How customers benefit from an ROI model?

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Recently I asked aniljoshi, one of SAP’s subject matter experts on value management, to explain his experience of creating a business case/ ROI model for a customer. You can listen to Anil go through the points as listed below in the transcript.

In this recording, Anil has touched upon the customer challenge, symptoms, root cause and overall business impact.

• Customer’s business problem
• Rationale for investing in SAP project
• Process of creating business case/ ROI model
• Team and organizational dynamics
• Eventual outcome

About you and the topic

Hello, my name is Anil Joshi.  I am a Principal Consultant at SAP’s Business Transformation Services.    The topic I am going to talk about is how we proposed solving the customer problem via implementing a SAP driven global business transformation initiative.  This assignment entailed creating a detailed business Case/ ROI Model to get the funding approved by customer’s Executive Board.

Your Background

As I said, I am a consultant at SAP.  I have been a management consultant for a long time and have worked previously at a major consulting partner of SAP.   The example I am narrating here is that of an SAP customer who was helped by a team consisting of professionals from SAP and its service partner that I represented.

Customer Profile- Overview

The customer is a large corporation that has significant business operations worldwide

Problem:  What is the problem you solved for the customer?

Broadly the problem was already known to the customer.  The customer had several business units that operated in different locations in fairly autonomous fashion.  The company had grown through acquisitions over the years, and while most of these business units were well-managed but they also had siloed business operations driven by different systems and processes.

Symptom:  What are some of the symptoms the customer experienced that helped them identify this problem?

Let me start by saying that this customer’s business was generally effective and profitable.  However there were signs that there was a scope for improvement, especially in areas that entailed cross-business unit coordination.

For example some customer orders experienced delays in situations where the order fulfillment cycle involved more than one business units.

Other example was it took the customer long time to consolidate the operational and financial reports at the corporate level.

Causes:  What are root causes for the stated problem?

The senior management of this customer felt the root cause of this problem was that business units ran their processes that were adopted and optimized to their own individual needs.  The business units also operated on a variety of legacy and enterprise systems that got added to their infrastructure over a period of time for their specific unique business needs.

Impact:  How was the problem solved and how did it impact  the way customer conducted their business

It was determined by the customer that their company needed to embark on a business transformation and process standardization initiative, supported by one global ERP system and as few legacy systems as possible.

The customer selected SAP as the global ERP system to drive this transformation project.  This would entail process rationalization across the company, as well as migration of several business units to SAP platform.  This would require massive investments.  At the same time, the expected benefits were huge.

To assess the feasibility of this transformation initiative the customer wanted SAP/ Partner to identify the areas of process improvement as well as create a detailed business case/ ROI model to justify the proposed investment.

So the team of SAP and its service partner got together, also supported by several of customer’s professionals.  The team conducted a detailed exercise of interviewing, analyzing and identifying the areas of process rationalization, the associated KPIs, the value drivers, etc.

Then the team went about estimating the potential benefits that SAP program would realize.  The analysis was done by processes (e.g., procure-to-pay, order-to-cash, financial reporting, etc.) both at the business unit level and at corporate level.

The team also estimated costs relevant to the implementation at a fairly detailed level.  These costs considered in this analysis were not just for implementing SAP project, but all associated costs such as shared services at the corporate level.

Both the costs and benefits were then refined for synergies obtained by use of a standardized global system.

The ROI calculator and business case also considered several options for sequencing the project deployments in the most optimal and feasible way.

The resulting business case had a healthy ROI and it supported company’s growth objective as well.

At the end of this exercise, the business case and ROI model as well as a high-level plan for the transformation initiative were presented to the executive board of the customer. The executive board approved the proposal and that set the plan in motion for implementing the initiative.

Constraints:  Were there specific constraints required to achieve the solution?

Looking back, there were some initial challenges in convincing certain business units that the proposed benefits could really be attained by migrating to SAP.  Many of them believed that their operations were quite efficient, and this initiative could not improve it much more.   We overcame these challenges, by making the case for operational synergies and operational effectiveness, and supported the case by a set of logically derived numbers- both on costs and benefit sides.

Role Perspective:  Were there specific customer roles involved in ensuring success? Unique considerations for each critical role?

Another important aspect was the support from some of the senior level managers of this customer.  Their presence not only helped us with additional insight on customer’s business, but also conveyed to the business units that their top management was supporting this endeavor, which helped building consensus.

Case Examples:  Do you have specific examples, stories or studies to share that would help other companies identify similar scenarios?

Before I wrap up, I want to talk about business case/ROI fit in a bigger picture

Creating business cases/ ROI models is often one of the initial steps for global SAP programs like this described here.  The key is really making the case in a logical manner to make it convincing to the customer.  In fact I wrote a blog recently on this subject on SAP Community Network noting that building Business Case/ ROI is only one activity during the discovery phase of the Value Management lifecycle.  SAP in fact defines value management lifecycle phases as “Discovery”; “Realization”; and “Optimization”.

Service Portfolio:  Can you please identify any service utilized from SAP Service Portfolio?

SAP has experts as well as other resources and tools to support a value management exercise such as this.  SAP also has a Value Academy to train customers on value management methodology and to generate collaboration among the customer community.

Let me stop here.  And please feel free to contact me if you have any questions.  My email is anil.joshi@sap.com.