"Discover how to reduce your SAP TCO," Dennis Keeling, BASDA


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"Discover how to reduce your SAP TCO," Dennis Keeling, BASDA

  1. 1. Dennis Keeling <ul><li>Business Software Analyst - Ovum </li></ul><ul><li>& </li></ul><ul><li>Chief Executive - BASDA </li></ul><ul><li>Business Application Software Developers’ Association </li></ul>The cost of implementing Business Solutions
  2. 2. Background <ul><li>1983 Formed consultancy </li></ul><ul><li>Developed means of evaluating business systems </li></ul><ul><li>Financial Times, Daily Telegraph, US Journal of Accountancy </li></ul><ul><li>BBC ‘The Software Show’, CNN, FT TV, Sky </li></ul><ul><li>Founder & Chief Executive - BASDA, Business Application Software Developers Association </li></ul><ul><li>Author: Corporate Financial Systems - Ovum </li></ul><ul><li>Business Age: acknowledged as the world’s leading authority on business & accounting systems </li></ul>
  3. 3. <ul><li>UK-based, not-for-profit, international standards body </li></ul><ul><li>300 + members from SAP, Oracle, Microsoft – Sage </li></ul><ul><li>Accounting, Human Resources, Logistics, Manufacturing, Taxation & Web-based applications </li></ul><ul><li>Established 10 years, significant growth in 2000 </li></ul><ul><li>Elected General Council - Cross Industry </li></ul><ul><li>Recognised by EU, FEE, BoE, DTI, Inland Revenue, HM C&E & HM Treasury, UN/CEFACT, Microsoft </li></ul>
  4. 4. Types of business applications <ul><li>Tier 1 - Enterprise-wide </li></ul><ul><ul><li>J D Edwards, Oracle, PeopleSoft, SAP </li></ul></ul><ul><ul><li>Full suite, Workflow, Self-Service Portals, 4GL environment for specialist systems </li></ul></ul><ul><li>Best-of-breed </li></ul><ul><ul><li>Agresso, Coda, </li></ul></ul><ul><ul><li>Financials + MIS, Definable interfaces to other systems </li></ul></ul><ul><li>Tier 2 - Mid-range </li></ul><ul><ul><li>Exchequer, Exact, Microsoft (Great Plains, Navision), OpenAccounts, Sage ES, Scala, SunSystems </li></ul></ul><ul><ul><li>Financials, order processing, assembly </li></ul></ul><ul><li>Tier 3 - Entry-level </li></ul><ul><ul><li>Sage Line 50, TAS Books, Quick Books, Simply Books </li></ul></ul><ul><ul><li>Financials, invoicing </li></ul></ul><ul><li>Tier 4 - Home / Office </li></ul><ul><ul><li>Microsoft Money, Money Manager, Quicken, </li></ul></ul><ul><ul><li>Cash Books </li></ul></ul><ul><li>Specialist </li></ul><ul><ul><li>Alphameric, Baan, eResult, IFS, Intentia, Misys, Siebel </li></ul></ul><ul><ul><li>Banking, Hairdresser, Hotels, Complex Manufacturing, Plant Hire, Retail, CRM </li></ul></ul>
  5. 5. Implementation: key messages <ul><li>Stick to vanilla business processes. </li></ul><ul><li>Use the vendor’s consulting services if you can. </li></ul><ul><li>Tier 1 software costs more than tier 2 to implement. </li></ul><ul><li>The licence fee alone is a poor indicator of implementation costs. </li></ul>
  6. 6. Ovum report – cost of implementation
  7. 7. Factors Affecting Implementation Costs <ul><li>Method of roll-out </li></ul><ul><ul><li>Central ‘Template’ Implementation </li></ul></ul><ul><ul><li>Separate implementations – 3rd parties </li></ul></ul><ul><li>Type of System </li></ul><ul><ul><li>Decentralised standalone </li></ul></ul><ul><ul><li>Enterprise-wide </li></ul></ul><ul><li>Implementation Partner </li></ul><ul><ul><li>Software developer </li></ul></ul><ul><ul><li>‘ Big 4’ Consultancy + implementation partner </li></ul></ul><ul><li>Method of Implementation </li></ul><ul><ul><li>Vanilla ‘best-of-class’ </li></ul></ul><ul><ul><li>Specialist developed system or processes </li></ul></ul>
  8. 8. Implementation Strategies <ul><li>Package developer or third party </li></ul><ul><li>Effective project management </li></ul><ul><li>Tight specification & implementation plan </li></ul><ul><li>Implementation methodologies </li></ul><ul><li>Fit of package – vanilla v specialist developed </li></ul><ul><li>System tuning </li></ul><ul><li>Consultancy requirement </li></ul><ul><li>Deployment in more than one country </li></ul>
  9. 9. Main Implementation Scenarios <ul><li>Single (Tier 1) </li></ul><ul><ul><li>Enterprise-wide (ERP) system </li></ul></ul><ul><li>Strategic (Tier 2) </li></ul><ul><li>stand-alone system in each operation </li></ul><ul><li>Two Tier Strategy </li></ul><ul><ul><ul><li>ERP (Tier 1) for large industrial units and stand-alone systems </li></ul></ul></ul><ul><ul><ul><li>Mid-range (Tier 2) for local medium sized and smaller units. </li></ul></ul></ul><ul><li>Disparate Systems </li></ul><ul><li>Best of Breed </li></ul>
  10. 10. <ul><li>Single Tier 1 solution </li></ul><ul><li>The ERP Dream </li></ul><ul><li>Centralised infrastructure </li></ul><ul><ul><li>one single database for accounting, order processing, manufacturing and human resource functions. </li></ul></ul><ul><li>Consolidated information from head-office down to the lowest subsidiary. </li></ul><ul><li>Drill-down from the consolidated Profit & Loss to the underlying transactions at the point of entry – anywhere in the world. </li></ul><ul><li>International world-wide deployment. </li></ul><ul><li>Advanced financial management reporting and analysis. </li></ul>
  11. 11. ERP – the dream was rarely met <ul><li>Cost of implementation and total cost of ownership. </li></ul><ul><li>Localisation issues outside of North America and the UK. </li></ul><ul><li>Complexity of Tier 1 applications for the smaller subsidiary and branch office. </li></ul><ul><li>Technical infrastructure problems in remote locations. </li></ul>
  12. 12. 2. Strategic Tier 2 <ul><li>Quality of management information and financial reporting. </li></ul><ul><li>Scalability in terms of concurrent users. </li></ul><ul><li>Restricted scope of the product suite – Workflow, CRM, HR. </li></ul><ul><li>Decentralised rather than centralised infrastructure. </li></ul><ul><li>Ability to deploy the application on an international basis. </li></ul>
  13. 13. 3. Two Tier Strategy - Tier 1 & 2 <ul><li>Cost of implementation of Tier 1 solutions due to their complexity. </li></ul><ul><li>Cost of deployment and support of Tier 1 solutions. </li></ul><ul><li>Availability of the technical infrastructure in 3rd world countries. </li></ul><ul><li>Stand-alone solutions are more suitable than a centralised solution for the medium-sized, smaller operation. </li></ul><ul><li>Localised solutions easier to implement in some countries than configuring a centralised solution. </li></ul><ul><li>Standardise on two vendors to allow effective application integration in a centralised strategy. </li></ul>
  14. 14. 4. Disparate solutions <ul><li>Best-of-Breed - Specialist solutions </li></ul><ul><ul><ul><li>Architecture </li></ul></ul></ul><ul><ul><ul><li>R&D Spend </li></ul></ul></ul><ul><ul><ul><li>Scope of product range </li></ul></ul></ul><ul><ul><ul><li>International deployment </li></ul></ul></ul><ul><ul><ul><li>Upgrade – bespoke solutions </li></ul></ul></ul><ul><li>300 BASDA members – 60% specialist solutions </li></ul><ul><ul><ul><li>40% standard package – 60% custom designed </li></ul></ul></ul>
  15. 15. Architecture Head Office Country Office Country Office Regional Office Regional Office Regional Office Regional Office Manufacturing Plant Manufacturing Plant Sales Office Sales Office Warehouse Warehouse Warehouse Warehouse Sales Office Sales Office
  16. 16. Architecture <ul><li>Central services </li></ul><ul><ul><li>Mainframe type configuration </li></ul></ul><ul><li>Decentralised </li></ul><ul><ul><li>Subsidiary stand-alone solutions </li></ul></ul><ul><ul><li>Employee Portals </li></ul></ul><ul><li>Wide-area networks </li></ul><ul><ul><li>EDI – Value Added Networks </li></ul></ul><ul><ul><li>3 rd World counties? </li></ul></ul><ul><li>Internet </li></ul><ul><ul><li>XML – open standards </li></ul></ul><ul><ul><li>SMTP / HTTP technology </li></ul></ul>
  17. 17. Infrastructure <ul><li>International deployment </li></ul><ul><li>Localisation issues </li></ul><ul><ul><li>Tax, Legal, Language, Currency, Character Set </li></ul></ul><ul><li>Template approach </li></ul><ul><li>ERP in smaller subsidiaries – in 3 rd world </li></ul>
  18. 18. Information roll-up Head Office Country Office Country Office Regional Office Regional Office Regional Office Regional Office Manufacturing Plant Manufacturing Plant Sales Office Sales Office Warehouse Warehouse Warehouse Warehouse Sales Office Sales Office Group Personnel Centralized Purchasing
  19. 19. Information roll-up <ul><li>Consolidation software </li></ul><ul><ul><li>Monthly / quarterly / annually </li></ul></ul><ul><ul><li>Financial information only </li></ul></ul><ul><li>Informal daily operating controls </li></ul><ul><ul><li>Key performance indicators (KPI) </li></ul></ul><ul><li>Drill-down from HO to smallest subsidiary </li></ul>
  20. 20. Total Cost of Ownership <ul><li>Initial Cost of Purchase </li></ul><ul><li>Capital cost of IT equipment </li></ul><ul><ul><li>workstations, servers, printers, networks, etc. </li></ul></ul><ul><li>Initial software licence fees </li></ul><ul><ul><li>often based on number of application modules purchased and the number of concurrent and casual users. </li></ul></ul><ul><li>Implementation </li></ul><ul><ul><li>External consultancy costs </li></ul></ul><ul><ul><li>Configuration and customisation </li></ul></ul><ul><ul><li>Training – either ‘train-the-trainer’ or individual external training </li></ul></ul><ul><ul><li>Internal staff costs – implementation, customisation and training </li></ul></ul>
  21. 21. Total Cost of Ownership <ul><li>On-going Running Costs. </li></ul><ul><li>Hardware maintenance and support charges </li></ul><ul><ul><li>internal & external. </li></ul></ul><ul><li>Application software maintenance and support charges </li></ul><ul><ul><li>internal and external. </li></ul></ul><ul><li>Cost of upgrades </li></ul><ul><ul><li>hardware, consultancy, customisation and internal costs. </li></ul></ul><ul><li>Cost of maintaining the infrastructure </li></ul><ul><ul><li>telecoms, licences. </li></ul></ul><ul><li>Management time </li></ul><ul><ul><li>solving operational and technical problems. </li></ul></ul><ul><li>Depreciation of initial capital costs </li></ul><ul><ul><li>normally spread over 1 to 5 years. </li></ul></ul>
  22. 22. Summary <ul><li>Licence fee - no indicator of total cost </li></ul><ul><li>Cheapest implementation </li></ul><ul><ul><li>By software developer </li></ul></ul><ul><ul><li>Vanilla ‘best-of-class’ </li></ul></ul><ul><ul><li>Template approach </li></ul></ul><ul><li>Major Issues:- </li></ul><ul><ul><li>Total Cost of Ownership </li></ul></ul><ul><ul><li>International deployment </li></ul></ul><ul><ul><li>Standardisation of configuration </li></ul></ul>
  23. 23. Contacts <ul><li>Dennis Keeling </li></ul><ul><li>tel +44 (0)1494 680907 </li></ul><ul><li>fax +44 (0)1494 680424 </li></ul><ul><li>E-mail dkeeling@ dkeeling.com </li></ul><ul><li>Web http:// www .dkeeling. com </li></ul><ul><li>BASDA </li></ul><ul><li>tel. +44 (0)1494 677699 </li></ul><ul><li>fax +44 (0)1499 681894 </li></ul><ul><li>E-mail info @ basda.org </li></ul><ul><li>Web http:// www.basda.org </li></ul><ul><li>http:// www.ebis-xml.net </li></ul>