy of key reports
• Improved vendor relations and negotiating power
• Improved visibility into information
• Compliance with the latest government reporting
requirements using automated reports directly from the
system – the first county in the United States to do so
• More staff time for value-added tasks
• Increased vendor payment discounts taken

Operational Benefits: Impact on Key Performance Indicators
• Purchase order cycle time reduced 80%
• Age of information in monthly reports reduced from six to eight weeks to
real time
• Full-time equivalents in accounts payable and purchasing reduced 50%
• Financial close process time (annually) reduced by 150 hours

Eliminating Multiple Financial Systems

With just 1,800 employees, Arapahoe County had little need for multiple
financial systems. But that was the legacy of a mainframe-based system and
numerous “shadow” systems – including individual Microsoft Excel
spreadsheets and Microsoft Access databases – assembled over a period of
decades.

Because those disparate systems couldn’t communicate with one another,
answers to simple inquiries could take weeks. Purchase orders for even
small expenditures took a week to process. Vendor payments were often
late, causing project delays. Monthly reports took six to eight weeks to

31


produce and print – by then already out of date. The lack of visibility made it
difficult for officials to manage already constrained budgets, since it was
virtually impossible to know how much money was currently available.

An Investment in the Future

In 2001, facing new government accounting and reporting standards as well
as criticism from managers for inadequate reporting, the county decided to
replace its antiquated software. After a careful review that included
applications from PeopleSoft and JD Edwards, they chose an SAP®
financial and procurement application.

“SAP offered a powerful solution that was proven in other municipalities
around the country,” says Kennedy. “We could see it had the functions to
take our county into the future.”

To conserve limited resources, Arapahoe County kept its SAP
implementation very straightforward, with no customizations. The “plain
vanilla” implementation was completed on time and on budget in just nine
months.

Lower Costs and Smoother Operations

Since implementing its SAP application, Arapahoe County has experienced
dramatic improvements in its total cost of ownership. Even more dramatic
are improvements in overall operations. County officials now enjoy online,
real-time visibility into financial, purchasing, and inventory reports – as well
as transactional information.

Purchase orders are now entered and expedited electronically in a matter of
hours, not weeks – improving vendor relations and allowing greater price
negotiation. Payments, too, are released far more quickly, allowing the
county to keep projects running more
smoothly and take advantage of vendor payment discounts. Staff members
no longer need to reconcile various financial systems, giving them much
more time for value-added tasks that leverage their professional skills.

32


The county’s auditors have praised the system’s detailed audit trail, ease of
use, and ability to drill down to source documents online – features that save
significant time and money for both the auditors and Arapahoe staff.
According to Kennedy, Arapahoe was the first county in the United States to
comply with the latest government reporting requirements using automated
reports generated directly from its software system. At the same time, the
county’s close process, enabled by SAP software, saves an estimated 150
labor hours each year. The net result is a significant savings for the county’s
taxpayers – along with a considerable improvement in the overall quality of
county services.

Looking ahead, Arapahoe County plans to implement a number of other
SAP applications and is considering an upgrade. “We’ve seen the power of
SAP applications,” Kennedy says. “And we’re very impressed.”

www.sap.com/contactsap

50 080 245 (06/07) Printed in USA.

© 2006 by SAP AG. All rights reserved. SAP, R/3, mySAP, mySAP.com,
xApps, xApp, SAP NetWeaver, 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. Data contained in this document
serves informational purposes only. National product specifications may
vary. Printed on environmentally friendly paper. These materials are subject
to change without notice. These materials are provided by SAP AG and its
affiliated companies (“SAP Group”) for informational purposes only,
without representation or warranty of any kind, and SAP Group shall not be
liable for errors or omissions with respect to the materials. The only
warranties for SAP Group products and services are those that are set forth
in the express warranty statements accompanying such products and
services, if any. Nothing herein should be construed as constituting an
additional warranty.

33


APPENDIX B
(Article)

Extending the Enterprise
SAP: Are its customers happy?
By Quocirca

Published: Thursday 16 September 2004

SAP's financials are solid but are its customers satisfied? Only through
keeping them happy will the European software giant be able to enjoy
continued success. Quocirca's Dale Vile goes to the source to find out.

This week SAP took some knocks in the press after one of its major
customers, MFI, cited problems with an SAP supply chain implementation
as a reason for poorer than expected financial results. Such stories occur
from time to time and, not surprisingly, the media laps them up.

For every horror story, however, there are many success stories that we
never hear about. And since all of these projects are based on the same
family of software, common sense tells us that other factors - such as the
way these implementation projects are managed - are the most likely causes
of failure.

Despite these knocks, SAP continues to show strength with regard to
financial results and market positioning - as was highlighted in silicon.com's
recent vendor dossier.

But, as the saying goes, past performance is not always a reliable indicator
of future success. Siebel Systems, for example, saw its skyward growth turn
into a nose dive over the course of a relatively short period of time.

For the past three years, Quocirca has monitored SAP's health by
interviewing over 100 of the largest SAP customers across Europe on a six-
monthly basis. We ask the customers about their investment plans and the
rationale behind them, as we find this is a good way of assessing the future
potential of a vendor.

34


This research has consistently revealed a high degree of commitment to SAP
amongst its customers. Unlike Siebel, an investment in SAP is viewed as a
strategic rather than a tactical decision by most customers. We have
observed that SAP customers continue to broaden their use of SAP year on
year - not pouring money into out-of-control open-ended projects but into
structured, incremental rollouts.

Of the 111 SAP customers Quocirca interviewed in June 2004, around three-
quarters told us their level of ongoing investment would either continue or
increase over the next two years. Less than 15 per cent said it would
decrease, with the remainder not being sure. This was true of investment
both at the overall programme level (including services) and on software
licences, underlining a healthy outlook for SAP in terms of software
revenues from its customer base.

The reasons given for ongoing investment included bringing new
subsidiaries or departments online and continuing rollouts to users in
existing business areas as part of a phased implementation programme.
Increasing deployment to 'occasional' users was particularly prominent. The
rationale given was that allowing more employees to participate directly in
automated business processes leads to additional operational efficiency gains
and more accurate business visibility - two of the most common reasons for
investing in SAP in the first place. In line with this theme, the most common
driver for additional investment was increased access by field users via
mobile technology.

Looking at the challenges faced by SAP users over the years, integration
between SAP and other systems has been a continuing theme. Traditionally,
SAP systems have published proprietary interfaces that everything around
them would need to adopt in order to communicate. This was to a degree a
limiting factor on growth within existing accounts and certainly an Achilles'
heel often exploited by competitors in bids for new business.

As a result, SAP has been investing heavily in R&D to move its solutions
onto open standards and a more service-oriented footing. The NetWeaver
platform, which underpins the latest SAP offerings and allows easier
integration with J2EE and .Net environments than previous products, is the
result of this effort.

35


NetWeaver is probably the single most significant product-related
development to come out of SAP in recent times and customers have
responded well to it. More than 70 per cent of the customers we surveyed
regard NetWeaver-related benefits as compelling or significant in terms of
operational cost reduction - particularly in relation to building and
maintaining interfaces to other systems. Almost 65 per cent said they also
expect NetWeaver to significantly reduce the cost related to extending
and/or modifying SAP functionality.

The findings of this research confirm that SAP is in the enviable position of
having a strategic relationship with most of its customers. In addition, its
customers acknowledge SAP is listening to them and making the right
moves to make their lives as easy as possible.

With such a firm position in its customer base and Oracle's antics with
PeopleSoft continuing to undermine the credibility of the competition, the
future does indeed look promising for the European software giant.

For more information on the research outlined in this article, please contact
Quocirca's Dale Vile at dale.vile@quocirca.com

This story was printed from silicon.com, located at http://www.silicon.com/

Story URL:
http://www.silicon.com/research/specialreports/enterprise/0,3800003425,39
124017,00.htm

Related Articles:

MFI gets caught in SAP trap

Inventory woes lead to profit warning

By John Oates → More by this author

Published Tuesday 14th September 2004 11:19 GMT

Story URL:
http://www.theregister.co.uk/2004/09/14/mfi_sap_problems/

36


APPENDIX C
(Case Reference)

HP users decry Itanium, SAP issues and bad English
Execs try to respond
By Ashlee Vance in Chicago → More by this author
Published Wednesday 18th August 2004 16:40 GMT

The Shipping News
But the biggest complaint against HP by far came as a result of its poor
shipping practices. Many of these grumbles were covered here
(http://www.theregister.com/2004/08/17/hp_ordersystem_stilldown/), but
one user, who did not make that story, stood out.

Bob Lewandowski, of ASAP Software in Illinois, was outraged by HP
blaming a difficult SAP supply-chain software rollout for recent financial
losses and shipping problems.

"I can't get good delivery dates," he said. "It would help me if you would
update channel partners so that we can get realistic delivery times. My guys
come back and say, "Well, we can get IBM products but not HP products.'"

"As a shareholder as well as a customer, it's hard for me to say there is a lot
of benefit in keeping (customers) as all HP shops. It's hard for me to
swallow, as a shareholder, that HP makes us customers pay for a
consolidation of SAP that is supposed to save costs."

Rather ironically, HP CEO Carly Fiorina was just bragging about HP's
wonderful supply chain expertise back at the company's June meeting with
analysts.

"Fiorina said that HP would bring the same focus on execution to selling
products and services in this new technology era, as it did with the HP-
Compaq merger," according to this report
(http://www.midrangeserver.com/tlb/tlb062204-story03.html). "In fact, it is

37


the merger that made HP aware that the lessons it learned in streamlining
one of the most complex manufacturing, supply chain, and IT operations in
the world made it realize it had to change not only what it sells but how it
sells. When customers buy into HP's Adaptive Enterprise approach to IT,
what they are buying is a piece of that HP merger experience."

After HP lost $400m in revenue from the failed SAP rollout, customers may
well move as far away from the HP merger experience as possible.

As RedMonk analyst James Governor puts it
(http://www.redmonk.com/jgovernor/archives/000070.html), "HP is trying
to build an application management business to rival IBMs. What better case
study in proving your R/3 and Netweaver capability than a good old dogfood
eating session - show everyone how to merge two SAP systems and they
will come to you the next time they make a merger or acquisition and want
to do the same thing. Who would go to HP now for a large scale SAP
integration? The CEO just publicly said HP can't effectively manage such a
project."

"There was a time when IBM's sales force had some issues with a Siebel
rollout. But the world at large never heard a thing. IBM wasn't about to
criticize its most important CRM partner in public. Well HP just did exactly
that." ®

Story URL:
http://www.theregister.co.uk/2004/08/18/hpworld_users_react/page2.html

38


APPENDIX D
(Case Reference)

CxO Extra
Cadbury IT glitch takes £12m chunk out of profits
Can you ever have too much chocolate?
By Andy McCue

Published: Thursday 8 June 2006

UK confectionary giant Cadbury Trebor Bassett (CTB) has taken a £12m hit
on its profits after IT problems caused too many chocolate bars to be
produced.

CTB was left with a glut of chocolate products at the start of the year, after
the rollout of a new SAP-based enterprise resource planning (ERP) system
led to an excess of chocolate bars building up at the end of 2005.

The build-up of chocolate bars caused by the IT problems was then
exacerbated by a slow start to the UK confectionary market in 2006, when
many people's New Year diets kick in after the over-indulgence of the
festive season.

As a result CTB was forced to put hefty discounts on its product lines -
which include Crunchie, Double Decker and Cadbury's bars - to clear the
high levels of inventory that had built up. This led to a total hit of £32m on
CTB's first quarter financial figures, £12m of which the company said was
directly related to the IT problems.

Todd Stitzer, CEO of CTB's global parent company Cadbury Schweppes,
cited "stock issues related to the implementation of new IT systems", adding
that it had contributed to a challenging start to the year for the confectionery
and drinks group's European region.

39


The new UK computer system is part of a five-year IT transformation
project called Probe to integrate the Cadbury Schweppes' supply chain,
purchasing, manufacturing, distribution, sales and marketing systems on a
global, £200m SAP-based ERP platform.

Cadbury Schweppes is aiming for £500m efficiency savings from the Probe
project but rollout has been far from smooth and the project was beset by
problems and delays when it was first introduced in Australia in 2002.

The Probe ERP system was finally launched in the UK at CTB in July last
year. A spokeswoman for CTB said the IT problems relating to the UK
rollout have now been resolved.

Story URL:
http://www.silicon.com/cxoextra/0,3800005416,39159392,00.htm

Related Article Comment/Post:
Alastair Sorbie, CEO, IFS

Location: High Wycombe

Occupation: CEO

Comment

Cadbury Schweppes, a SAP MFI re-run
The £12m product surplus at Cadbury Schweppes caused by a bad SAP
supply chain strikes me of MFI’s SAP disaster two years ago. It just goes to
show that what some regard as a safe choice can cost you your share price,
your results, and even your job. The days of the global wall-to-wall five-year
rollout are over, and businesses can only benefit as a result.

SAP needs to learn from its customers, enable them to become more agile,
and integrate their business processes. In the current economic climate you
need to be able to respond quickly to change, and not remain shackled by
unresponsive systems that can’t react immediately to changes in supply and
demand.

40


SAP’s recent attempts to jump on the SOA bandwagon show that even the
software giant itself is aware that it needs to spend time and resource on
breaking down those monolithic apps.

Comment/Post URL:
http://www.silicon.com/cxoextra/0,3800005418,39159392,00.htm?PROCESS=
show&ID=20074231&AT=39159392

41


APPENDIX E
(Gate Methodology Reference)

Gate Methodology
Have you
tried Or, get the control back!
our new
SAP Everyone has heard the horror stories of cost
Blog overruns on SAP programmes. While there are a
Aggregator few factors which are outside the control of the
yet? programme managers (e.g. business change,
funding withdrawn) the majority of the
responsibility lies at their door.

From the programme managers viewpoint it is
essential to get early warning that things are
starting to slip. One of the quickest way to lose
your job is to surprise your board 4 weeks from go-
live with the message that the programme is 6
months late.

One of the best ways to get this early warning is
through implementing a gate methodology which
forces a structured review of the programme at pre-
defined checkpoints along the way. In essence you
build gates at the exit points of the major phases of
the programme. Naturally these are also the
entrance points to the next major phase.

Let's assume that you have five major phases as
follows: Scope & Plan, Design, Build, Test, Go-
Live. You would then have five major gates as well
- each positioned at the exit point of the five
phases: Gate 1 - Exit Scope & Plan, Gate 2 - Exit
Design, Gate 3 - Exit Build, Gate 4 - Exit Test and
Gate 5 - Go-Live. Potential criteria for each of
these gates could be as follows:

42


Gate 1 - Exit Scope & Plan

 Is there a scope document, and does it cover
all aspects of scope including functionality
requirements, modules to be implemented,
geography, gaps, interfaces, organisational
 aspects, technical aspects, data conversion
etc
 Is there a plan, and does it include detailed
tasks (nothing longer than two weeks), with
resource names mapped to tasks, and is it
resource balanced (no simple task)
 Is the design team mobilised
 Is there a design authority in place, and is the
change control process agreed
 Is the sandbox SAP system ready, and is
there a client strategy document agreed

Gate 2 - Exit Design

 Has the design been documented, including
SAP transactions identified, and signed off
by the business? A design walkthrough is
strongly recommended.
 Have critical areas of the design (depending
on your business) been prototyped in the
sandbox
 Have all gaps and interfaces been identified,
specified and estimated
 Has the data required been identified and
mapped to legacy (ignore this at your peril),
and have the data conversion programmes
been identified and specified at a high level
 Have the roles required been identified
 Have control requirements been identified
 Has the plan been updated, and (if necessary)
the scope document updated

43


Gate 3 - Exit Build

 Has the system been fully built and unit
tested in the development system (not the
sandbox), and signed off by the business. A
config walkthrough is strongly
recommended.
 Have the gaps and interfaces been fully built
and unit tested (this is a grey area)
 Have the data conversion programmes been
built and unit tested (this is not a grey area)
 Has the system gone through any scenario-
based validation (a step up from unit
testing)? It is probably best to include this in
the Design phase since you cannot be fully
satisfied your requirements have been met
until you run business scenarios through the
system.

 Has the configuration been fully
documented, and the design documentation
updated (if necessary)
 Have the roles been built
 Have the control requirements been built
 Has the plan been updated, and (if necessary)
the scope document updated

Gate 4 - Exit Test

 Has the system been fully tested in the test
system (not the development system), and
signed off by the business. A test
walkthrough is strongly recommended.
 Have the gaps, interfaces and data
conversion programmes been fully tested and
signed off
 Have the user procedures been documented
and tested Has the training material been

44


completed and tested
 Has the system been tested by running
converted data through it (warning: expect to
do this four or five times before it works
properly)
 Have all critical test problems been resolved.

Gate 5 - Go-Live (done a few days prior to go-live)

 Have the users been trained
 Are the user procedures in place
 Is the user documentation in place
 Did the data conversion work
 Is the support team in place
 Is your 'cutover control room' ready, manned
24 hrs, and have detailed cutover plans in
place (this might have started already for the
data conversion)
 Have you done a trial cutover
 Do you have a contingency plan
 Everyone feeling well rested? Then push the
button!

For the programme to actually exit the gate, you
hold a gate meeting at which each team is required
to demonstrate (not only verbally claim) why the
feel that they have satisfied all the criteria. Pre-gate
meetings will probably be required about 4 weeks
out to help the teams finalise their positions.
Usually, but not always, post-gate meetings are
required where teams resolve any issues which
arose during the gate meeting itself.

Properly implemented and executed, a gate
methodology provides and excellent early warning
system and should be looked at by every project.

URL Link: http://www.thespot4sap.com/Articles/Gate%20Methodology.asp

45


APPENDIX F
(Article - Duet)

Code-named Mendocino, the solution addresses the inefficiencies and
inconsistencies inherent in the gap between desktop productivity tools and
enterprise business applications -- and the pressing need to connect
information workers with enterprise processes in the context of their
standard work environment, the Microsoft Office System.
Links
 Official website - Duet
 Press Release - Project Mendocino
 SAP and Microsoft Announce First Joint Product Designed to
Revolutionize How Information Workers Access Enterprise
Applications

This jointly designed and developed solution boosts information-worker
productivity by eliminating costly duplication of effort, the time required to
find critical corporate information, and the need for additional training.
Leveraging the openness of the .NET and Enterprise Services Architecture
infrastructures, Mendocino exposes selected business process functions and
data from mySAP ERP 2004 through Microsoft Office 2003. As a result,
information workers will be able to perform corporate-driven tasks such as
time management, budget monitoring, organization management, and leave
management through their desktops, using features such as:

 Extended application menus
 SAP-specific smart panel
 Business analytics delivered through Microsoft Excel
 Smart business documents in Microsoft Word
 Outlook synchronization between Microsoft Exchange and SAP
processes

Mendocino enables a new level of continuity between information-worker
and enterprise business applications, unifying information and processes and
dramatically simplifying the way information workers access and use
enterprise applications. The solution delivers significant benefits, including:

46


 Higher productivity -- By providing easy access to enterprise
applications, Mendocino removes the need for redundant tasks and
enables information workers to participate directly in automated
processes.

 Better decision-making -- Mendocino eliminates information
inconsistencies between desktop and enterprise applications,
providing information workers with a solid foundation for decision-
making.

 Audit traceability and transparency -- By facilitating consistent and
proper use of corporate processes, Mendocino reduces personal, ad
hoc workflows and mitigates the risk of non-compliance with
corporate workflows and policies.

 Fast user adoption -- Mendocino's familiar user interface is instantly
usable by all information workers, which leads to a higher degree of
business process automation across the organization.

Mendocino will be sold and supported by Microsoft and SAP. The product
will become available for early access to select customers in the fourth
quarter of 2005.

Article URL Link:
http://www.erpgenie.com/interfaces/mendocino.htm

Related Articles:

Cover Story
Microsoft and SAP: Bittersweet Symphony
Microsoft and SAP have a successful Duet together, but they'll be less
harmonious as they battle for ERP supremacy. Partners might be forced to
take sides.

47


March 01, 2007

by Lee Pender
http://rcpmag.com/features/article.aspx?editorialsid=693

Steve Ballmer: Microsoft Business Summit 2005
Remarks by Steve Ballmer, CEO, Microsoft Corporation
Microsoft Business Summit 2005
"Together, We Build Business"
Redmond, Washington - September 7, 2005

http://www.microsoft.com/presspass/exec/steve/2005/09-
07BusinessSummit.mspx

SAP and Microsoft Introduce Duet Software; Bringing Together the Worlds
of Productivity and Enterprise Applications

Companies tout on time delivery, early customer adoption and new
business scenarios for Duet, formerly known as “Project Mendocino.”

http://www.itweb.co.za/office/sap/0605040812.htm

School District Provides Web-based Access to SAP R/3 Financial
Data with SharePoint Portal Server
(Published: June 2003)

When Seattle Public Schools needed to provide senior management with
self-service access to data contained in its SAP R/3 financial system, the
school district turned to Microsoft SharePoint Portal Server. In less than two
weeks, the district implemented a solution that uses SharePoint Portal Server
and a SharePoint plug-in from ERP-Link to extract reports from SAP and
present them to users through an intuitive Web-based interface. Taking this
approach has enabled Seattle Public Schools to avoid purchasing SAP
desktop licenses for users who only need to view data and to reduce training
costs by eliminating the need to teach so many extra people how to use the
SAP desktop client.

48


APPENDIX G
(Case Study Index – Additional Case References)

Erie County works with IBM for enterprise-wide business
transformation

IBM Business Consulting Services worked with Erie County, the second
largest county in the state of New York, to implement a SAP project,
replacing decades-old systems and restructuring core processes while cutting
operating costs and improving system performance.
Published date: 13-Dec-2004

Erie County leads the way to shared citizen services with SAP and
IBM

Erie County engaged IBM Global Business Services to review its full
systems architecture, including the apparently fixed business processes it
was designed to serve. IBM helped Erie County to initiate a business process
and IT transformation that has put it at the top of the...
Published date: 30-May-2006
http://www-01.ibm.com/software/success/cssdb.nsf/CS/STRD-
6Q9H83?OpenDocument&Site=gicss67sap&cty=en_us

Nova Scotia Liquor Corporation builds a robust retail environment
with IBM and SAP

Working with IBM Global Business Services, the NSLC decided to adopt
industry best practices, and reengineered both its business processes and its
IT landscape to fit around a new SAP for Retail solution. This business
transformation was achieved within 12 months – on time...
Published date: 09-Oct-2007
http://www-01.ibm.com/software/success/cssdb.nsf/CS/STRD-
77TDNW?OpenDocument&Site=

49


Successful modernisation of Council Services
Independent report identifies LogicaCMG helping to enable a 72
per cent Return on Investment on IT systems at London Borough
of Waltham Forest
An IT system designed to join up services across the Council and improve
customer care is literally paying for itself, according to a recent independent
report by a leading IT analyst. The new system, SAP, will save the the
Council 72% of the original cost of purchasing and installing it in its first
five years. This will be achieved through more efficient working and is
equivalent to £5.3 million.
http://www.lbwf.gov.uk/index/council/about/e-government/sap-roi-
report.htm

50

SAP: A Propensity For Failure

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