How to calculate the Business Case for a global ERP 2005 ... a Global...Upgrade & Unicode Conversion R/3 4.6b or lower ERP 2005 unicode Unicode conversion before upgrade Yes No Yes

How to calculate theBusiness Case for a globalERP 2005 upgrade

Tobias Dosch – SVP, SAP Solution Management ERPJochen Hopf – SAP Business Consulting

31. October 2006

SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 2

Enable businessinnovation whilereducing IT costsImprove workforceproductivityEnsure compliance,controls and propergovernanceNeed greater visibility,predictability andcontrol

Why Are We Here Today?

Your IT situation

?Is the timeright to invest in anUpgrade to mySAP

ERP 2005?

How to develop a global business caseHow to decide on the right upgrade scenarioWhat are exemplary business case results

Multiple R/3 systems(and non-SAP) in andacross severalregions/countriesOutdated architectureRunning and stablesystem (probably withheavy modifications)High maintenance costand limited ability toinnovate

Yourbusiness demand


Long-term FoundationNewly announced 5-year release cyclewith enhancement packagesMajor cornerstone in your overall ITstrategyERP upgrade decisionis important

Most Popular Processes*New G/LEmployee Self ServicesManager Self ServicesAdministering Employee HR dataCredit Management

Upgrade Value*87% met or exceeded ROI objectives*Performance impact company-specificMain drivers: DSO reduction, staffproductivity increase, TCO reductionStrategic value mainly perceived onflexibility and compliance

Upgrade Drivers* (in %)

Snapshot on mySAP ERP 2005

6

9

19

23

23

Technical infrastructure

Process re-design

Continuous compliance

Lower system cost

Additional functionality

* ASUG survey: 55 companies* Ramp-up feedback from >200 projects

* ASUG survey: 163 companies


Agenda

Building a business case for an upgrade

Identifying your upgrade scenarios

Calculating your business case


R/2 to ERP Evolution

Why a business case? Evolution of Value within SAP ERPSystems

NewDimension

Projectson-time andon-budget*

BenefitConcentration

Real-Time Scalability Flexibility/Platform

Concentrated DistributedConcentrated

Without business case:9%

With business case:91%

Consequence

SAP R/3

BusinessPrcess

Innovation

SAP R/2

mySAP ERP 2005

Mainframearchitecture

Client Serverarchitecture

Enterprise Servicesarchitecture

HRFI/CO

MM/PP SD

HCM

Operations

Financials

Corporate Services

Partner apps (Duet)

xApps

Manufacturing

Accounting

HR

Benefit size

Capture the entirepotential from

mySAP ERP 2005

* ASUG survey: 68 companies


Truth about Business Cases

A good business case is valuable for…Alignment between IT and business perspectives within yourorganizationShowcase for value that IT brings to the business and corporatestrategyResults are quantified and owned by line executivesCreation of ownership/adoption in the organization for systemsdecisionOpportunity to review your overall IT strategyComparison IT investment and upgrade options with each otherand against other investment optionsImplementation plan is actionable and measurable

…but only 17%* of companies have a formal businesscase for their IT Projects

* Source: Meta Group Worldwide IT Trends and Benchmark Report 2002, Gartner Total Value of Opportunity Study 2003Forrester IT Measurement is still immature 2003


Approach to Develop an Upgrade Business Case

Objective Identify value potential from an upgrade to mySAP ERP 2005

Identify currentsolution footprintIdentify businessscenarios withinsufficient systemsupport (whitespots)or where existingsystem capabilitiesare not leveragedIdentify prioritizedbusiness targets ofall LoBs and keyvalue drivers

Quantify results withControllingCalculate benefits ofsystem for next 3-5years for scenariosConsolidate tangibleand intangiblebenefits per areaValidate results withbusiness ownersCalculate NPV forgo/no-go decisionGet senior mgmtdecision

Get commitment fromsenior mgmt. tobusiness caseDetermine projectscope (systems, org.units, regions)Set up a projectorganization (IT, LoB,advisors)Decide on upgradescenarios to beinvestigatedSet up project plan

Identify most valuablefunctions included innew releaseMap delta/existingfunctionality towhitespots andbusiness targetsDetermine andprioritize improvementpotential withbusiness ownersAnalyze implemen-tation cost (IT &advisors)

BenefitAnalysis

CostAnalysis

Project SetupConsolidation& Calculationof the results

As-IsAssessment

III IVIIIa

IIIb


Case Study A: Approach for Global High-Tech Customer

Industry:High-TechGlobalEmployees:>30,000Revenues:$8-12 billion

BackgroundFocus on building business justification for upgrade to mySAP

ERP 2005Business case took six weeks to analyze business benefits.Around 50 people involved from Lines of Business (25+), IT (10),

other advisors (5+)In functional scope for this upgrade: Financials, Corporate

Services, Analytics, End-User Service Delivery, Sales & ServiceGeographic focus: Europe and shared services location centers,

Cross-check in different regions where necessaryMethodology:

– Identify business goals of each Line of Business– Identify which major new capabilities are most relevant– Benefits assessment with key users of each business process affected

(correlation capabilities-goals, prioritization)

Lines of Business responsible for realizing quantified benefits

Approach


Industry:TelecomGlobalEmployees:<5,000Revenues:$1-2 billion

BackgroundFocus on comparing upgrade optionsBusiness case took four weeks to analyze business benefitsAround 60 people involved from Lines of Business (30) mainlythrough workshops/video-conferencing, IT (20). Case preparedthrough external consultants.In Scope for this upgrade: Financials Systems and supportingapplicationsGeographic focus: All geographiesMethodology:

– Identify business goals of each Line of Business– Identify which major new capabilities and which existing capabilities

that are currently unused are most relevant– Benefits assessment with key users of each business process

affected

Lines of Business responsible for realizing quantified benefits

Approach

Case Study B: Approach for Global Financials UpgradeCase


Agenda





Objective and Scope: mySAP ERP 2005 Upgrade Scenarios

Strategic Business ImprovementFocus on functionality extension andimprovementEnablement of new and optimized businessprocesses and scenarios based on new ERPcore functionality

Functional UpgradeFocus on reduction of system complexityMaximization of SAP standard functionality byreplacing custom modifications

Technical UpgradeFocus on pure technology upgradeNo changes to used standard functionalityNo changes to system modifications

3

2

1

R/3 4.6c R/3Enterprise

mySAPERP 2004

mySAPERP 2005

SAP Releases

SAP

Stan

dard

izat

ion

Hig

hly

mod

ified

envi

ronm

ent

Lim

ited

num

ber

of m

odifi

catio

nsS

tand

ard

func

tiona

litie

sN

ewfu

nctio

nalit

ies

Starting Point

.

Target

1

2

3

Possible Upgrade ScenariosValue

Potential

Sweet spot for business case


Path: Typical Roadmap Options for SAP R/3 Customers

“INNOVATE”(Consolidated R/3

customers)

“CONSOLI-DATE”

(Distributed R/3customers)

mySAPERP 2005

side-by-side

“GROW”(Consolidated R/3

customers)R/3 mySAP

ERP 2005Upgrade

R/3

mySAPERP 2005

mySAPERP 2005

Upgrade &MergeR/3

R/3

R/3

R/3


Upgrade all instances first Merge all instances first Decision per SAP instance

Earlier access to features andbenefits of new SAP releaseDowntime during upgrade alwayseffects only one systemEarlier back in SAP mainstreammaintenance (avoiding additionalmaintenance fees)Retrofit of enhancements to SAPstandard is possible earlierProcesses are less complex

Fewer system to be upgradedStreamline of support organizationpossible earlierProcess harmonization beforeupgrade (but on potentially oldprocesses)

Optimization of supportorganization possible at laterstage (after merge)More systems to be upgraded

Later access to features andbenefits of new SAP releaseDown time during upgrade isrelevant for all companies in themerged systemProcesses are more complexPotential overlap with SAPextended mainstreammaintenanceRetrofit of enhancements is onlypossible at a later stage

Pro

Con

Systems wise earlier access tobenefits of new SAP releasesOptimized learning curveMost flexible alternativeDowntime effects could be takeninto consideration and from a riskperspective be optimizedOptimized sequence based onbenefit realization

Potential overlap with SAPextended mainstreammaintenanceMore systems to be

Decision matrix of a global SAP R/3 customer with a distributed system landscapechoosing an adoption path for mySAP ERP 2005

Case Study C: Decision Approach for Roadmap Option


Globalization: Upgrade Options for Unicode Conversion

Directupgrade toERP 2005

Seeschedule for

more information:SAP Offerings

for UnicodeConversions

Yes

R/34.6c

ERP 2005unicodeUpgrade, directly followed by

Unicode Conversion

Upgrade

No

Do youcurrently

use MDMP?

ERP 2005non-

unicode Convert

R/3 4.6c orhigher?

R/3 4.7 orERP2004?

CombinedUpgrade &UnicodeConversion

R/34.6b

or lower

ERP 2005unicode

Unicodeconversionbeforeupgrade

Yes

No

Yes

No

R/34.7 orhigher

Convert Upgrade ERP 2005unicode

>90%of customers

Directupgrade toERP 2005

Upgrade ERP 2005non-

unicode

ConvertR/34.6b orlower

ERP 2005unicode

Temporary “Go-Live” with ERP 2005 and MDMP, Disclaimer needs to be signed

R/34.7 orHigher

(unicode)

R/34.6b orlower

ERP 2005unicodeUpgrade, directly followed by

Unicode Conversion

Twin Upgrade& UnicodeConversion


Agenda





What is the Business Case for an Upgrade to mySAP ERP2005?

Compliance, governance and controlAdoption of standard processesImproved visibility and transparencyEnablement of innovation and flexibilityImproved base for decisions

Reduction of maintenance cost– Remove unused modifications– Replace modifications w standard functionality– Avoidance of additional maintenance cost– Instance Consolidation

Reduced development cost for improvement projectsReduced operations cost

Ability toQuantify

Value of anUpgrade toERP2005

Strategic

“Hard”BusinessBenefits

TCOReduction

Source of Value

Reduction days sales outstandingReduction of bad debtDecrease in travel costImproved real estate utilization…

Type of Value

“Soft”BusinessBenefits

Core ERP 2005Capability

Analytics,ESOA,GRC,SEM, UI

Employee productivityImproved HR staff productivityFaster financial close…

FSCM, TravelMgmt, RealEstate MgmtESS, MSS,HR, New G/L


StrategicUpgradeIndustry:High-TechGlobalEmployees:>30,000Revenues:$10-12 billion

BackgroundFinancials

– Financial Supply Chain Mgmt– New General Ledger– Corporate Governance

Corporate Services– Real Estate Management– Travel Management

Operations– Procurement– Sales and Service

Analytics– Analytics– Strategic Enterprise Management

Technical– ERP Technical Features– Other Technical Enhancements

Key Value Drivers

Case Study A: Business Case Results (1/2)

Positive impact on thebusiness due to

reduced days salesoutstanding (in somesubsidiaries)increased employeeproductivity due tohigher usability ofsystemenhanced SOXcompliance due toincreasedtransparency andhigher dataconsistency

Benefits


Major deltafunction

Helps achieve BusinessTargets Potential Business Benefits

CreditManagement(FSCM)

Minimize default riskfactorsIncrease quality assuranceand SOX complianceStandardization andautomization of processes

Reduces risk, reduce need for general provision for doubtful debtsSupports compliance with SOX, Basel IIAvoids high manual effort for credit information researchHelps establish one unique credit policyCombine internal data on customer credibility with external rating information

CollectionsManagement(FSCM)

Increase efficiency by costsavingsLive best class processes

Improve days sales outstandingReduce high manual effort for collections by telephone

TravelPlanning(Travel Mgmt.)

Increase travel policycomplianceReduce cost

ESS User Interface for all travel processes => Higher satisfaction and adoption bytravelersOnline booking for hotel, air, car => Enables volume bundling, reduce extra cost (e.g.shuttle)Hotelbooker.org integration in process & automatic policy checks => Direct savings, lessdata entry for travelers by straight through processing, higher adoption of hotelbookerPotential savings by connecting low cost carriers to standard booking interfaceShow cost information about reservations for approvers prior to trip, Travel-related budgetreports in MSS => Avoid travels, Increase cost awareness and transparency

Real EstateManagement

New room booking systemBetter reporting andanalysis functionsSpace Management withinone location

Room reservation * => higher efficiency and process standardization in roombooking/administration, increase room utilizationRE Analytics, Master Data Management => Remove existing Excel spreadshets /decrease effort of manual maintenance / increase automizationSpace Management => Increase utilization of existing rooms

Case Study A: Examples for Detailed Business CaseResults (2/2)


FunctionalupgradeIndustry:TelecomGlobalEmployees:<5,000Revenues:$1-2 billion

BackgroundBusiness case results show 2-3x value from upgrade tomySAP ERP2005 in comparison to upgrade to 4.7

Case Study B: Business Case Results for FinancialsUpgrade

Upgrade to Version 4.7can deliver ~$20-25 Min benefits

Additional benefitsfrom mySAP~$50-65 M

Benefit in 2006 $1.7 M $3.0 M $4.2 M $7.4 M

Annual Benefits after ramp-up $2.7 M $4.8 M $7.4 M $19.1 MProject Cost $8.1 M $9.9 M $10.7 M $15.2 M

Start Year for full Savings 2007 2007 2007 2008

$70-90Cumulative Incremental 5 Year Benefits (2006-2010) Likely Scenario ($ M)

Upgrade toVersion 4.7Financials

Upgrade to mySAPFinancials

Expanded Scope(incl. HR)

$20-25

$35-40

$20-25 M$20-25 M$20-25 M

$10-15 M$10-15 M

$40-50 M

Consolidate andleverage Version

4.6 B

$10-15 M

$10-15


Further Information

MySAP ERP and SAP NetWeaver:

Homepage mySAP ERP: http://service.sap.com/erp

mySAP ERP Solution Browser: http://solutionbrowser.erp.sap.fmpmedia.com

Homepage: SAP NetWeaver: http://service.sap.com/netweaver

Development News: http://service.sap.com/developmentnews

Releasenotes: http://service.sap.com/releasenotes

Release Strategy: http://service.sap.com/releasestrategy

Maintenance Strategy: http://service.sap.com/maintenance

Online Knowledge Product: http://service.sap.com/okp

SAP Upgrade Info Center:

Homepage: http://service.sap.com/upgrade

mySAP ERP Upgrade: http://service.sap.com/upgrade-erp

SAP Upgrade Road Map: http://service.sap.com/upgraderoadmap

SAP Upgrade Newsletter: http://service.sap.com/upgradenewsletter

SAP Upgrade Tools and Services:

SAP Upgrade Tools: http://service.sap.com/upgradetools

System Switch Technology: http://service.sap.com/upgradetech

SAP Solution Manager: http://service.sap.com/solutionmanager

Overview and order information: http://service.sap.com/upgradeservices

Upgrade Services of SAP Consulting: http://service.sap.com/ufg

Safeguarding: http://service.sap.com/safeguarding

http://service.sap.com/erp

http://solutionbrowser.erp.sap.fmpmedia.com/

http://service.sap.com/netweaver

http://service.sap.com/





http://service.sap.com/upgrade

http://service.sap.com/upgrade-erp

http://service.sap.com/upgraderoadmap

http://service.sap.com/upgradenewsletter

http://service.sap.com/upgradetools

http://service.sap.com/upgradetech

http://service.sap.com/solutionmanager

http://service.sap.com/upgradeservices

http://service.sap.com/ufg



Questions

Tobias DoschSolution Management ERP

SAP AG

E [email protected]

Jochen HopfSAP Business Consulting

SAP AG

E [email protected]

mailto:[email protected]

mailto:[email protected]

How to calculate the Business Case for a global ERP 2005 ... a Global...Upgrade & Unicode Conversion R/3 4.6b or lower ERP 2005 unicode Unicode conversion before upgrade Yes No Yes

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