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The other day I was talking to a pair of executives looking for a way to determine whether or not their SAP implementation cost was higher or lower than their competitors.  They had wanted benchmarks or some other way to know if they were in line with the marketplace.  The CFO was worried that they might have paid way too much for their SAP implementation.

After talking for a few minutes they realized that they were looking at the entire question the wrong way.  They wanted to know how their expenditure compared with other competitors, what they were really asking but were not articulating very well is whether or not they got what they paid for.

A simple illustration drove the point home quickly–, it doesn’t matter if you spent twice your competitors, or if you spent half, what matters is the return on technology dollars.  The numerical illustration I gave them is if they are looking at the amount they spent, say if they spent $50 million and their next closest competitor spent $20 million, they are looking at the wrong thing.  What really matters is the return.  If they achieved a 10% financial return from process improvements, automation, task time reduction, etc., and their competitor was achieving a -3% return then even at 2 ½ times the cost of their competitor they got the better deal.

By the time we finished the conversation it was clear they were simply asking how to measure any return or business results they received from the implementation.  However, from the conversation it didn’t sound like they were very happy with any perceived return.

Control SAP Implementation Costs and Promote a Return on Investment by Focusing on Investment Drivers

The best way to understand how SAP can benefit your business is to start out by understanding what you are trying to accomplish with an SAP implementation.  This in turn will determine what your success criteria is and that success criteria is a critical factor in value realization from your SAP implementation.

As SAP Blue Book author Michael Doane says “just because a project is delivered on time and on budget does not make it a successful project.” To wring value out of SAP it must be seen as an investment, an important component of your company’s growth, its long-term health, and part of the investment portfolio much like capital equipment or financial leverage.

This investment paradigm out of necessity includes a component of return on that investment, and a view of the investment that goes beyond the delivery date for the project, therefore it must include more than a project that is delivered on time and on budget.

You wouldn’t define a successful stock investment as spending the money and then receiving the stock, over some period of time you would want a tangible return on your investment.  You should begin with that mindset from your SAP implementation.  Also, you generally wouldn’t expect that return the day you purchase the stock either.

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    6 Comments

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    1. Bill Wood
      Any thoughts on the kinds of ROI or return on investment categories or items to consider for SAP?
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    2. Mohammad Rashid Ali
      Excellent article, wherein the true value of an SAP implementation is highlighted in terms on business benefits. Most customers look at it from a financial perspective (implementation) and thus lose out on the true meaning of implementing SAP.
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    3. Kunal Gandhi
      Mr. Wood, a nice to the point excerpt. But somewhere at the back of my mind if I put myself in customers’ shoes, I dont have a ‘bullet’ answer justifying the ROI that I may have out of my SAP implementation. Yes, in a generic way we will be able to justify. Can we try and mark specific pointers that allow the customer visualize the future and these pointers we explain them in present so as to ease the understanding and justification to the customer? Thoughts appreciated.

      Thank you.

      Regards,
      Kunal Gandhi

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      1. Bill Wood
        Good perspective.  But there are very specific items and categories that can be addressed from a financial perspective and business benefit. 

        I’ve worked on ROI driven projects and projects that had very specific business justifications.  The real problem I see is that there are too few justifications that are carried through the SAP project and then measured after go-live.

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        1. Kunal Gandhi
          Exactly, we need these soft elements to be dynamic so as to make our customers feel justified and convinced during the entire journey.
          I am writing a blog “Once upon a time in BI…” on the same lines, under review currently.
          Would appreciate your inputs on the same.

          Thank you.

          Regards,
          Kunal Gandhi

          (0) 

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