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How value management improves ERP implementations

by Scott Priest, Managing Editor

December 14, 2011

ERP implementations have long been a source of frustration for companies, whether they're complete legacy replacements, application add-ons, or upgrades. Sometimes this frustration alters the project, keeping the business from getting the gains it needs out of the new system.

In his latest article for SAP Professional Journal, "Beyond a Standard Implementation: 4 Key Elements of an ERP-Enabled Business Transformation," Sameer Page argues that project failure can come from companies approaching their implementations in the wrong way. Sameer notes:

Both organic and inorganic growth demand robust systemic business processes to manage scale, size, and complexity of operations. ERP solutions offer the capability to integrate processes. For companies that already have an ERP footprint that proves to be inadequate, the only option left is to completely revamp the current business processes and supporting ERP applications. Such a strategic exercise is an initiative called ERP-enabled business transformation. This type of program aims to match a company’s initiatives with its business strategies.

He goes on to talk about how a business transformation program differs from a standard implementation, and then looks at the programs in detail. The foundation of an ERP-enabled business transformation program is built around four key points:

1. Scope and change management

2. Business blueprinting, design, and implementation

3. Program management

4. Value management

Below is an excerpt of the last segment, focusing on value management.

4. Value Management

The whole premise for the business transformation program is based on value. Generally, value is defined in monetary terms and cost savings are expected out of the value proposal. The value management process identifies, analyzes, and ensures sustainability of the value from a business transformation program. The business case typically lists all the major value levers at a high level. During analysis, each value lever is broken down into a value proposal and then is weighed against the cost of change.

Consider an example in which a business case mentions one of the value levers, such as reducing the cost of maintenance on the existing systems. The value management team drills down on this value lever further to the value proposal and identifies the cost of the maintenance for systems with higher costs. The value proposal is then made to replace some of those systems, and the net cost savings are calculated. The value management team also works on the value proposals at the business process level. Typical value proposals include:

  • Automating and optimizing specific business processes
  • Eliminating processes
  • Increasing EDI enablement with the business partners
  • Real-time booking of inventory movements and accounting

Post-implementation review of the value proposals ensures that the cost advantages listed in the business case are considered. The success of the ERP-enabled business transformation starts with organizations defining a strong business case with a detailed value proposition, and is delivered with excellence by adopting best-in-class practices for program, change, and value management. 

For the full article, SAP Professional Journal readers can go here. For more information about SPJ, go here.

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