Remember business-process reengineering (BPR) in the early 1990s? Dr. Michael Hammer, president of Hammer and Company, coined the phrase and the concepts that we all strove to implement. Among my clients BPR was widely adopted using standard workflows, custom software, manual steps, and organizational realignment. By the mid 1990s the ERP wave was in vogue and “package-enabled reengineering” emerged to redesign and standardize processes around a software package such as SAP R/3. In some cases, companies violated package limits during the redesign effort since packages of that era lacked deep (functional) or broad (industry) capabilities. The results were evident, since ownership and the ability to change or enhance business processes became costly and paybacks were in question. When the go-to-market strategy changed, ERP struggled to keep up.
In today’s service-oriented architecture (SOA) world — or enterprise services architecture (ESA), as SAP calls it — the time to rethink business processes is now. The fundamental principle is the abstraction of business activities or events, modeled as enterprise services, from the actual functionality of the enterprise application. Aggregating these functions as Web services into business-level enterprise services provides more meaningful building blocks. Business applications based on these principles support reduced cost (by lowering TCO for existing IT solutions) and provide a platform for innovation.
The majority of R/3 installations are facing an upgrade to mySAP ERP or mySAP Business Suite, both powered by SAP NetWeaver. As you look at SAP’s growth, you’ll see a growing middle market and a new customer base for SAP that now takes for granted the monolithic ERP of yesterday. These new installations have benefited from the ERP evolution and now have a path to ESA where robust functionality and the ability to truly customize affordable business processes are becoming a reality. When the CFO wants to validate cost points and paybacks, an ESA solution can deliver. How did (or can) this happen?
Since the Internet bubble burst, I have seen two activities in the market that have culminated in very complex enterprise business processes. First, the Web has changed the way we work. For the last eight years or so, the Web has been “publisher-based,” meaning someone creates content and the users “consume it.” As a result, we have become trained to bookmark and visit numerous Web sites per day (supplier portals, intranet, and so on). In the past two years there has also been a change in this approach, specifically in the content we desire and the ways that we want to access it.
Now, users can create content (e.g., SAP Collaboration contains 12 solutions ranging from team rooms to broadcasting reports) and access it when and where they want to. We are not desktop-centric; we’re network-centric! The edge of the network is wherever I am (office, home, car, train, or airplane). We have moved outside the firewall interacting with SAP and legacy content. Business partners (employees, suppliers, or customers) have access and can publish back to us or amongst themselves. This new consumption model enabled by the Web provides access to the largest business-content source for corporate users, your SAP investment. Now mySAP truly means “my SAP.”
The second item leading to business-process complexity is SAP’s creation of new functionality through a new technology jet stream. SAP is now built upon widely accepted industry standards (Java, .NET, TCP/IP, Web Service Definition Language [WSDL]), new innovative products (portals, analytics, master data management) and tools (SAP Solution Manager, SAP NetWeaver Visual Composer, SAP NetWeaver Developer Studio). In my view, SAP is now a tools and technology vendor.
The enterprise application game is over, and the focus now is on the technical stack that enables ESA. SAP NetWeaver is that technical stack, culminated by acquisitions (Top Tier for SAP NetWeaver Portal, In-Q-My for SAP Web Application Server, and A2i for SAP NetWeaver Master Data Management) plus internal development. Don’t let the new acronyms and rhetoric confuse you. The technology enables new and enhanced business processes; without it we would still be on a GUI, menu-driven with hardwired interfaces, all inside the firewall.
One example of using this technology is SAP Human Resources (SAP HR) self-service and eProcurement. Nothing has changed functionally from vintage R/3 HR or Materials Management (MM) except the user’s role and the interaction. Your access and available content are different because the technology enables the process differently. You are not constrained by the desktop or the publisher. Regardless of whether you see these changes as incremental or a step-change, this is an opportunity for business-process innovation/renovation. Complexity drives innovation.
Today, I see a strong desire to rethink business processes and renovate those that are true differentiators for the enterprise. This is happening at new installations of mySAP, as well as during upgrades from R/3 to SAP ERP Central Component (ECC). In many cases the renovation itself is fueling the business case needed to justify the upgrade. Capital committees struggle to fund IT investments (e.g., upgrade from release 4.6 to ECC 6.0) with no new functionality or payback. In addition, the user community wants enhancements that are inherent with SAP NetWeaver.
I also see the need to define the “renovation equation.” My team and I have presented this concept many times over the past year. The following pattern has emerged and is gaining wide acceptance: A deep understanding of SAP NetWeaver capabilities, plus application architecture, plus holistic governance, equals business-process renovation.
The first element in the renovation equation is a deep understanding of the new capabilities. Today, we have capabilities in software that did not exist in the BPR era. The Web changed everything. Most SAP modules now have an extension (for example: material management -> supplier relationship management [SRM], sales, and distribution -> customer relationship management [CRM]). In addition, each component in SAP NetWeaver can add a technical innovational element to the module, such as alerts, smart forms, single sign-on, collaboration, mobile, and more. In the renovation equation, combining business functions within the core (or extension) SAP NetWeaver components becomes a pillar of the design. Renovation occurs when you have mastery of “core + extensions + SAP NetWeaver componentry.”
Remember, BPR yielded business processes that were desktop-centric (not network-centric) and publisher-based (not consumer-based). For example, today’s SAP NetWeaver renovated purchase-to-pay business process could originate with a smart Web form linked to a hosted catalog at a negotiated supplier, use workflow for approval notices to the supervisor’s cell phone or email, with notifications (advance or late ship notices) delivered to the desktop, electronically invoiced and paid, with the resulting supplier delivery/cost/quality monitored in a buyer’s portal.
This type of business-process renovation results in touch-less purchase order management. It enforces compliance within the buying community to purchase from strategically negotiated contracts. It creates visibility of spending and allows for quicker submission, posting, and payment terms. The consumers can use self-service to access the latest product mix and the most current negotiated pricing. This renovation is complete when the organization of the sourcing and accounts payables departments recognize the workload reduction and optimize their departments. This innovation yields a quantifiable business case.
Next time, I will continue to explain the elements of the “renovation equation.” I will focus on the application architecture needed to design renovated business processes like the example above.
Adolf Allesch is the vice president of SAP NetWeaver Solutions at Capgemini. A pioneer with the Web and an early adopter of mySAP.com, Allesch is now the SAP NetWeaver evangelist at Capgemini. He specializes in technology-enabled business transformation using SAP and is a frequent presenter at SAP events worldwide.