Leveraging IT to Drive Business Value IT to Drive Business Value.pdf · Leveraging IT to Drive Business Value Riaz Raihan National Vice President, Value Engineering and Business Development

Leveraging IT to Drive Business Value

Riaz RaihanNational Vice President, Value Engineering and Business DevelopmentSAP CanadaSAP Canada

February 2010

Agenda

1. Challenges and Opportunities

2. How Best in Class Companies Drive Valuep

© SAP AG 2009. All rights reserved. / Page 2

Traditional View of IT

1. Order Taker: Business requirements converted into solution, with little or no strategic input into the process

2 Tactical View: Solving problems of today with no2. Tactical View: Solving problems of today with no view of future challenges or issues

3. Lack of Cross-functional Collaboration: Cross functional business processes are difficult to execute due to lack of ownership (i.e. Order to p (cash, Procure to pay)


Challenge #1Capital is Scarce & Economic Conditions Unfavorable!

High and Demonstrable ROI

Low and/or Not Demonstrable ROI


More than 82% of IT decisions now require an ROI analysis (InformationWeek)

Challenge #2: Need to demonstrate Business Value for IT Investments

Decisions about IT investments areincreasingly value-driven

1 2 Influence of non-CIO Executive level on ITinvestments is rising

100 100CEO COO

CIO’s: In the last 12 months the pressure to decidebased on value has increased in 60% of all

companies.

37

1229 + 142%

- 16%

CEO, COO,CFO, CMO

CIO

IncreaseNo change

5140

3116%

- 22%Line

Management

Don’t knowReduced

Source: Gartner/DataquestSource: Terry A. Kirkpatrick: Research CIO's speak on ROI


With a cost-justification report and business case, a project is 60% more likely to be approved (Gartner)

Gartner Survey

Survey Question: What are the biggest weaknesses or shortcomings in IT Sales and Marketing efforts today?

57.2%

73.6%

Tailoring the Discussion to our Issues

Understanding our Business Needs/Requirements

55.3%

57.2%

Quantifying the Value Proposition

Tailoring the Discussion to our Issues

36.7%

46.6%

Understanding our Industry

Clarifying Business ImpactSource: Gartner Survey of

Over 600 Fortune 2000 IT

29.9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Product/Service Knowledge

P t f R d t

Decision Makers


%Percentage of Respondents

Managing Spend

% Spend Managed Strategically YoY % Annual Savings

16%

7%

Best In Class Average


Source: SAP ASUG Benchmarking Initiative. N = 47

Less is More

Support FTE per 100 Users Number of Critical Interfaces

43

8



Source: SAP ASUG Benchmarking Initiative.

Improved customer service and reduced cost

% Error Rate in Bills Sent Out Interaction Center

$Cost Per Interaction ($)

$6

$3



Source: SAP ASUG Benchmarking Initiative. FINANCE = 27, CUSTOMER CONTACT CENTER = 22

Key Insight from Procurement Benchmarking: Staffing

Staffing ProfileProcurement FTE per Type as % of Total

Procurement FTEs)

Staffing Profile

Transactional Expertise Based Strategy

28%

64%

60%

28%

12%

9%

Q1

Avg

Note: Non allocated FTEs are not included in the above analysisSource: Participant Responses, SAP Analysis

81% 10% 9%ABC


Key Insights from Benchmarking: Best Practices

Average Best Practice Rank by FunctionAverageQ1ABC(Coverage)ABC( Importance)

3.5

4.0

4.5

5.0

1.8

2.5

1.7 1.81.3

1.1 1.1

2.0

1.3

2.5

1.82.0

1 01 0

1.5

2.0

2.5

3.0

1.1 1.0

0.0

0.5

1.0


Agenda

1. Challenges and Opportunities

2. How Best in Class Companies Drive Valuep


Value Management Lifecycle

Value Discovery (pre-decision): “Build the Case”

Understand your businessRecommend enabling solutions

Build the Case

gBuild the business caseDevelop implementation timeline for results

SOFTWARESELECTION

V l O ti i ti V l R li ti

Realize the ValueMeasure the Value

Value Optimization(post-use): “Measure the Value”

Measure before / after impact of SAPRecommend changes to

Value Realization (post-decision): “Realize the Value”

Ensure that the implementation plan is steered towards business valueg

maximize value attainment Implement process changeEnsure business metrics in place


GO LIVE

How the Best Companies Create Value

Build the Case1. Align to WHY change is needed

Competitive benchmarking highlights largest value areas.

Realize the Value

Measure the Value

g g

What Moving the Needle Could Mean

to Compan X

Company XPeer BestPeer WorstMeasure the Value

Every one percent in Revenue = $.2 millionin operating earnings

Every one percent reduction in SG&A

percentage = $5 million

to Company XCapital

Utilization

Revenue Growth’03-’04 18%

.481.143

33%-5%

percentage = $5 millionin operating earnings

Every one percent reduction in COGS

percentage = $5 millionin operating earnings

By achieving peer best

COGS as a % of sales

SG&A as a % of sales

80%

14%

73%

10%

86%

15%

y g pin these three

areas, Upstream Inc upper boundary of EPS improvement is $1.991

Operating Income Margin

Fixed AssetsUtilization

5% 12%4%

.07.25 .19



Build the Case2. Understand WHAT value drivers exist

SAP process benchmarks further clarify improvement targets.

Realize the Value

Measure the ValueSG&A

Measure the Value



Each process area has specific value targets and implementation plan.

Build the Case 3. Develop Roadmap for HOW value will be created

Realize the Value

Measure the Value HR Project

Finance Project

Measure the Value j

IT Consolidation

0

$5 M

Total net improvementin SG&A

Finance Human Capital Management Information Technology

05 06 07 08

Improved Budgeting15-45%

Financials Staff Productivity15-25%

Better AP/AR Invoice Processing15-40%

Improve Cash Management10-25% Enhance Manager’s Self-Service

Enhance Employee Self-Service

Better HR Staffing Productivity15-35%

15-40%

25-50%

Reduce New Hiring Costs15-25%

Costs-Lack of IT Standardization10-35%

Lower Reporting Costs25-75%

Fewer Programmers/Developers0-5%

Reduce Admin & Maint Staff15-25%


g

Reduced Close Cycle Time20-35%

g

Other Internal IT Staff15-25%

Lower Training Costs35-65%


Build the Case

Even with a compelling business case, companies face many challenges in achieving the expected value of their

investment.

Measure the Value

Realize the Value

Typical Barriers

Transition

Business

Unclear ProgramValue Imperatives

Blueprint, Technology,

Issues/DelaysSolution Funding >Program Execution

Executive L k f O iCaseBlueprint, Technology,

& Organizational

Lack of ProgramValue Metrics

ExecutiveDisconnectson Key Business

Case Assumptions

Lack of OngoingValue Review

Unable to ensure new capabilities deliver value

Roadmap “On-time, on-budget”focusLack of Value

ReadinessOrganizational Culture,

Technology Factors


FUNDINGAPPROVED

30-60 days 90 days Beyond


Successful value realization plan has the following components:

Validated consensus business caseCritical program KPI metrics in place

Build the Case

p g pReadiness and risk assessmentClear best practices and KPIs for project teamsPeriodic value check upsMeasure the Value

Realize the Value

SAP Implementation RecommendationSAP Implementation Recommendation

Value Readiness Scan

Mobilization Readiness Assessment Score:

PROGRAM VALUE REALIZATION SCORECARD - MOBILIZATION

Value Audit Report

Process Change incorporated into Blueprint13%

38%

47%

2%

Not incorporated In progress Incorporated Deferred

Value Audit Report

Process Change incorporated into Blueprint13%

38%

47%

2%


Q1Q4Q3Q2Q1Q4Q3

SAP Implementation Recommendation

Assemble To OrderSupplier Relationship Management APO / Demand PlanningGlobal Available to PromiseQuality Management

SalesOpportunity/Partner/Contact Mgmt.Customer service/Lead & Marketing Mgmt.Technical upgrade to CRM 4.0

Services

Initial EstimateDuration 15 monthsConsulting 6,150 resource daysCo. XX Res. 8,310 resource days Consulting Cost ~ $11.5M

2003 2004 2005

Q1Q4Q3Q2Q1Q4Q3

SAP Implementation Recommendation

Assemble To OrderSupplier Relationship Management APO / Demand PlanningGlobal Available to PromiseQuality Management

SalesOpportunity/Partner/Contact Mgmt.Customer service/Lead & Marketing Mgmt.Technical upgrade to CRM 4.0

Services

Initial EstimateDuration 15 monthsConsulting 6,150 resource daysCo. XX Res. 8,310 resource days Consulting Cost ~ $11.5M

2003 2004 2005Value Mgt Principles

Culture of ComplianceGovernance

Defined Process and Accountability

Skills and Competencies

Project / Program Management

Vision and StrategyAlignment

Leadership and Sponsorship

Organization

Attribute

Communications

Case for Change

Organizational design and policies

ScoreCharacteristicScore

Process Change incorporated into Realization3%

36%

52%

9%


Mitigation Steps:• GTM team has to focus on trade spend process design to incorporate off invoice reductions• Logistic process for customer delivery has not completely adopted the new picking strategies

Process Change incorporated into Realization3%

36%

52%

9%


Mitigation Steps:• GTM team has to focus on trade spend process design to incorporate off invoice reductions• Logistic process for customer delivery has not completely adopted the new picking strategies

©SAP Page 24 SAP Value Proposition July 30, 2003.ppt

Proof of ConceptService Operations (Repair/ Install Base/Warranty)Service Mgmt. (Call center / contracts/Invoicing)

Employee ProductivityFinance, SEMPortals

HRHR, MSS, ESS

The scope of the project and the timelines have been jointly developed with Co. XX IT personnel and business owners.

©SAP Page 24 SAP Value Proposition July 30, 2003.ppt

Proof of ConceptService Operations (Repair/ Install Base/Warranty)Service Mgmt. (Call center / contracts/Invoicing)

Employee ProductivityFinance, SEMPortals

HRHR, MSS, ESS

The scope of the project and the timelines have been jointly developed with Co. XX IT personnel and business owners.© SAP AG 2006, Value Realization Call and Learn, January 20, 2006 – page 3

© SAP AG 2006 Value Realization FAST START – page 12

Incentives and Rewards

Knowledge Mgt and Methods

Platform and ToolsTechnology

Performance Mgt

Framework for Measurement


© SAP AG 2005 12© SAP AG 2005 12

How the Best Companies Measure Value

Each targeted value area must have specific governance plan in the project.

Value Source Baseline Improvement % BenefitBuild the Case

IT Auditing Costs $2.0 M 30 - 40 % $0.6 – 0.8 M

Financial Auditing Costs $5.0 M 8 - 12 % $0.4 – 0.6 M

Budget-to-Report Productivity $12.0 M 10 - 15 % $1.2 – 1.8 M

Realize the Value

Total Annual Impact $2.2 – 3.2 MMeasure the Value

Value Area Key KPIs Owner Project Team

ValueStatus

Related Initiatives

IT Auditing costs IT Audit cost as % of total audit cost

Eva Posch (EP)Bill Ditch (PO)

Finance Sarbanes Oxley

Financial Auditing Costs

Audit costs as % of finance cost


Finance Sarbanes Oxley

Budget to Report Productivity

Finance FTE per SG&A cost


Finance Shared Services


Value Engineering Process

ProcessBenchmarking

Overall Staffing Levels

140

80

35

76

Employees Served by One HR FTE

Overall Staffing Levels

140

80

35

76

Employees Served by One HR FTE

Recruiting and Staffing

HR FTEs per 1,000 EE’s Cost per Employee ($)

Applicant tracking system is integrated with employee data repository8

Recruiting system has automated analysis and reporting capabilities to analyze the talent pool and to measure source effectiveness

7

Recruiting system delivers a broad range of reports and analyses specifically designed to measure the effectiveness of the Recruiting process, including time to hire, acceptance rate and source effectiveness

6

Employee performance expectations clearly communicated during Recruiting process. Applicant tracking system is integrated with employee data repository; no re-keying of data at the time of hire

3

5

4

2

1

# Best Practice Listing

Hiring managers have comprehensive recruiting self-service, including the ability to create and submit job requirement profiles, the use of approval workflows; and viewing of candidate short lists and profile and application data Recruiting system automates candidate administration, with interview invitation, rejection letters and standard offer letters generated automatically based on standard templates, and assessments completed and tracked online

Extensive pretesting of applicants performed to determine fit with job requirements

External and internal applicants are able to place themselves in a talent pipeline according to their own interests or goals

Best Practice Ranking 1 = No Coverage5 = Full Coverage1 = No Coverage5 = Full CoverageOutsourcingIT Systems Used Org. Model

45%35%

5%

45%35%

5%

14%

21%

36%

2

3

4

5

0.1

0.4

0.1

Q1 Avg Co X

$14

$58

$26

Q1 Avg Co X

Company X = between Average and Q1Company X = SAP Company X = CentralizedCompany X = Inhouse

Recruiting and Staffing

HR FTEs per 1,000 EE’s Cost per Employee ($)

Applicant tracking system is integrated with employee data repository8

Recruiting system has automated analysis and reporting capabilities to analyze the talent pool and to measure source effectiveness

7

Recruiting system delivers a broad range of reports and analyses specifically designed to measure the effectiveness of the Recruiting process, including time to hire, acceptance rate and source effectiveness

6

Employee performance expectations clearly communicated during Recruiting process. Applicant tracking system is integrated with employee data repository; no re-keying of data at the time of hire

3

5

4

2

1

# Best Practice Listing

Hiring managers have comprehensive recruiting self-service, including the ability to create and submit job requirement profiles, the use of approval workflows; and viewing of candidate short lists and profile and application data Recruiting system automates candidate administration, with interview invitation, rejection letters and standard offer letters generated automatically based on standard templates, and assessments completed and tracked online

Extensive pretesting of applicants performed to determine fit with job requirements

External and internal applicants are able to place themselves in a talent pipeline according to their own interests or goals

Best Practice Ranking 1 = No Coverage5 = Full Coverage1 = No Coverage5 = Full CoverageOutsourcingIT Systems Used Org. Model

45%35%

5%

45%35%

5%

14%

21%

36%

2

3

4

5

0.1

0.4

0.1

Q1 Avg Co X

$14

$58

$26

Q1 Avg Co X

Company X = between Average and Q1Company X = SAP Company X = CentralizedCompany X = Inhouse

What is the opportunity?

2. Order to Cash Benefits Tangible Benefits

$0.5 – 0.7M20-25%60 FTEs3Increased customer service productivity (cost avoidance)

$0.3 – 0.4M15-20%40 FTEs2Reduced order entry/management costs (cost avoidance)

$3.7 – $11.2M1-3%$375M1Increased revenue (margin) via enhanced marketing and lead mgmt effectiveness

Improvement % BenefitBaseline Value Source

2. Order to Cash Benefits Tangible Benefits

$0.5 – 0.7M20-25%60 FTEs3Increased customer service productivity (cost avoidance)

$0.3 – 0.4M15-20%40 FTEs2Reduced order entry/management costs (cost avoidance)

$3.7 – $11.2M1-3%$375M1Increased revenue (margin) via enhanced marketing and lead mgmt effectiveness

Improvement % BenefitBaseline Value Source

Estimated Solution Benefits ($M)

Low-end Estimates

High-end Estimatestbd tbd

One-time Benefit

Potential Annual Benefits:

Potential One-time Benefits: tbd tbd

tbdtbdSales and MarketingtbdtbdIncreased Sales Efficiency

tbdtbdProcurementtbdtbdIncreased Procurement Efficiency

Estimated Solution Benefits ($M)

Low-end Estimates

High-end Estimatestbd tbd

One-time Benefit


Potential One-time Benefits: tbd tbd

tbdtbdSales and MarketingtbdtbdIncreased Sales Efficiency

tbdtbdProcurementtbdtbdIncreased Procurement Efficiency

P. 13

Q1 Average Q4 Company X

Source: Participant Responses, SAP Analysis

P. 13

Q1 Average Q4 Company X

Source: Participant Responses, SAP Analysis

P. 37

Cost per Hire ($):• Average:• Q1:• Company X:

Time to Hire (Days):• Average:• Q1:• Company X:

Recruiting Process:• Automated = 53%• Manual = 47%

Other Benchmarks

Manual/NoneOutsourced

SAP & OtherOther

SAP

Decentralized

Centrally managed /decentrally deployed

Centralized

Offshore

< 33% O.S.33% to 66%

Inhouse

Fully Outsourced> 66% O.S.

10% 5%5%

10% 5%5%

29%1

2

#1 #2 #3 #4 #5 #6 #7 #8

Average Q1 Company X

P. 37

Cost per Hire ($):• Average:• Q1:• Company X:

Time to Hire (Days):• Average:• Q1:• Company X:

Recruiting Process:• Automated = 53%• Manual = 47%

Other Benchmarks

Manual/NoneOutsourced

SAP & OtherOther

SAP

Decentralized

Centrally managed /decentrally deployed

Centralized

Offshore

< 33% O.S.33% to 66%

Inhouse

Fully Outsourced> 66% O.S.

10% 5%5%

10% 5%5%

29%1

2

#1 #2 #3 #4 #5 #6 #7 #8

Average Q1 Company X

Where is theBenefits

Assessment

© SAP AG 2005, VE Plan page 6

Source: Customer-provided data. SAP analysis.

Strategic BenefitsIncreased customer satisfactionEnhanced marketing effectivenessImproved order and billing accuracy, and reduced disputesReduced sales cycle timeImproved pricing/margin managementIncreased agent satisfaction and retention of top sales and service peopleAccelerated agent ramp-up time Improved first contact resolution and increased customer self-serviceEnhanced product feedback and quality informationImproved alignment and consistent execution of corporate strategy

($36 – 68Mone-time)$2.5 – 4.88-15%$454M4

$31.8M4

Reduced DSO (accounts receivable):One-time cash increaseOn-going cost of capital impact

(cost avoidance)

$7.0M – $17.1MTotal Annual BenefitAssumptions

1 Revenue for the trailing 4 quarters (Q4 ’04 – Q3 ’05) is $1931M; ‘Incremental’ margin of 19.4% was calculated as the average gross margin over the period (22.2%) minus 25% of the SG&A (11.4%)

2 120 global customer service representatives; ~33% of time spent on order mgmt; assume $45k fully-loaded cost per employee3 120 global customer service representatives; ~50% of time spent on customer service (excluding order management, training, breaks

and vacation time); assume $45k fully-loaded cost per employee4 Accounts receivable as of the end of Q3 ’05 were $454M (or 78 days of sales); cost of capital is assumed to be 7%.


Source: Customer-provided data. SAP analysis.

Strategic BenefitsIncreased customer satisfactionEnhanced marketing effectivenessImproved order and billing accuracy, and reduced disputesReduced sales cycle timeImproved pricing/margin managementIncreased agent satisfaction and retention of top sales and service peopleAccelerated agent ramp-up time Improved first contact resolution and increased customer self-serviceEnhanced product feedback and quality informationImproved alignment and consistent execution of corporate strategy

($36 – 68Mone-time)$2.5 – 4.88-15%$454M4

$31.8M4

Reduced DSO (accounts receivable):One-time cash increaseOn-going cost of capital impact

(cost avoidance)

$7.0M – $17.1MTotal Annual BenefitAssumptions

1 Revenue for the trailing 4 quarters (Q4 ’04 – Q3 ’05) is $1931M; ‘Incremental’ margin of 19.4% was calculated as the average gross margin over the period (22.2%) minus 25% of the SG&A (11.4%)

2 120 global customer service representatives; ~33% of time spent on order mgmt; assume $45k fully-loaded cost per employee3 120 global customer service representatives; ~50% of time spent on customer service (excluding order management, training, breaks

and vacation time); assume $45k fully-loaded cost per employee4 Accounts receivable as of the end of Q3 ’05 were $454M (or 78 days of sales); cost of capital is assumed to be 7%.


Notes:• Analysis is directional in nature; Assumptions are outlined in the

appendix • Sources: Customer-Provided Data; Interviews; SAP analysis

tbdtbdReduce Tooling Expenses

tbdtbdReduced Spares Inventory

tbdtbdAsset Utilization

tbdtbdIncreased Product Management EfficiencytbdtbdIncreased Revenues/ Sales Effectiveness

tbdtbdManufacturing

tbdtbdSupply Chain

tbdtbdCustomer Service

tbdtbdReduced Direct LabortbdtbdReduced Indirect Labor

tbdtbdReduced Freight CoststbdtbdReduced Supply Planning

tbdtbdReduced Inventory Carrying CostsReduced Inventory

tbdtbdIncreased Sales Order Management Efficiency

tbdtbdReduced Incentive Spend/ Increased Effectiveness

tbdtbdReduce Deduction Admin

tbdtbdReduced Indirect Material SpendtbdtbdReduced Direct Spend

tbdtbdReduce Hardware Costs / Maintenance

tbdtbdReduced Compliance CoststbdtbdIncreased AP/AR Efficiency

tbdtbdReduced System Costs / Maintenance

tbdtbdReduced External Labor Costs

tbdtbdIT

tbdtbdFinance and Pricing

Reduced IT Backlog (cost avoidance)

tbdtbdReduced IT Administrative Costs

tbdtbdDSO Costs

tbdtbdReduced Pricing Admin

tbdtbdReduced Deductions

tbdtbdReduced Obsolete Materials

tbdtbdIncreased Procurement Efficiency

tbd tbd

tbd tbd


Notes:• Analysis is directional in nature; Assumptions are outlined in the

appendix • Sources: Customer-Provided Data; Interviews; SAP analysis

tbdtbdReduce Tooling Expenses

tbdtbdReduced Spares Inventory

tbdtbdAsset Utilization

tbdtbdIncreased Product Management EfficiencytbdtbdIncreased Revenues/ Sales Effectiveness

tbdtbdManufacturing

tbdtbdSupply Chain

tbdtbdCustomer Service

tbdtbdReduced Direct LabortbdtbdReduced Indirect Labor

tbdtbdReduced Freight CoststbdtbdReduced Supply Planning

tbdtbdReduced Inventory Carrying CostsReduced Inventory

tbdtbdIncreased Sales Order Management Efficiency

tbdtbdReduced Incentive Spend/ Increased Effectiveness

tbdtbdReduce Deduction Admin

tbdtbdReduced Indirect Material SpendtbdtbdReduced Direct Spend

tbdtbdReduce Hardware Costs / Maintenance

tbdtbdReduced Compliance CoststbdtbdIncreased AP/AR Efficiency

tbdtbdReduced System Costs / Maintenance

tbdtbdReduced External Labor Costs

tbdtbdIT

tbdtbdFinance and Pricing

Reduced IT Backlog (cost avoidance)

tbdtbdReduced IT Administrative Costs

tbdtbdDSO Costs

tbdtbdReduced Pricing Admin

tbdtbdReduced Deductions

tbdtbdReduced Obsolete Materials

tbdtbdIncreased Procurement Efficiency

tbd tbd

tbd tbd

Where is the value?

InitiativePrioritization

Lesser customization leads to lower application support cost

Reduced QA Cycle due to a simpler landscape- hence better responsiveness

Leveraging Industry Open Standards in Application platform

Past CDPs – they being covered in Core – hence simplify landscape

Current CDPs – being supported in the core – hence avoid future custom development effort

Service Enablement of Business processes

FactorsConsidered

Option Evaluations (Intangibles)

Option 2Upgrade in ‘06

Option 1Upgrade NOW


Architectural Benefits

Functional/ Business Benefits

IT Landscape

Lesser customization leads to lower application support cost

Reduced QA Cycle due to a simpler landscape- hence better responsiveness

Leveraging Industry Open Standards in Application platform

Past CDPs – they being covered in Core – hence simplify landscape

Current CDPs – being supported in the core – hence avoid future custom development effort

Service Enablement of Business processes

FactorsConsidered

Option Evaluations (Intangibles)


Option 1Upgrade NOW


Architectural Benefits

Functional/ Business Benefits

IT Landscape

Detailed Solution Priority Analysis

Urg

ency

(B

usin

ess

& I

T)

TrainingTools

Project / Portfolio

Mgt

Finance DataMgt

IntellectualProperty

Management

Low

Hig

h

Treasury

Supply Planning &

Visibility

DemandPlanning

HR Interaction

Center

HR DataMgt

ComplianceAutomation

Sales/MarketingSupport

ProcurementPricingTools

Portal

CustomerLoyaltyTools

MaintenanceScheduling

& Parts

MgrReporting& Tools

ChannelMgt

Forms& Office

UI

Detailed Solution Priority Analysis

Urg

ency

(B

usin

ess

& I

T)

TrainingTools

Project / Portfolio

Mgt

Finance DataMgt

IntellectualProperty

Management

Low

Hig

h

Treasury

Supply Planning &

Visibility

DemandPlanning

HR Interaction

Center

HR DataMgt

ComplianceAutomation

Sales/MarketingSupport

ProcurementPricingTools

Portal

CustomerLoyaltyTools

MaintenanceScheduling

& Parts

MgrReporting& Tools

ChannelMgt

Forms& Office

UI

How do we enable?

© SAP AG 2005, Confidential Document / For Discussion Only / 5

Additional S/W Maintenance Cost

Cost of UpgradeFinancial

HighBenefit

LowBenefit No conclusive decision

could be made

© SAP AG 2005, Confidential Document / For Discussion Only / 5

Additional S/W Maintenance Cost

Cost of UpgradeFinancial

HighBenefit

LowBenefit No conclusive decision

could be made

R d

Power Supply ProcurementUsability, Production Orders, Reliability Centered MaintenanceAnalytics, Mobile

FinanceProject SystemsNew General Ledger, Financial ReportingPortfolio Management, Bus Planning & Simulation, Consolidations

2 – ERP 05 3 – New App 4 – Later1 - Now

Deliverable Example: Business Initiatives Roadmap

Power Supply ProcurementUsability, Production Orders, Reliability Centered MaintenanceAnalytics, Mobile

FinanceProject SystemsNew General Ledger, Financial ReportingPortfolio Management, Bus Planning & Simulation, Consolidations

2 – ERP 05 3 – New App 4 – Later1 - Now

Deliverable Example: Business Initiatives Roadmap ESA Roadmap Example: Innovative Order-to-cash Process

Platform

Business ProcessesRoadmap to Enterprise Services

Order entry

OTC

Order management (IDOC)order entryClearing

Validation CheckATP checkGTS check

Credit checkOrder processing

InvoicingControlling

ESA Roadmap Example: Innovative Order-to-cash Process

Platform

Business ProcessesRoadmap to Enterprise Services

Order entry

OTC

Order management (IDOC)order entryClearing

Validation CheckATP checkGTS check

Credit checkOrder processing

InvoicingControlling

Implementation EffortLowHigh

Notes: (1) The size of the circle corresponds to the magnitude of the anticipated financial benefits(2) Yellow circles indicate initiatives/opportunities with a strong usability component

Implementation EffortLowHigh

Notes: (1) The size of the circle corresponds to the magnitude of the anticipated financial benefits(2) Yellow circles indicate initiatives/opportunities with a strong usability component

What should


RoadmapDevelopment

© SAP AG 2006, Value Realization / 24

Transmission and DistributionWork Order Mgmt, Warehouse Mgmt, Predictive MaintenanceDocument Management SystemProject Management, Contractor & Invoice ManagementDistribution Work Order System Replacement

Customer Care / BillingData Accuracy, Meter Validations, Credit and Collections, Collections Operations, Scheduling for Outside Service ProvidersEnergy Data Management

Information Technology (IT)Archiving, General Reporting & Analytics, Knowledge ManagementInfrastructure Consolidation, Elimination of Duplicate Applications

Human Resources ManagementOpen Enrollment Consolidation, Compensation & Skills DB, Auditing, Time Entry Life Event Processing

SRM/SCMOperational ReportingSupplier Collaboration, Catalog & Content Mgmt, Maverick Spend, Vendor Portal

© SAP AG 2006, Value Realization / 24

Transmission and DistributionWork Order Mgmt, Warehouse Mgmt, Predictive MaintenanceDocument Management SystemProject Management, Contractor & Invoice ManagementDistribution Work Order System Replacement

Customer Care / BillingData Accuracy, Meter Validations, Credit and Collections, Collections Operations, Scheduling for Outside Service ProvidersEnergy Data Management

Information Technology (IT)Archiving, General Reporting & Analytics, Knowledge ManagementInfrastructure Consolidation, Elimination of Duplicate Applications

Human Resources ManagementOpen Enrollment Consolidation, Compensation & Skills DB, Auditing, Time Entry Life Event Processing

SRM/SCMOperational ReportingSupplier Collaboration, Catalog & Content Mgmt, Maverick Spend, Vendor Portal

© SAP America 2006 Roadmap Imperatives, Jack Childs July 2006 42

2005 2006 2008Time

2007

short term mid term long term

ApplicationsRoadmap toApplicationLandscape

R/3 „P01“ 4.6c

R/3 „P02“ 4.6c„P03“ mySAP ERP05

LOTUS DB

SIEBEL CRMmySAP CRM 5.0

HYPERION

ERP

CR

MSE

M

PlatformRoadmap toNetweaver

SAP XI / BPM 3.0 SAP XI / BPM „2006“

SAP Portal 6.0 SAP Portal „2006“

SAP MDM 3.0PoC

PoC

PoC

SAP BW 3.5PoC SAP BW „2006“

SAP BW „2006“

© SAP America 2006 Roadmap Imperatives, Jack Childs July 2006 42

2005 2006 2008Time

2007

short term mid term long term

ApplicationsRoadmap toApplicationLandscape

R/3 „P01“ 4.6c

R/3 „P02“ 4.6c„P03“ mySAP ERP05

LOTUS DB

SIEBEL CRMmySAP CRM 5.0

HYPERION

ERP

CR

MSE

M

PlatformRoadmap toNetweaver

SAP XI / BPM 3.0 SAP XI / BPM „2006“

SAP Portal 6.0 SAP Portal „2006“

SAP MDM 3.0PoC

PoC

PoC

SAP BW 3.5PoC SAP BW „2006“

SAP BW „2006“ we do when?

ASUG/SAP Benchmarking – Designed to Get Actionable Results

Strategic Service by ASUG and SAP, launched in 2004 as a forum to exchange metrics and best practices

Company-Specific ReportDetailed, confidential report comparing your performance to peers

Program covers 20 processes, with 1,000+ corporate participants who leverage the program to:

Build a business case for changegCompare performance to leading companies, industry peers, and between regions/divisionsAssess value realization, year-over yearProve success

Survey participation is free of charge

Survey content relevant for business asSurvey content relevant for business as well as IT audiences


Focused 360o approach to problem identification and resolution

Available Benchmarking and Best Practices Surveys

Financial Excellence Strategic ITCustomer Contact

CentersFinance Total Cost of Ownership (TCO)SRM/Procurement

B siness Intelligence/

Operational Excellence Superior Customer Value

Sales EffectivenessFinancial Compliance Business Intelligence/ AnalyticsManufacturing

Trade Promotion ManagementCenters of ExcellenceResponsive

Supply NetworksEnterprise Performance

Management

Best People and TalentProduct and Service

LeadershipOrganizational Change

ManagementTransportation Management

CRM StrategySupply Chain PlanningFinance Shared Services Enterprise Data Management

Human Capital Management

Talent Management

NPDI

Enterprise Health Check

Running the ERP Marathon

Value RealizationWarehouse Management

Enterprise Asset High Performing Assets End-to-End Processes

Order-to-Cash

Enterprise Health CheckAMR – Terabyte Survey

Management

EH&S ComplianceHR Shared Services

Value ManagementGlobal Submission Summary


= Best Practice Surveys

Cash-to-CashTotal Benchmarking Best PracticeSubmissions 6,900 4,150 2,750Unique Customers n/a 2,060 1,100

© SAP

NewCo Corporate Objectives

Improved visibility to execution activitiesB tt t f t d iBetter management of procurement and sourcing activitiesReal time performance measurementFinancial / physical synchronization

Reduce Operating

Costs

Improvement opportunity prioritization

Increasing Profitability

Global visibility to key business driversDetailed cost & profitability analysisFinancial modeling / simulation

Enhance Product

Reduce operating costsIncrease capital efficiency and free cash flow Improve labor productivityDrive innovation and new Financial modeling / simulation

Scalability to handle increased volumesMarginsDrive innovation and new

product introductionEnhance ability to capture profitable growth opportunities


© SAP

Impediments to Growth

Market Better Consumer Insights and Customer Visibility is needed to manage the Brand and develop campaigns and promotions Our transaction costs are high as a result of our

Sg

disparate systems and manual business processes.

SellWe can not adapt to an ever-changing customer and consumer requirements. We have high error rates and poor inventory accuracy, resulting in miss ships and stock

Manufacture Vs Source

resulting in miss-ships and stock outs.

Manufacture Vs. Source Make vs. BuyDesign anywhere make anywhere. It is difficult to consolidate our purchasing power across the company.

AnalyzeWe have trouble getting relevant and accurate information. Our executives, managers, and employees often work with latent

PlanForecasts accuracy impacts excess and obsolete inventory Failing to meet


yreports. We can not quickly identify profitability and productivity factors that impact the business.

obsolete inventory. Failing to meet promised delivery dates adversely impacts both customers satisfaction and market share with the consumer.

© SAP

Profitable Brand Growth for CP Companies

MarketWe have a complete and flexible visibility by Brand, Category and Channel enabling Strategic and Tactical decisions in how to reach the consumer while servicing our

SellWe have a complete and flexible sales order management solution that allows us to manage the market

customers’ requirements. and channels while meeting our customers requirements. We have reduced administrative costs by automating sales order management. Customer service levels are high, as we deliver accurate and timely

Manufacture/Source

accurate and timely inventory, invoices, and information.

Consolidating spend allows us to integrate supply activities across your organization. Improved visibility supports smarter make vs. buy decisions

PlanStreamlined forecasting and requirements planning work processes, result in more

AnalyzeWe have complete and integrated financial information that ensures compliance and predictability of business performance. We have a

lid l tf t d


accurate forecasts, greater supply stability, and a better inventory mix and service levels.

solid platform to expand our business, realize greater efficiencies, and ensure compliant and accurate accounting and financial reporting.

© SAP

Primary Value Drivers & Benefits

Value Driver/KPI Baseline Benefit Range Benefit

R d d R M t i l I t $1 200 M1 $120 M $150 M3010Reduced Raw Material Inventory $1,200 M1 $120 M – $150 M

Reduced Global and PO Price Gap $173 M $61 M – $69 M40% – 50%35% – 40%

5035

15% – 30%10% – 12.5%

3010

Increased RFQ Automation $489 – $559 M $29 M – $39 M6% – 7%3% – 6%

73

Reduce Expedited Transportation $171 M $17 M – $26 M

Reduce Inventory Carrying Costs $120 – $150 M $16 M – $23 M15% 30%13% 15%

3013

10% – 25%10% – 15%

2510

AssumptionsNote 1:

15% – 30%13% – 15%


•Total raw material inventory of $2.4 B as per Company ABC data•50% of that inventory assumed to be eligible for improvement through better supply chain planning and execution•SAP benchmark based on customer success stories and ASUG-SAP benchmarking information

Bus. Case Improvement

SAP Benchmark

© SAP

Estimated Benefits: $189 M – $254 M Annual and $135 M – $176 M One-time

Conservative EstimateLikely Scenario$189 M $254 M

$135 M $176 M


Potential One-Time Benefits: One-Time Benefit

Direct Materials Procurement $119 M $149 MReduced Global and PO Price Gap $61 M $69 MReduced Spend via Parts Consolidation $13 M $19 MIncreased RFQ Automation $29 M $39 MR d d S d i D l i P h $16 M $22 M

Quotation Management $7 M $10 MImproved Margins for New Quotes $5 M $7 MImproved Quoting-related Efficiency $2 M $3 M

Human Resources $7 M $10 MReduced Spend via Delaying Purchases $16 M $22 M

Supply Chain Management $43 M $68 M

Reduced Inventory (One-time)

Reduce Obsolete Inventory

Reduced Employee Turnover $4 M $6MIncreased Manager Self-Service $3 M $4 M

Finance/Analytics $8 M $10 MImproved Analytics-related Efficiency $4 M $5 M

$120 M $150 M

$15 M $26 M

Reduce Inventory Carrying Costs $16 M $23 MReduce Expedited Transportation $17 M $26 MReduce Freight Costs $10 M $19 M

Manufacturing $5 M $7 MR d L b E $3 M $5 M

Reduced Treasury Transaction Cost $4 M $5 M

Reduce Labor Expenses $3 M $5 MReduce Non-Labor Expenses $2 M $2 M


Source: Company ABC data and SAP analysis

© SAP

Benefits Costs Analysis

Investment Cost & Benefits Flow ($Millions) 5-Year Project Economics

NPV $702 M

IRR 92%$300.00

$350.00

$400.00

Payback 25 Months

3 Month Cost of Delay $5.3 M

$131 00

$261.00 $278.00

$100 00

$150.00

$200.00

$250.00

($78.00)($36.00) ($37.00) ($7.00) ($7.00)

$25.00 $55.00 $55.00$33.00$73.00

$131.00

-$50.00

$0.00

$50.00

$100.00Benefit Assumptions

25%, 50%, 75% and 100% accrual has been assumed in years 1 – 4 year post implementation respectivelyDiscount Rate: 10%-$100.00

Year 1 Year 2 Year 3 Year 4 Year 5

Annual benefits One-time benefits Total cost

Discount Rate: 10%5 year cash flow analysis


© SAP

Value Lifecycle Manager


© SAP

Canadian National Railway –Business Transformation Study


04_17324_CNRail_BTS_Long.pdf

Risk Premium Justification

The Risk-justified Project Cost Is Higher Than the Actual Proposed Project Cost of the SAP Solution

$1.75

$1.83

$2.50 $22.58

Implementation Risk Discount off the

risk adjusted cost

$3.00

$3.50

$

$12 20

TCO/ Operational Risk

Country Localization

Technology Platform Risk

MethodologyLocal Presence

Pro

ject

Cos

t

ustif

ied

Cos

t

cost

$10.00

$12.20 Solution flexibility

Risk

Openness of solutionScalability

Supplier Risk

Roadmap & VisionM&A

Solution Risk

Tota

l

duct

/ C

ost To

tal R

isk

Ju

duct

/ n

Cos

t

M&A Exposure (Viability)Local presence

Product CapabilitiesResearch & DevelopmentTechnical ArchitectureC

ompe

ting

Prod

Impl

emen

tatio

n C

Tota

l SA

P P

rod

Impl

emen

tatio


All $ in Millions

© SAP

Gartner Magic Quadrant AnalysisInternational Retail Core Banking 2008

Ability to Execute Completeness of Visiony

Product capabilities & roadmap

Technical Architecture

Professional Services

VisionMarket Understanding

Marketing StrategySales Strategy

Overall viability

Customer experience

Operations

Product Strategy

Business ModelIndustry StrategyInnovation

Geographic Strategy


Source: Gartner (April 2008)

© SAP

Solution Risk – Risk Quantification


© SAP

Value Management Adoption Visionnt

Full Value Lifecycle

Management

Inve

stm

e

Value Based

Management

Val

ue /

I

Business Case

Portfolio

Reactive


Business / IT alignment

Thank you!

Leveraging IT to Drive Business Value IT to Drive Business Value.pdf · Leveraging IT to Drive Business Value Riaz Raihan National Vice President, Value Engineering and Business Development

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