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Case Study

 

Tech Data Follows a Unique “Viral” Strategy to Globally Roll Out SAP Software

by Dave Hannon | insiderPROFILES

October 1, 2010

What are the two biggest challenges to selling an ERP project to your executive team? The risk of lost productivity and total project cost. While that may be true in the typical big bang ERP project, this profile details the unique “viral” strategy, which IT products distributor Tech Data Corporation used to mitigate both concerns as it migrated its operations in Europe and the Americas onto SAP software gradually, one business challenge at a time.
 

Perhaps the two biggest challenges of selling an ERP project pitch to your executive team are, one, the risk of reduced productivity during the implementation process and, two, the project’s total cost when all of the dust settles. But IT products distributor Tech Data Corporation found a unique way to mitigate both concerns as it migrated its operations in Europe and the Americas onto SAP software.

For its European operations, the SAP project team selected a series of big bang implementations, a method of instant and complete system changeover, and had great success with the strategy. However, when the team turned to expand its SAP footprint globally to the Americas, it selected a more phased approach that Tech Data’s Executive Vice President and CIO, John Tonnison, calls “viral SAP,” and which he says is working very well for the company.

This viral strategy aligns perfectly with the company’s overall business strategy, which sets three clear priorities: execute or provide a stable core business; diversify or support expansion both geographically and in new business areas; and innovate or drive the advancement of channel and technology fulfillment.

“With the viral approach, you don’t have to make the single, big decision that you have to with the big bang,” says Tonnison. “And, ironically, it’s actually a cheaper method because, by rolling things out piece by piece, you can reduce the contingency and risk mitigation costs.”

Why Tech Data Chose the Big Bang Strategy for Europe

As Tonnison explains, Tech Data’s ERP history had been something of a mixed bag. The company was running about half of its European businesses on SAP software and the other half on homegrown business systems. Tech Data decided to bring all of these homegrown systems onto SAP software and upgrade the existing SAP systems. Starting in Switzerland, Tech Data’s SAP project team got each business up and running on the upgraded software one country at a time. After four years, 34 Tech Data locations in Europe — countries, business units, and facilities — were live on SAP software.

“Effectively, each country’s rollout was a big bang, which worked well for us in Europe,” says Tonnison. One reason the strategy was so successful there was because of the diversity of the business and locations. If one country’s business was distracted at all during the data migration, Tech Data’s remaining European operations would continue to perform independently and ensure the region’s continued performance.

As Tech Data’s SAP project team rolled out across the continent, they became so adept at the migration process that within 60 to 90 days of implementation, the business in that country was either back to pre-implementation productivity levels or, more often, reporting improved productivity.

Selecting a “Viral SAP” Approach for the Americas
     
   

John Tonnison of Tech Data

“With the viral approach, you don’t have to make the single, big decision you have to with the big bang. By rolling out the software piece by piece, you can reduce the contingency and risk mitigation costs.”
— John Tonnison, Executive Vice President and CIO, Tech Data
     

Tech Data’s motivation for its SAP implementation in the Americas differed from the drivers for the European business units. First of all, Tech Data was not yet running SAP software in the region at all. It was running a legacy ERP system that was installed in the early 1990s.

Secondly, there was discomfort about how a migration to SAP software would take place in the Americas without causing a major disruption to Tech Data’s key US market. The European country-by-country strategy was not going to work in the Americas region.

And lastly, executives at Tech Data were concerned the cost of the implementation would have a much more immediate impact than the more gradual European migration.

For these three reasons, the executive team chose to hold off on a full-fledged SAP implementation in the Americas.

“Instead, we took another approach,” says Tonnison. This viral strategy, in a nutshell, entails leveraging a specific piece of SAP technology to solve a pressing business issue when the need arises in a specific business or region. The piece of technology can range from a whole suite of applications, to individual modules, to single components of a module — but it’s always SAP software.

The Viral Strategy’s Many Successes

The first viral rollout in the Americas came when Tech Data realized it needed a more advanced human resources (HR) system. According to Tonnison, the project implementation team went to its SAP technology stack and implemented the HR functionality as a standalone application. And given the team’s prior experience implementing the technology in Europe, the project went very smoothly, building a stronger case for the viral strategy.

Despite what the name may convey, “viral” does not translate to a lack of foresight. For example, to set the base for future business intelligence (BI) tools in the Americas region, Tech Data implemented SAP’s business warehouse functionality — before it even had any other SAP systems in production.

We backwired the data warehouse to the existing systems and brought the data into it in an SAP-like format,” Tonnison says. “So when we started teaching BI and self-service analytics to our staff and leadership, they were already using SAP terms, interfaces, and tools, long before real SAP data was coming into the data warehouse.”

A particularly challenging viral implementation came in the company’s logistics operations in North America, which operates eight very high-velocity logistics centers. As the company’s shipping volumes grew, it realized it needed to upgrade its warehouse management system in the region to maximize its opportunities.

So Tonnison’s team went back to the SAP technology stack and implemented SAP’s warehouse management functionality, tying it into its existing ERP system. And borrowing from its European network-like strategy, Tech Data brought each logistics center up individually, which allowed the other centers to compensate for any temporary productivity dips during implementation.

More recently, Tech Data has implemented SAP functionality for financials in the Americas, again tying it to the existing ERP system in the region.

Beyond the Last Mile and into Latin America

With all of this SAP technology in place, Tonnison says Tech Data is reaching the tipping point where it makes sense to finish the job by replacing its remaining non-SAP systems in the Americas with SAP software. This remains a serious project, but it is certainly not as daunting as implementing all of an ERP system’s modules at once.

Geographic expansion is also on the to-do list. Nearly all of the work in the Americas to date has focused on North America, where Tech Data’s sales volumes are highest. Tonnison says the smaller Latin American markets don’t require an entire application in most instances, although he is closely eyeing SAP’s cloud-based software offering, SAP Business ByDesign, as a possible solution.

The exception to that trend, however, has been Costa Rica. Last year, Tech Data implemented SAP’s HR functionality in Latin America to help it ramp up and manage its sales organization, which focuses on small and midsize customers. Given the HR experience Tech Data’s project team gained from the previous deployments, it was a quick implementation that helped get the new sales unit running quickly to serve the vital small and midsize business market.

Lowering Costs with a Strong, Experienced Internal Team

Tonnison admits that he set the ROI bar fairly high by implementing SAP solutions to meet the most pressing business needs and by picking the low-hanging fruit first. “In reality, big return doesn’t necessarily come from every function and business area, but much more from a few heavy-hitting functional needs and divisions,” he says. “We went after the heavy hitters early.”

While the ROI of later implementations in later projects might not be as high, the implementation costs are much lower due to the smaller scopes, the project team’s experience, and lower risks.

A number of Tech Data’s SAP team members have stayed on through the rollouts in Europe and now in the Americas, and as the company rolls out more and more implementations in a variety of geographies, these individuals have become extremely valuable assets.

In the European implementations, the project teams typically were an even mix of internal IT staff, business people, and external integration partners.

But after three years of European rollouts, the need for an external integration partner diminished due to the internal teams’ strength.

By the time the rollouts in the Americas came along, Tech Data’s internal team members had replaced the external integration partners, which dramatically reduced the rollout costs.

“There aren’t too many integration partners that can bring in a team in which nearly every member has experience in more than 20 rollouts,” Tonnison points out.

Just how much of that experience translates to actual cost savings? Tonnison estimates that Tech Data will complete its implementation in North America for half of what it would cost to use an external integration partner rather than the company’s own resources and experience.

Tonnison cites another factor in his ability to execute the viral plan: a knowledgeable and supportive management team. “My peers at other Fortune 500 companies often claim that some of their biggest challenges are getting a seat at the table and aligning the business and IT,” he says. “Because we are a technology company, every level of leadership here is incredibly IT-aware and values technology and IT very highly.”

A Pragmatic Approach Pays Off

With all the experience in hand, Tonnison says that Tech Data has learned some valuable lessons when it comes to deploying technology across a broad enterprise.

“The IT leader’s job is to have a clear vision and to apply that vision pragmatically, step-by-step, rather than trying to get an entire corporation to simultaneously buy into an irrevocable end state,” he says. “Our approach in the Americas has been highly pragmatic — not explosive — taking measurable steps along the way.”

Going forward, Tech Data plans to continue its SAP journey as its own business expands. “We are committed to continue innovation in the areas of our business that differentiate us,” Tonnison says. “And at the same time, we can learn from and embrace the innovation that SAP is doing with other customers in those, and all, business areas.” 

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