End User Performance: Building and Maintaining ROI

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Explore how organizations are achieving strong ROI on their IT by emphasizing user performance. These companies ensure that users are prepared even before the software implementation, and understand the importance of a user-training strategy, not just a user-training delivery system.

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End User Performance: Building and Maintaining ROI

  1. 1. SAP White Paper mySAP ERP DELIVERING OPERATIONAL EXCELLENCE WITH INNOVATION Enterprise Services Architecture for Enterprise Resource Planning
  2. 2. © Copyright 2006 SAP AG. All rights reserved. HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C®, World Wide Web Consortium, No part of this publication may be reproduced or transmitted in Massachusetts Institute of Technology. any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed Java is a registered trademark of Sun Microsystems, Inc. without prior notice. JavaScript is a registered trademark of Sun Microsystems, Inc., Some software products marketed by SAP AG and its distributors used under license for technology invented and implemented contain proprietary software components of other software by Netscape. vendors. MaxDB is a trademark of MySQL AB, Sweden. Microsoft, Windows, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation. SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, and other SAP products and services mentioned herein as well as their IBM, DB2, DB2 Universal Database, OS/2, Parallel Sysplex, respective logos are trademarks or registered trademarks of SAP MVS/ESA, AIX, S/390, AS/400, OS/390, OS/400, iSeries, pSeries, AG in Germany and in several other countries all over the world. xSeries, zSeries, z/OS, AFP, Intelligent Miner, WebSphere, All other product and service names mentioned are the Netfinity, Tivoli, and Informix are trademarks or registered trademarks of their respective companies. Data contained in this trademarks of IBM Corporation. document serves informational purposes only. National product specifications may vary. Oracle is a registered trademark of Oracle Corporation. These materials are subject to change without notice. These UNIX, X/Open, OSF/1, and Motif are registered trademarks materials are provided by SAP AG and its affiliated companies of the Open Group. (“SAP Group”) for informational purposes only, without representation or warranty of any kind, and SAP Group shall Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, not be liable for errors or omissions with respect to the materials. VideoFrame, and MultiWin are trademarks or registered The only warranties for SAP Group products and services are those trademarks of Citrix Systems, Inc. that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. 2
  3. 3. CONTENTS Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Enterprise Resource Planning: Strategies and Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Why Consolidation Is Difficult. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Why Innovation Is Difficult. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Why Outsourcing Is Difficult . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 The Solution to Becoming an Adaptive Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Embracing Innovation and Achieving Operational Excellence. . . . . . . . . . . . . . . . . . . . . . . 10 Business and IT Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 – Example: Consolidating HCM as Shared Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Business-Process Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 – Example: Extending the Quotation Process to More Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 – Example: Reengineering the Employee On-Boarding Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 – Example: Reengineering the Procure-to-Pay Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 – Example: Integrating Desktop Productivity Tools with ERP Applications . . . . . . . . . . . . . . . . . . . 13 Business-Process Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 – Example: Outsourcing Logistics Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Unlocking the Potential of ESA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 mySAP ERP and ESA: Aligning IT and Business to Achieve Operational Excellence. . . . . 17 What’s Next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 For More Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3
  4. 4. EXECUTIVE SUMMARY Today, islands of automation, growing IT complexity, governance This white paper is intended for IT executives and line-of- pressures, and budget reductions are IT realities that hamper the business management. It introduces business strategies, trends, ability of small and large organizations to embrace new business and issues related to enterprise resource planning (ERP), finan- practices and technological innovation. As organizations look for cial management, operations management, and human capital better ways to achieve competitive differentiation, market respon- management (HCM) that drive the consideration of enterprise siveness, and operational excellence, they often find their existing services architecture (ESA). It also examines the importance of IT landscapes too complex, inflexible, and costly to adapt to such architecture and the role it plays in guiding organizations evolving business conditions. Even if organizations can afford the to create value, improve efficiency, and respond to evolving busi- resources, time, and effort it takes to change and enable new ness needs in ERP – on any scale and for any industry. The docu- practices, all those might prove too extensive to justify the value ment then illustrates and compares a number of deployment of the investment. IT – often regarded as a monolithic, rigid, examples with and without ESA and clarifies why businesses are slow-moving, or foreign entity by many businesspeople – must be adopting an enterprise services approach to compete effectively aligned with business needs and evolve with changing market in a dynamic marketplace. demands to enable future innovation, agility, and excellence. The growing importance of IT architectures has led many IT executives to rethink traditional approaches and seek better, smarter, and more efficient ways to serve their organization’s needs. The adoption of services-oriented architecture (SOA) is central to becoming more responsive and agile. An SOA not only helps organizations address short-term needs – such as lowering IT costs, improving quality of service, and enhancing existing IT systems – but also, and more importantly, provides a flexible, adaptive, and open IT foundation that can accommodate changing business practices, market dynamics, and competitive challenges. 4
  5. 5. ENTERPRISE RESOURCE PLANNING: STRATEGIES AND TRENDS In the past, organizations deployed ERP software to gain internal efficiency in back-office operations, such as manufacturing, Common Experiences When Changing accounting, HCM, financial management, and purchasing. Business Practices Such technological investments helped management reduce costs. But today’s businesses can no longer rely on automating • Once the competition copies a differentiating activity back-office processes to achieve top-line growth and bottom-line from the core, efficiency and productivity become the improvements. primary purpose of the core. • Consolidating common business and IT functions This situation is well described in Living on the Fault Line by reduces costs and redundancy while it enforces Geoffrey Moore. In the book, Moore frames the challenges of global policies. achieving continuous business innovation around an organiza- tion’s “core,” the business processes that differentiate businesses • Outsourcing nonstrategic processes enables an enter- in the eyes of their customers, and its “context,” which is every- prise to focus on its strategic or core competency. thing else (see Figure 1). The purpose of an enterprise’s core is to drive business innovation and competitive differentiation to stimulate growth. The context’s primary goal, according to Businesses might want to leverage their ERP software for com- Moore, is to operate as efficiently and productively as possible. petitive differentiation by finding new ways to achieve greater The catch is that core remains core only as long as it differenti- efficiency in previously untried or unsuccessful areas. They ates the enterprise from the competition. Once it has been might also want to consider outsourcing standard processes copied, it becomes context and is no longer an innovation. to free up resources for strategic endeavors that lead to At that point, the organization must refocus on improving the differentiation. efficiency and productivity of the context. Examples of business practices that can enhance differentiation or improve productivity for an organization include the Core Context Focus on Differentiation Focus on Productivity following: Innovation Standardization • Implementing mass customization with geographically Mission- dispersed contract manufacturers and suppliers to reduce Consolidate Critical cycle times, rework, and inventory costs in the automotive Activities Compose or high-tech industry Out-Task • Extending an existing quotation management process to exter- Insource Scale nal suppliers to encourage more efficiency and responsiveness within the contract manufacturing process Enabling • Improving new hire, employee transfer, termination, and Activities Invent Retire other workforce management events to automate the Invention Commoditization exchange of information with third parties in accordance Courtesy of Geoffrey Moore’s Living on the Fault Line with local and global policies Figure 1: Business-Process Innovation – Core and Context • Centralizing common operations as a shared service to enforce global policies and leverage economies of scale • Outsourcing payroll and human capital management to third-party agencies 5
  6. 6. THE ISSUES Given the complexity and nature of IT in many enterprises, these applications. Similarly, developing innovative processes from the operational strategies are difficult to implement. Traditionally, context into the core is equally challenging and expensive, organizations develop custom applications from scratch and use because IT must determine the best way to leverage existing various platforms, but then find that they lack the flexibility to investments. And business-process outsourcing is difficult and accommodate change. Moving from core to context to consoli- expensive, because it requires organizations to manage the date common IT practices, for example, is difficult and expensive. performance of the third-party vendors on service-level To make the move, enterprises must analyze their IT landscape agreements, but monitoring and enforcing such new policies to determine which assets to replace, upgrade, or make obsolete; would require new integrations with third-party systems that acquire new skills; and support integration with new reside beyond existing boundaries. Core Context Core Context Custom Development Packaged Applications Custom Development Packaged Applications on a Tech Platform on a Tech Platform Innovation Standardization Innovation Standardization Consolidation Innovation is extremely can’t easily difficult: leverage existing • New platform investments. • New skills • New integration • Time • ... Invention Commoditization Invention Commoditization Core Context Custom Development Packaged Applications on a Tech Platform Innovation Standardization Outsourcing is challenging: • New process extensions • Data on different systems • Governance • ... Invention Commoditization Figure 2: Business-Process Innovation Hampered by IT
  7. 7. Why Consolidation Is Difficult Why Innovation Is Difficult In many enterprises, consolidating common business and IT To achieve innovation, organizations often attempt to build functions is difficult and costly for several reasons. For instance, upon existing IT investments. However, a number of issues applications are often implemented independently to address impede their efforts. For instance, some organizations use enter- specific needs at a given time. This approach creates islands of prise application integration (EAI) tools to integrate independent automation that comprise different technologies and proprietary applications to support new or reengineered business processes. code that are too complex to integrate, that are too costly to This approach relies upon proprietary interfaces to hardwire dif- adapt to changing business requirements, and that make it diffi- ferent applications. Although EAI tools have been used success- cult to share critical business information. With evolving business fully for such linkage, they require employees with specialized conditions – such as mergers and acquisitions, company spin- skills who understand the inner workings of the systems on both offs, and reorganizations – fragmented information, inconsistent sides to create tightly coupled integration. In addition, skilled user interfaces, additional pockets of automation, and redundant employees are also needed to maintain the integration over the systems not easily used by other business units only complicate useful life of the applications. But the costs of up-front develop- the IT landscape further. ment and ongoing maintenance and efforts involved in integra- tion can be avoided. Consider the example of an enterprise that has grown through acquisitions and now consists of a few independently operated Consider a second example of the difficulty of process inno- HCM, financial, procurement, and IT groups, each with its own vation. In many organizations, the need to reference structured system to support local needs. Any policy changes required at the (or online) data and unstructured (or offline) data is not only global level – such as IT security policies, privacy laws, or desirable to increase efficiency, but also mandatory to satisfy contractual pricing – must be enforced separately at the local regulatory requirements. This situation is especially true in the level. public sector, where agencies rely on traditional paper forms to conduct business with smaller companies that might not have The question? How can organizations in such a situation act online access. Because traditional systems do not fully address the effectively to comply with global and local regulations? The end-to-end process, the agencies create a wealth of offline data answer? Not easily. Many organizations look for better ways to through administrative paperwork, e-mail, faxes, mail, and other centralize common functions as shared services, rid themselves methods of offline communication. The staff must then spend of redundancy, increase their operating efficiency, and enable non-value-added time sorting the offline information and tying reuse of their existing investments. Unfortunately, the growing it back to, or reentering the data into, appropriate systems for complexity of the organization’s IT landscape often hampers compliance purposes. To innovate this process and ensure com- these laudable goals. pliance with federal regulations, agencies must invest in IT staff to develop the custom integration necessary for data exchange and in a team of contract administrators to govern the end-to- end process. 7
  8. 8. Why Outsourcing Is Difficult Outsourcing is often difficult, because organizational boundaries Why the Complexity of IT Systems Hinders constrain an organization’s systems and applications, neither of Excellence and Innovation which was designed to be interoperable with external systems. To accommodate outsourcing, organizations often build proprietary • Impedes the ability of organizations to respond integration between internal and external systems, which to business change increases the cost of ongoing maintenance and adds complexity to the IT environment. In addition, changes to the internal or • Requires additional investments to unite scattered or hidden information external systems cause a wave of updates to development, testing, and documentation. For example, if an organization wishes to • Increases the costs of building and maintaining outsource its payroll information, it must extend its time and integration attendance processes in HCM to a third party. But doing so is • Requires custom integration by personnel with difficult, because success here relies upon the ability of multiple scarce and expensive skills systems with different functionalities, underlying logic, and rules to work well with each other. • Forces employees to work with multiple systems to accomplish tasks Consider logistics outsourcing as another example. Extending an organization’s inventory management system to a third-party warehouse inventory system requires proprietary integration and specialized skills unless the systems are built upon open stan- dards and communication protocols. Subsequent changes to the tightly coupled systems drive up the costs of maintenance. 8
  9. 9. THE SOLUTION TO BECOMING AN ADAPTIVE ENTERPRISE The need to respond rapidly to business demands, support new Furthermore, although Web services are suitable for promoting strategies, and improve the overall user experience is driving syntax and protocol-level communications, they do not yet pro- IT organizations to search for new ways to improve IT at a lower vide a way to ensure semantic interoperability. For example, the cost. IT organizations can overcome these challenges by adopting way a customer is defined in a product from Siebel Systems dif- SOA. In general terms, SOA is a technical framework for building fers from the way it is defined in a solution from SAP. Organi- software applications that use services available from a network zations need a way to resolve the data and process disparities like the Web. Applications in SOA are designed to use Web between different Web services and to translate syntax and services as the standard means to communicate well-defined communications into business constructs that can be reused information with an array of other applications. across different situations. The notion of enterprise services does exactly that through the “semantic leveling” and “right sizing” Enterprise services architecture, as defined by SAP, is a business- of individual Web services. For example, an enterprise service can driven approach to SOA that expands the concept of Web services encapsulate incompatible and individual Web services that span into an architecture that supports enterprise-wide, service- the Siebel and SAP® systems into a common business concept enabled business architecture. However, SOA and ESA are not such as “retrieve customer information.” Various enterprise serv- one and the same. The difference between an SOA and an ESA ices can then be assembled to form a composite application. comes from service enabling the most common business process- es, such as procure to pay, order to cash, and hire to retire. Composite applications enable the orchestration of new business Although SOA can be seen as a more technical concept, ESA can processes that leverage enterprise services from existing applica- be thought of as the blueprint that enables flexibility, openness, tions in ESA. Whether a composite application is designed for and agility, which are critical elements for success in an adaptive internal or partner use, it shows how any company can address enterprise. Simply put: ESA is a blueprint for a business-oriented new business needs and extend its existing processes by using approach to SOA. existing systems and applications based upon ESA. 9
  10. 10. EMBRACING INNOVATION AND ACHIEVING OPERATIONAL EXCELLENCE ERP solutions that adopt a services-oriented approach enable In a centralized scenario, a self-service portal for employees is organizations to achieve competitive differentiation by allowing introduced globally to allow employees to perform simple HCM them to implement a variety of IT and business strategies, includ- tasks or use an online employee handbook and other knowledge ing business and IT consolidation, business-process innovation, tools. The portal serves as an automated first line of support. The and business-process outsourcing. This section illustrates the HCM department is readily accessible if the employee needs assis- value of an ERP system built upon ESA for helping organizations tance with the task at hand or with using the portal. This new implement a number of processes under the following strategies: approach liberates the local HCM representative from a signifi- cant number of routine administrative tasks to focus on more Strategies Used to Achieve Competitive Differentiation strategic initiatives that can further improve employee satisfac- tion and reduce operating costs. Strategy Examples • Business and IT consolidation • Consolidating HCM as shared services Existing Employee On-Boarding Process Deployment of the employee self-service portal requires extensive • Business-process innovation or • Extending the quotation process to reengineering more suppliers proprietary integration with back-end systems. For example, to • Reengineering the employee register an employee home address change, the update must on-boarding process • Reengineering the procure-to-pay need to be reflected across multiple systems, as shown in the fol- process lowing table. • Integrating desktop productivity tools Information Used by Multiple Systems • Business-process outsourcing • Outsourcing logistics operations Type of Information System Involved Employee master information ERP system Business and IT Consolidation By consolidating business processes, organizations can reduce Travel profile Third-party travel system redundancy and increase cost savings. Organizations avoid the 401(k) Third-party financial services system complexity and costs of a fragmented, heterogeneous environ- Employee stock purchase plan Third-party investment system ment by consolidating redundant applications and systems into a single technology platform based upon ESA. American Express card Third-party credit and banking system Payroll ERP system and third-party payroll Example: Consolidating HCM as Shared Services processing Consider the example of centralizing HCM functions for all Tax services Third-party tax services employees. In a distributed scenario, local HCM teams are on-site to address specific issues and administrative tasks. The tasks might be as simple as executing an address change, enrolling in a 401(k) plan, or managing direct payroll deposits. But the tasks might also be as complex as managing benefits planning through different providers using different systems on several continents. 10
  11. 11. Integration of an HCM solution without ESA requires the design, and external systems – including homegrown, third-party, testing, deployment, and documentation of a multitude of cus- and legacy systems – are in place to help address ERP, customer tom proprietary interfaces. Changes to a given interface result in relationship management (CRM), supplier relationship manage- yet another wave of development, testing, and documentation. ment (SRM), HR, supply chain management (SCM), and In time, this task becomes insupportable, because it is overly financials. complex, cost prohibitive, and highly inefficient. The process starts with the receipt of a request for quotation Enhanced Employee On-Boarding Process (RFQ) from the end customer. The account manager enters the An HCM solution built upon ESA can use enterprise services information into the CRM system and then assesses the opportu- to exchange employee data securely and reliably with multiple nity. The internal team is notified of the opportunity and assem- systems. For example, when an employee submits a home address bles pricing and material information from multiple internal change through the self-service employee portal, the appropriate and external sources. Depending upon the sourcing needs, the change home address service is invoked to communicate real-time internal team might produce an RFQ to source more competitive information to third-party systems. Several systems can use the quotations from suppliers. This situation can occur when insuf- enterprise services developed upon open standards–based inter- ficient manufacturing capacity exists or when more competitive faces in the enterprise services repository. This flexibility reduces prices can be obtained. the time, effort, and cost required to build and maintain tightly coupled integration. Existing Quotation Management Process The contract manufacturer relies upon its internal team as Business-Process Innovation human integrators to bridge the flow of information manually By reengineering existing processes and by composing and exten- between multiple systems and parties. The extended quotation ding new applications, organizations can enable new business management process requires extensive offline communication, processes. Doing so is difficult without ESA, because innovation paperwork processing, data reentry, and other administrative or changing existing business processes would require the IT tasks, all of which result in poor process governance and frag- organization to understand the inner workings of the underlying mented data. The process is clearly ineffective, reactive, unre- applications. With ESA, IT organizations can compose appli- liable, time-consuming, and difficult to manage for all parties cations that leverage existing IT investments and accelerate involved. Changes to the original RFQ require a wave of updates the rate of change while eliminating the need for proprietary to the existing applications, which compromises responsiveness integration. and data accuracy. The contract manufacturer can automate the process through hardwired integration between its internal ERP Example: Extending the Quotation Process systems and the supplier’s systems, but this approach is complex to More Suppliers and difficult – especially considering the vast number of suppliers Consider the example of a contract manufacturer that must and proprietary systems with which the manufacturer might extend the quotation management process to external suppliers have to connect. And even worse, this type of integration increas- to improve efficiency and responsiveness. Today, the process es the total cost of ownership by making the IT landscape more spans the line of organizational silos – the end customer, the and more complex. internal team, and the external suppliers. Numerous internal 11
  12. 12. Enhanced Quotation Management Process 7. Initiate facilities request for office, phone, furniture, and Using enterprise services, ERP systems can exchange business- wiring to support TCP/IP (automated) critical information between different systems, including SRM 8. Provision services, including facilities, IT procurement, and third-party CRM systems, and even with other ERP systems. office space, and so on (automated) Examples of enterprise services include purchase order and con- 9. Schedule new-hire orientation (hiring manager) tract status tracking, costing updates, sourcing, vendor quotes 10. Enroll in benefits, submit W-4 forms, and so on (employee status tracking, and PO creation. through third party) The new approach enables different systems to communicate With the composite application, activities can be automated and using a common language and reduces the need for data reentry information can be exchanged in real time. Furthermore, the and offline communication. For example, the document con- composite application provides a consistent look and feel that troller receives supplier quotation information through vendor makes it simpler for employees to access the enterprise services of quotes developed specifically for a third-party CRM solution. the ERP system and other systems. Information is then automatically communicated to the manu- facturer’s system with enterprise services. Example: Reengineering the Procure-to-Pay Process Consider the example of a federal agency in the United States Example: Reengineering the Employee that acquires goods and services from suppliers. Today, federal On-Boarding Process agencies are mandated to use standard forms to conform to Fed- Consider the employee on-boarding process that affects personnel eral Acquisitions Regulations (FAR). Depending upon certain in a number of departments, including the hiring manager, criteria, such as acquisition value and type, specific contractual human resources and facilities employees, IT administrators, and provisional clauses must be presented on any forms sub- and so on. mitted to suppliers and contractors for bidding. (Agencies still rely upon standard forms to accommodate suppliers and With ESA, organizations can compose new business processes by contractors who might not have online or Internet access.) orchestrating and rearranging existing enterprise services into a composite application that automates the new-hire process as With ESA, agencies can submit standard forms as Adobe PDF follows: files to suppliers and contractors (see Figure 3). Suppliers and 1. Initiate new-hire request (hiring manager) contractors can print a form and fill it out offline, or enter 2. Approve request (approver) the information directly into the PDF file and submit it. 3. Generate offer letter and employee contract (automated) 4. Accept or reject offer (candidate) Using enterprise services, the unstructured data in the PDF 5. Initiate service request to provision users on IT systems document is easily transported to ERP systems and stored as (automated) structured data. The benefit of this approach is that agencies can 6. Initiate purchase request to acquire new laptop and other reuse existing online and offline forms to comply with federal supplies (automated) requirements. At the same time, the competitive bidding process is simplified for contractors and suppliers. 12
  13. 13. real-time information between a desktop tool and a financials system in the context of managing appointments with Microsoft Outlook. Time Recording Plan Execute Control Schedule Assign Submit and Appointment Project Charge Time Figure 3: Sample RFQ in Adobe PDF Format Example: Integrating Desktop Productivity Tools with ERP Applications ESA Integration Time and attendance management offers a prime example of the • Real-Time Access and Updates from Desktop Tools to ERP need for a services-oriented approach. To manage time and • Data Integrity • Corporate Governance attendance, employees must record their activities in HCM and • Real-Time Insight financials systems and maintain the same information using desktop tools such as Microsoft Outlook and Microsoft Project. Figure 4: Enhanced Time Management Process An abundance of information that, for compliance and control purposes, is scattered throughout the universe of available Business-Process Outsourcing systems and is unnecessarily difficult to track further complicates By outsourcing context activities, organizations enable their the process. IT and business employees to focus on the next differentiating practice and still ensure proper governance of service levels. Using enterprise services, time and attendance information is Organizations can use enterprise services based upon open automatically exchanged between third-party desktop tools, standards to communicate and exchange information between HCM systems, and financials systems, thus saving employees time internal and third-party systems rather than building pro- and effort and greatly improving the accuracy of reporting. Figure prietary, costly integration with third-party systems. Because 4 illustrates how employees can improve productivity while multiple systems can reuse enterprise services, this approach meeting corporate compliance requirements by exchanging significantly reduces IT complexity. 13
  14. 14. Example: Outsourcing Logistics Operations The outsourcing initiative requires interoperability of the com- Consider the outsourcing of logistics management for a global pany’s internal ERP and legacy systems with the homegrown, high-tech original equipment manufacturer. The company has sophisticated transportation and warehouse management tools manufacturing plants, logistics centers, and third-party ware- of the third-party provider. Without proper ESA, the company houses located across Europe, the Middle East, Africa, the Asia- will be forced to build and maintain custom, proprietary inter- Pacific region, and North America. Each location has varying faces between its ERP system and all third parties to exchange inventory levels of finished goods, from 0 to over 120 days of product, bill-of-material, order, inventory availability, pricing, supply, to meet service-level agreements (SLAs) with customers. and customer information. The interfaces are required to ensure that the third-party provider can share real-time information at A key objective for the company is to reduce the finished goods any time on shipments, including those in transit and held up at inventory across its distribution centers and warehouses. How- customs, such as details on expected delivery dates, damaged ever, the staff is consumed by the day-to-day activities of tactical shipments, inventory at distribution centers, and so on. logistics and warehouse management related to global ship- ments, such as working with logistics carriers, custom agents, Now, suppose the company decides to establish a new process to and third-party warehouse providers. monitor and enforce SLAs with the third-party logistics provider. Because of the existing complexity of IT and the inflexibility As a result, the manufacturer decides to outsource its logistics of the tightly coupled systems, the organizations will face chal- and warehouse operations to a third-party provider with special- lenges in decomposing existing functionality and composing ized expertise in multimodal transportation and planning, con- a new application that can span business and IT boundaries. tract negotiation, competitive pricing, insurance management, Platform For Packaged Business Processes import and export, taxation, warehouse management, and so on. These activities are clearly mission critical for the business, but Flexible Packaged Business Applications the company recognizes that it does not have the core com- Custom and SAP® xApps™ mySAP™ Composite Applications Powered by petency in-house to differentiate itself. Powered by SAP NetWeaver SAP NetWeaver® Innovation Standardization to Pay Procure Existing Logistics Outsourcing Process The company uses an ERP system for sales and distribution Mission- Order to Cash Critical and materials management, legacy systems for HR and CRM, Activities Manufacture to Inventory and third-party solutions for warehouse management. The IT Enterprise environment is complicated by a myriad of unique business Services processes and proprietary, tightly coupled integrations. Commoditization Enabling Activities Enterprise SAP NetWeaver Services Repository Invention Custom CRM SCM SRM PLM ERP Figure 5: IT Landscape Before Logistics Outsourcing 14
  15. 15. Enhanced Logistics Outsourcing Process What’s more, enterprise services enable organizations to compose In ESA, ERP, HCM, financials, and operations software can use and fine-tune business processes more easily. In the case of build- enterprise services to communicate and exchange information ing a process that governs an SLA across company boundaries, with the external systems of the third-party logistics provider. the use of enterprise services can ensure that business-critical Both parties can leverage their existing IT systems and publish information is exchanged in real time between the third-party enterprise services that can be found and invoked over a network. provider and the manufacturer. For example, the manufacturer Some of the services might include product details, pricing, can monitor the actual service levels of deliveries from order inventory availability checks, delivery status checks, purchase receipt (in the ERP system), to shipment in transit (in the third- order details, purchase order changes, partial shipments, and party system), and ultimately to shipment delivered (in the third- bill-of-lading details. party system), even though the process spans different systems. Platform For Custom Business Processes Compose Differentiating Processes . . . by Leveraging Packaged Solutions Custom and SAP® xApps™ mySAP™ Composite Applications Powered by Powered by SAP NetWeaver SAP NetWeaver® Innovation Source Standardization Procure Procure Mission- to Pay Critical Order Ship Order Activities to Cash Order to Cash (with Logistics Outsourcing) Plan Manufacture Inventory Manufacture to Inventory Enterprise Services Commoditization SAP NetWeaver Enterprise Services Invention Repository Tracking Custom Mgmt. house Trans- Ware- Third- Third- tation CRM SCM Party Party SRM PLM ERP por- Figure 6: IT Landscape Enabling Logistics Outsourcing 15
  16. 16. UNLOCKING THE POTENTIAL OF ESA To address the business context in communication between SAP NetWeaver also enables delivery of role-based user interfaces applications, SAP elevates Web services to enterprise services through an enterprise portal that allows organizations to struc- through its Enterprise Services Architecture Adoption Program, ture business processes and deliver relevant financial, operational, which helps companies develop a blueprint for their ESA. HCM, and other business information tailored to a specific role. Through the program, organizations can expand the concept This approach improves user productivity and provides a more of Web services into an architecture that supports an enterprise- consistent user experience. With SAP NetWeaver, organizations wide, service-enabled business architecture. can provide their users with access to structured and unstruc- tured information scattered throughout an enterprise, including The mySAP™ ERP solution, the mySAP Business Suite family of information stored in SAP and third-party systems, databases, business solutions, and many partner solutions are powered by data warehouses, desktop documents, and Web content. the SAP NetWeaver® platform – the open integration and appli- cation platform that provides the best way to integrate all Rather than establishing, managing, and maintaining a myriad of systems running SAP or non-SAP software. SAP NetWeaver IT systems, organizations can cut costs and reduce IT complexity unifies integration technologies into a single platform and is by consolidating their infrastructure. SAP intends to develop SAP preintegrated with business applications, enabling change and NetWeaver into a business-process platform, or “applistructure,” reducing the need for custom integration. SAP NetWeaver that helps organizations merge enterprise applications with infra- enables customers, partners, and SAP to unlock the potential structure technology. This approach allows business analysts to of ESA. Based upon open standards like Web services, Java, and compose applications by assembling enterprise services from the XML, SAP NetWeaver unites information and functionality enterprise services repository, a central repository for modeling from SAP applications and offers them as enterprise services for enterprise services and storing metadata as defined by customers, communication with SAP, third-party, and legacy systems. SAP, and partners. SAP plans to make the repository an integral part of both SAP NetWeaver and mySAP ERP as they evolve to Traditionally, organizations have had two options when it comes enable an ESA. Figure 7 illustrates the different components en- to IT infrastructure: build or buy. With ESA, organizations have abling the evolution of mySAP ERP and mySAP Business Suite a third choice: compose. Organizations that leverage ESA can to ESA. develop applications more quickly and with less effort to support next or evolving business practices. Portal Devices Office RFID Organizations with an ESA can use the SAP NetWeaver Visual Composer tool to compose applications. In the past, teams of Composite Applications business analysts and application developers have translated busi- ness requirements into detailed, procedural logic. With ESA, the language of business becomes the language of IT. Enterprise serv- Enterprise Services SAP NetWeaver® ices within mySAP ERP are defined with simplicity and at a gran- Repository ularity that allows business analysts to understand them easily. Thus, business analysts can leverage the appropriate enterprise mySAP™ services for composite applications that support new business Existing Systems scenarios. Figure 7: mySAP ERP in ESA 16
  17. 17. mySAP ERP AND ESA: ALIGNING IT AND BUSINESS TO ACHIEVE OPERATIONAL EXCELLENCE The following table illustrates the difference between pursuing business strategies using a traditional IT environment and doing so with an ESA in place. Adopting ESA Enables Operational Excellence Business Strategy ERP Examples Traditional IT Environment With Enterprise Services Architecture in Place Consolidate common ERP and legacy Accounting Different applications might have differ- Enterprise services can be used by systems to provide shared services and • Time and expense management ent technology platforms and proprietary multiple applications, so consolidation reduce total cost of ownership • Credit and debt analysis interfaces – difficult and complex. will be more efficient and effective. • Collections • Invoicing • Accounts payable • Billing dispute resolution Self-services • Employee interaction center for centralized management of IT and HR Compose applications to support unique HCM Custom-built applications with Enterprise services are modular and can business needs • Employee on-boarding proprietary code are not designed for be easily rearranged to support composite reuse by other systems. applications. Extend existing applications to drive Supply management and procurement Special skills and proprietary interfaces Enterprise services are modular and can further operating efficiency beyond • Procurement are required to integrate multiple be orchestrated to enable other business existing boundaries • Logistics management systems, meaning higher costs and effort. processes by other systems. • Warehouse management Changes would also drive total cost of ownership higher as a result of additional coding, testing, documentation, and training. Outsource core business processes and Human capital management Core business processes are difficult to Business-process outsourcing is simplified their IT systems • Payroll outsource because the underlying IT because enterprise services are modular • Benefits enrollment systems are tightly integrated. and loosely coupled and can be more • Benefits management easily out-tasked without affecting the • Training rest of the IT landscape. Supply management and procurement • Procurement • Logistics management • Warehouse management Demand management • Call center operations • Analytics 17
  18. 18. WHAT’S NEXT? To demonstrate its continued leadership in helping customers In 2005, SAP announced its ESA preview system with more than move toward SOA and build upon its commitment to provide 500 live enterprise services. Developed and deployed on the the partner community with a development platform, SAP’s road latest version of mySAP ERP, the preview system offers partners, map for ESA includes the following milestones: developers, and customers an opportunity to test the enterprise • SAP plans to publish an inventory of its enterprise services that services, and more importantly, to influence the definition and customers and partners can use for planning. Customers’ and development of service-enabled solutions that help enterprises partners’ composite applications and longer-term planning can run business-critical processes more efficiently. leverage the list. Additional service-enabled functionality will be made available, focusing on business-process flexibility and The following are just a few examples of the ways that the enter- anticipating the needs of new composite applications. prise services can be used: • In 2006, SAP intends to create an enterprise services repository • A third-party provider of tendering software uses enterprise based upon the next release of SAP NetWeaver. The purpose is services to extend the purchasing functionality in mySAP ERP to make all relevant enterprise services actively available from to address the public sector’s unique regulatory requirements. the repository for use by selected partners and customers. Enterprise services from mySAP ERP help the company verify budget availability before the release and publication of RFQs. Once the award is determined and the tendering process between the customer and supplier is complete, the company uses enterprise services to generate purchase order information and pass the information to mySAP ERP for invoicing and pay- ment processing. • Using enterprise services, another third-party software and services company integrates its time and attendance tracking application with the mySAP ERP Human Capital Management solution some 90% faster than it could with traditional methods. Enterprise services enablement of mySAP ERP allows the vendor to provide its customers with comprehensive and real-time insight into time and attendance status in a fraction of the time it would have taken otherwise. • A large infrastructure management software company is work- ing to extend its asset management and infrastructure moni- toring systems into the purchasing functions available in the mySAP ERP Operations solution. Traditionally, these systems have been implemented independently, without integration with SAP systems. ESA will enable the company to use enter- prise services from SAP to exchange asset details, pricing, and contract terms and conditions from the purchasing functions to its asset management systems. The company also plans to trigger an event from its infrastructure management tool to automate the procurement process in the purchasing module. 18
  19. 19. CONCLUSION FOR MORE INFORMATION Today, enterprises are burdened by complex IT landscapes that For more information about how ESA can help your organiza- drive up the cost of innovation and slow down the pace of tion deliver operational excellence and realize new levels of change. With rapidly shifting business conditions – such as innovation, please contact your account executive or visit us mergers and acquisitions, business consolidations, new business on the Web at www.sap.com/erp, ventures, new partnerships, and changing market dynamics – www.sap.com/solutions/esa/index.epx, or enterprises must find a better way to effect change and employ www.sap.com/contactsap. innovation. There is a better way. The market is recognizing the value and potential of SOA – a new approach to help organizations make their IT operations leaner, more responsive, and more easily adaptive to enterprise solutions. SAP is among the first to recog- nize this vision and is leading the market with an ESA vision to support the next generation of ERP innovation. mySAP ERP, powered by SAP NetWeaver, is evolving into an ESA with a new repository of enterprise services developed upon open standards for exchanging information with a variety of sys- tems, such as ERP, HCM, SRM, CRM, and SCM. The evolution will enable customers and their trading partners to seek greater efficiency and differentiation as they become empowered to implement new business strategies with less IT complexity, lower total cost of ownership, and increased agility. With ESA, mySAP ERP enables organizations to increase effi- ciency and growth by doing the following: • Extending existing processes across new business boundaries • Consolidating business and IT to leverage economies of scale and eliminate redundancy • Innovating existing business processes by developing composite applications that leverage existing investments • Replacing custom programming with model-driven composition of applications • Delivering flexible and highly productive user interfaces • Simplifying the IT landscape and reducing the costs and effort associated with integrating internal and external applications Organizations of all sizes around the world now have the choice, flexibility, and freedom to evolve into adaptive enterprises using an enterprise services approach that keeps them open to innovation and responsive to change. 19
  20. 20. www.sap.com /contactsap 50 077 977 (06/02)

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