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COEs Evolve into Agents of Change

by Evan J. Albright

August 11, 2009

SAP Centers of Excellence (COEs) that have stood the test of time are evolving along with the technology they support. Learn how these agents of change enable organizations to take advantage of the interoperability of SAP NetWeaver and the reusable technology of enterprise SOA.

Originally envisioned as agents for centralization and cost reduction, SAP Centers of Excellence (COEs) are evolving along with the technology they support. That traditional model of a COE — a siloed, centralized organization designed to support a specific SAP application — is disappearing in favor of a less rigid organization more tilted toward supporting the business rather than supporting an application or system. On the horizon, COEs are being seen as the agents of change to enable organizations to take advantage of the interoperability of SAP NetWeaver and the reusable technology of enterprise service-oriented architecture (enterprise SOA).

“Traditionally, a COE or a solution center has been focused on an individual IT vendor,” says Tushar Mehta, a principal architect in SAP’s Melbourne, Australia office. “Its main objective was to focus on operating and maintaining a silo of business functions serving a BU [business unit] or a single technology.”

Today’s enterprise SOA, however, forces a more business process focus for IT. Companies that adopt an enterprise SOA philosophy and continue to use the silo approach with their COEs risk being at a competitive disadvantage. Having a COE that is aligned with the enterprise SOA concept better positions a company to reap the benefits of enterprise SOA and to enable the necessary organizational changes.

Why Have a COE?

According to Doug Whittle of Whittle Consulting, organizations create COEs to control costs, reduce risk, optimize and support business processes, train users, and integrate functionality, processes, and data. COEs can be called “communities of practice,” “knowledge banks,” “shared resource centers,” or locations for shared services.

Novartis, one of the world’s leading healthcare companies, operates several COEs for all those reasons and more. “In the life-sciences and pharmaceutical industries, we need to harmonize change management and change control,” says Ken Grady, head of ERP for the Novartis Vaccines and Diagnostics division. “Compliance is a very high demand for us. We need to make sure we have a standardized process for documentation, for example.”

As a result of the need for a strong compliance component, “Being in a heavily regulated environment, we need to have a rigorous change-management/change-control policy and practice with extensive documentation of user requirements and testing,” Grady says. One of the principal responsibilities of COEs is to stay connected with each other “to force harmonization in policy and controls to maintain a single production system.”

Evolution of a COE is not a new concept. Since the introduction of the concept of a COE more than a decade ago, many companies have turned to these organizations to provide a wide variety of functions. According to Whittle, some of the roles COEs can perform are:

  • Being a core group that sustains and grows the architecture, business processes, and configuration, as well as base applications and support

  • Managing the SAP investment in terms of technical infrastructure and related processes

  • Protecting the investment (e.g., security, master data) and using it to drive business benefit (aligning systems design to best practices); becoming the key user network identifying opportunities to drive enhancements

  • Developing solid processes in change and problem management, ranging from the help desk all the way back to development

  • Becoming a business-led organization, reporting back to the business and within the ERP solution center

  • Providing integrated, joint, business and IT leadership

At Capgemini, a leading consulting and professional services firm, the COE is very much a part of the business, according to Rita Swan, head of the company’s COE for the United States. The COE owns the hardware and infrastructure Capgemini’s consultants use to demonstrate and test SAP applications for their clients. The COE is also in charge of identifying training programs for consultants (see “Center of Excellence as an Agent for Change”).

Center of Excellence as an Agent for Change

At SAP consultancy Capgemini, the COE has become an agent of change, aligning consultant expertise with the strategic direction of the company. A decade ago, an SAP consultancy could be expected to have individuals who were expert in one specific area of SAP. One person would know FI/CO, another HR, and so on. Today, much of the growth within the SAP market has been around non-traditional R/3 products. For example, a request for proposal from an SAP customer seeking Capgemini’s expertise may involve Financial Accounting/Controlling, Project System, cFolders, portals, Employee Self-Service (ESS)/Manager Self-Service (MSS), composite-application (xApp) Resource and Portfolio Management (xRPM), and SAP NetWeaver’s business intelligence (BI) functionality. To send a team of consultants, each with an expertise in one specific area of technology, would cost more than any client would be willing to pay. Capgemini turned to its COE, which in turn created what it calls the “2-2-1” program.

The 2-2-1 initiative identifies the education and career development steps its consultants must take to adapt to the changing SAP solution architecture. Capgemini employees are required to know:

  • 2 = At least two “core” modules of SAP

  • 2 = Two “extended” areas

  • 1 = One “tool” (such as SAP Solution Manager, SAP Composite Application Framework [SAP CAF], SAP NetWeaver Visual Composer)

The 2-2-1 program includes self-learning, formal training, and staffing strategies tailored to the individual based on his or her experience base and career aspirations.

For example, an employee who is a Sales and Distribution (SD) module expert might choose a path that expands their knowledge into Materials Management (MM). This person could add SAP CRM and SAP NetWeaver Portal to their competencies, and also take training on SAP Solution Manager.

Based on a changed business landscape, the COE served as the agent of change to break down the technology silos and cross-train its workforce to make them more efficient and more cost-effective for clients.

Eskom, a South African utility company, established its COE when it implemented SAP in the late 1990s. “At the time we deemed the best way forward was to have it centralized,” says Rudolph Louw, production support manager for Eskom’s Business Application Solution Centre. Eskom has autonomous divisions, much like Novartis, but instead of each division having its own COE with its own “bits and pieces” of SAP, “the board decided that we would have [just one] COE,” he says.

“The specific business objectives at the time were simple: to prevent duplication of skills between divisions,” Louw says. “If we didn’t have a COE, our four divisions would each have to have an FI [Financial Accounting] specialist. It was simple mathematics.” The scope of the labor market in South Africa almost requires centralization. In South Africa, when it comes to finding SAP-trained labor, “there’s a lot of demand and not a lot of skills,” Louw says. “If you have a COE, you can have multiple skills and manage it better.”

COEs – Better Late Than Never

Most experts agree that the best time to create a COE is when a company first implements SAP so it becomes just one more reorganization task among many. But many companies already have SAP, so they don’t have that luxury.

According to everyone interviewed, the human element presents the greatest change-management challenge in creating a COE. “It is human nature that we want our own and we want it close to us,” says Louw.

At Novartis, the European offices and facilities were formerly under the umbrella of the company’s U.S. COE. Executive management decided to create a new COE just for the European branches. According to Grady, part of the decision was based on the growth of the European side of the business. “We made the decision not to have a [physically] centralized COE because we recognized it was important to have interaction, day-to-day, with the business.”

Grady was sent to England to build the COE. “We have different challenges now, but they are better challenges,” he says. The issues formerly had been customer satisfaction and customer engagement. “When managing from California, it is very difficult. The time difference is a challenge; language differences are a challenge.” Those issues became less critical once the COE launched in Europe. “Now we’re more focused on value-add activities, how to grow systems, how to partner with business to determine where we want to be in five years.”

COEs Need a Leader and a Vision

Enacting organizational change such as that required to create a COE requires strong executive leadership to make it work. It also requires a vision by management. In the case of Eskom, the board of directors believed that by consolidating the skills and resources for SAP within a single COE, it could operate almost as an outsourced function, Louw says.

“But outsourced functions, at least in our company, are constantly under pressure, especially when there’s a change in management,” Louw warns. “It’s an ongoing process; you can never rest on your laurels, never relax.”

At Eskom – as at many other companies – the centralization versus decentralization argument is in a constant push/pull state. “I’ve been with the company for a long time, and I’ve seen shifts [between] centralization and service centers — seen them come and go for various reasons. This is the longest surviving one,” he says.

The point, at least as far as Eskom is concerned, “is that we can’t be overhead to the organization; [we must] work on bottom-line cost recovery,” Louw says. “I need to justify my existence to the business all the time.”

Every month Louw provides managers in all four divisions of Eskom with a detailed analysis of the services provided broken into 20 different categories, such as support, enhancements, new releases, value-added services. Louw also presents results of how the COE performed against service-level agreements and the cost per hour of each service. “I need to justify to the business every month what I’m costing, which forces me [into close proximity with] the business, whether I want to be or not.”

Louw says he works to be proactive, such as by providing performance contracts “to prove to myself or the business that we are engaged in value-added activities,” adding, “You have to prove it and the only way you can do it is to be part of your customer’s business,” he says.

From an SAP viewpoint, COEs represent a vital component in making the new enterprise SOA strategy work. “In the past IT was principally aimed at driving automation and the operational effectiveness of the business,” says Mehta. “Enterprise SOA is aimed at the agility and flexibility of the business to gain a competitive edge through innovation. The COE must operate within this view and enable the aligning of the organization’s IT systems to changing business requirements.” (For more information on enterprise SOA and the COE, see “The Enterprise SOA COE: Objectives, Offerings, and Organization.”)

The Enterprise SOA COE: Objectives, Offerings, and Organization
by Tushar Mehta

Given that one of the principal objectives of enterprise SOA is to drive business productivity and flexibility across a cross-section of business units (BUs)/divisions, enterprise SOA naturally lends itself to a discussion on organizational structure to establish and roll out an enterprise-wide SOA strategy.

The cross-BU nature of the enterprise SOA and the promise of reusable business services solutions demand a discussion around the need to transition to a central, shared service model. More importantly, in contrast to the traditional solution centers established toward the end of a major build and implementation phase, the enterprise SOA COE may need to be set up much earlier in the life cycle, perhaps before the solution-design phase.

The enterprise SOA COE is fundamentally different from other COEs. It gains from configuring enterprise-wide processes into small reusable process units. This inherently requires a strategic engagement at senior management levels with several business units, technology vendors, and partners. Hence, it needs to be set up much earlier in the system-development life cycle (SDLC), in the concept-development phase.

The services that the COE and the existing enterprise-architecture group offer will appear to overlap. However, the COE offers expertise and governance in a specific area of systems integration for the purpose of automating cross-BU business processes; the enterprise-architecture group, on the other hand, takes a broader view of IT across multiple disciplines. (For an example of a governance model, see “Enterprise SOA Governance Model” below.)

Enterprise SOA Governance Model

Structures Processes People
Organization Guidelines Strategic alignment Business-
service mgmt
Competencies Personal
Standards for enterprise services Alignment of business and IT objectives Domains Service- portfolio management Enterprise SOA KPIs Identification and allocation of human resources Career paths
Tasks and
Standards for orchestration platform Requirements analysis (management) Business-process landscape Service-orchestration platform (architecture management) Benefit- tracking Skill profiles Performance management
Org structure Standards for applications Project portfolio management   Application management Budget and cost allocation Training  
Budget ownership Standards for IT infrastructure     IT infrastructure management Risk management Knowledge management  
        Service support Compliance    

1] Objectives: The main role of an enterprise SOA COE should be to provide governance to maximize enterprise-wide business-process automation and systems integration in reusable process steps with a view to minimizing operating costs and meeting new business opportunities.

The COE needs to organize itself around the following objectives:

  • To provide architecture, program-management, and change-management governance

  • To get all relevant stakeholders to recognize enterprise SOA as a formal discipline

  • To provide centralized R&D to enable process optimization, automation, and systems integration via IT

  • To provide best practices, methodologies, and guidelines for systems-integration projects

  • To act as “consultants” to in-house project teams

  • To provide risk review and quality-assurance reviews

  • To participate proactively in any cross-geopolitical integration initiatives — within the organization and with partners or vendors — for the purpose of minimizing the time and investment in these activities

Over time, an enterprise SOA COE may dissolve into the existing enterprise-architecture group, but initially it must be geared to act as a hub between the corporate enterprise-architecture group, other shared-services teams, BUs, various application-delivery teams that support the individual bus, and external systems integrators (see “COE as Hub” below).

An enterprise SOA COE must be geared to act as a hub among the various groups that use it.

2] Offerings: For an organization to gain the benefits of an enterprise SOA blueprint as a true business-enabling application and infrastructure platform, the COE must strive to offer the following services:

  • Creating and managing reusable IT assets that influence business-process automation and optimization via a collaborative repository

  • Performing R&D for new process-modeling technologies

  • Acting as gatekeepers and regulators of systems-integration applications and infrastructure projects

  • Providing SOA consulting services to other application-development teams, complimented with change-management expertise

3] Organization: To perform the function of COE effectively, the roles shown in “COE Organization Roles” will be required over time. This model should evolve gradually over the span of several projects.

This COE model develops a mature enterprise SOA delivery capability over various delivery phases, moving toward more self-sufficiency.

The aim is to acquire self-reliance and stability within the COE over an appropriate period of time, and to jumpstart the enterprise SOA initiative with minimal risk (see “Developing an Enterprise SOA COE”). You should also review using a virtual team for certain roles to maximize cost-effectiveness. The enterprise SOA “applistructure” must be laid with a mature organizational framework to deliver business benefits that support short-term requirements, and is “future-capable” to meet the medium- to long-term business requirements.

A roadmap to developing enterprise SOA skills and operational maturity over time.

The Challenges of COE

Given the inherent nature of “cross-enterprise” integration that extends its influence over various teams in the organization, the enterprise SOA-based “applistructure” may begin to act as a single conduit to the multiple BUs. This poses a few challenges, such as the following:

  • Business and funding model of COE

  • Demystifying enterprise SOA

  • Fostering a cohesive enterprise architect council and gaining momentum across various BUs and other technical groups within the organization

  • Enterprise services lifecycle management

  • Quality control of enterprise services

  • Infrastructure-capacity project planning and systems integration to roll out the “applistructure” in controlled and quantifiable achievements

I strongly recommend that organizations that decide to transform their IT architecture into enterprise SOA investigate the need for an early COE and a strong governance model.

Tushar Mehta works in the Melbourne office of SAP Australia as a principal enterprise architect. His experience combines management and technology consulting that covers systems integration, ERP, and CRM.

Adapt, Evolve, and Survive

The COEs that stand the test of time are those that can adapt to changing technology and changing business conditions. At Eskom, the COE evolved beyond SAP. “We have one center of excellence that not only covers SAP but most of the other applications and systems in our utility,” of which there are 40, Louw says.

The COE at Novartis also changed with the times. “We structured the COE based on the business requirements of a regulated environment and to reduce the TCO of the SAP environment, which we definitely met,” Grady says. “But we modified a centralized COE into a distributed model to maintain and keep business analysts focused on business engagement. There’s no better way to be connected to the business than to be sitting right next to your customer.”

Another key to success is constant measurement. Before Grady launched the new COE in Europe, he spent the first three to six months figuring out exactly how the COE would measure its success. It took 18 months from start to finish to create the new COE, he says, “and at the end of 18 months we were able to demonstrate to the business that the COE was working.”

In Eskom’s case, even though it is the only IT game in town, “you can get into trouble a lot easier because you can become complacent,” Louw says. “We are service-level and statement-of-work driven. That keeps you on your toes. You need to keep current and stay ahead of changes in your business.” Eskom also hires Gartner to perform regular benchmark studies of COE performance. “We learn all the time how we can improve and be better for the company.”

“What we won’t be is a back-office function,” Grady says of the Novartis team. “If you are a back-office function, you can be in India, anywhere. We leverage outsourcing, certainly, but the value we provide as a COE is business analysis and support.”

3 Lessons Learned

Keep up-to-date. Creating a COE almost always means centralizing what previously had been disparate IT functions. As a result, “We have to prove that we can provide a bigger and better service than a smaller unit can,” says Louw. “You need to keep current and stay ahead of changes in your business.”

One way to do that is to stay current with the latest in technology and other developments. The Eskom COE, even though it is located in South Africa, is an active member of the Americas’ SAP Users’ Group (ASUG). “We also send people overseas to attend conferences, such as those hosted by SAP, ASUG, and SAP Insider.”

Swan of Capgemini agrees. She encourages staff to take advantage of what free content is available, such as SAP NetWeaver Magazine, SAP Insider, or SAPInfo, as well as other fee products such as the SAP Expert newsletters or SAP Professional Journal.

Louw says that he finds it especially valuable to meet with peers on site visits, but recognizes that not everyone may have that opportunity. “Since we are a regulated utility and don’t compete with anyone, companies are more willing to share their experiences with us,” he says.

Break down silos where possible. Each Novartis division has its own COE, but each readily shares information and resources with the others, even across divisional lines. “This facilitiates the collaboration [needed] for lessons learned,” Grady says.

Organize to get most from SAP directly. Novartis has a single corporate account management team that works with SAP and represents all divisions. “They negotiate centrally for licenses, expansions, upgrades,” says Grady. However, for support and other contact with SAP, engagement is done at a divisional level. “If I’m interested in new technology, I can contact SAP myself,” he explains. For example, he investigated using SCM for clinical trials, and as none of the other divisions was pursuing that, Grady worked directly with SAP. But his lessons learned have been shared throughout the company.

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