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Case Study

 

A Foundation for Growth

Vivint Smart Home Adopts SAP S/4HANA in the Cloud to Scale and Expand its Business

by Scott Priest, Editorial Director | SAPinsider, Volume 19, Issue 1

January 23, 2018

Fast-growing Vivint Smart Home realized it needed to replace its patchwork of systems if it wanted to keep on expanding. Its checklist of required functionality for future business needs led to the selection of SAP S/4HANA as the technology foundation. An early adopter of SAP S/4HANA in a cloud deployment, Vivint Smart Home has realized benefits in a number of areas, including inventory transactions, finance controls, and reporting. With the installation of SAP GRC solutions, including SAP Access Control, monitoring of user access has improved. But that was just the beginning. Now Vivint Smart Home is going to build on that foundation with even more SAP functionality.

With the array of technologies available to startups today, companies can pop up seemingly out of nowhere to dominate a market quickly. Consider Vivint Smart Home, the leading smart home services company in the United States. Founded in 1999, Vivint has amassed nearly 1.3 million customers and over $750 million in annual revenue, and has grown quickly.

To support this growth, Vivint recognized it needed technology that could support its future business requirements. The company needed to be flexible in addressing changing business models, both in the form of new sales channels, such as those through partnerships as diverse as those with retailer Best Buy and home rental company Airbnb, and new technologies, such as its smart home assistant Sky, which leverages artificial intelligence.

In Vivint’s early days, it relied on a patchwork of systems to execute specific tasks. Many of these systems were homegrown, so they met the company’s immediate needs, but they were undocumented and required specialized skills of the company’s early workers to support them. This was not a recipe for scale, and with Vivint’s significant growth, change was needed to replace fragmented solutions and data silos into something more integrated and effective.

“We were tracking inventory across multiple disparate systems that weren’t meeting our needs,” says Pat Kelliher, Vivint’s chief accounting officer. “To even call it a true inventory system might be a stretch.”

With integration and scalability as key decision drivers, the company knew it needed a major reboot of its technology, and as a company with an appetite for innovation — Fast Company named Vivint Smart Home one of the world’s 50 most innovative companies of 2017 — it chose SAP S/4HANA as its digital core for the future. SAP S/4HANA offered the standardized process and control baseline that Vivint was looking for, not to mention the improved performance of the in-memory SAP HANA database. And while the implementation would be wide-ranging and mean a significant impact to Vivint’s legacy infrastructure, the company recognized the need for the project.

“We’re a technology company, and we’re risk-tolerant when it comes to technology and innovation,” says Kelliher. “We’re not afraid of a new solution.”

 

Boosting Finance in the Cloud

Vivint had a checklist for finding the system upon which its future business would rest. Comprehensive sets of finance and supply chain functionality were a given, and a turnkey implementation was a must for a business that couldn’t afford to devote employees’ time to a bloated, inefficient project. Beyond that, the company wanted to integrate with other enterprise applications, including mobile apps for technicians in the field, and standardize its reporting as well as provide more visibility into the business. 

SAP S/4HANA provided the functionality Vivint was looking for, and a cloud deployment through SAP HANA Enterprise Cloud meant a turnkey implementation would be possible. A few factors led to the decision to go to the cloud, including the lower operating expense of cloud solutions, the company’s existing cloud infrastructure, and its ability to rely on SAP for updates and skills through SAP HANA Enterprise Cloud.

“We were able to essentially outsource the skillsets needed to maintain and update the systems to SAP,” says Kelliher. “Since we’re located in a place with a competitive market for tech talent, and SAP has the knowledge required as a result of developing the solutions, this was a great option for us.”

The company doubled down on this concept by using premier engagements with SAP that included accelerated response for resolving issues and providing assistance, as well as working exclusively with SAP Gold Partners, ensuring that they were partnering with the best companies in the SAP ecosystem.

“We were an early adopter of SAP S/4HANA, so it really helped us to have that sort of interaction,” says Kelliher.

Additionally, with SAP S/4HANA updated automatically in quarterly installments, Vivint didn’t have to worry about falling behind in terms of its tech proficiency; it would have the latest and greatest features from SAP whenever they were made available.

We have a highly integrated environment, so we did three rounds of integration testing with real data, not sample data, to make sure that when we were working with full data sets on a fixed timeline during the cutover, it would go smoothly.

— Pat Kelliher, Chief Accouting Officer, Vivint Smart Home

Integration and Data Conversion

Key to the implementation project was the conversion of data from legacy systems to SAP S/4HANA. The legacy setup was siloed, so the quality and usefulness of data could vary widely. Vivint conducted a detailed data conversion quality assessment, starting with its strategy and designing and mapping documents. Then it focused on the actual conversion from source file to the target system file, before validating, testing, and running reports.

“We had a very long list of action items and timelines, and we were being diligent about sticking to them,” says Kelliher. “We have a highly integrated environment, so we did three rounds of integration testing with real data, not sample data, to make sure that when we were working with full data sets on a fixed timeline during the cutover, it would go smoothly.”

Vivint’s preparation and organization in the implementation planning process ultimately paid off: When the company went live in February 2017, its systems were only down for a day.

“We told our field service professionals we’d be down for Monday and that was it,” says Kelliher. “But we were up and running by 3:00 in the afternoon on Monday. Some senior management didn’t even realize we had cut over. The business just operated as usual.”

Optimizing Inventory

Vivint has seen benefits across a number of areas of the business since implementing SAP S/4HANA.

Operationally, it now has automated daily order processing and real-time inventory transactions, with a significant boost in functionality from its outdated legacy systems. With the improved inventory transactions and processing, finance also saw streamlined inventory reconciliations.

Previously, the process required reports out of two different systems and took three to four days. Once the reports came out of the systems, users had to reconcile the data, handle what the company called “leakage” — outlier data that didn’t reconcile between the reports — and then evaluate. Because of the time involved and the unreliability of the data, management struggled to be confident in what they were analyzing.

Now, the process is often the first thing done during the monthly close, and only takes an hour or two, where they simply need to compare an inventory stock report to the general ledger, research, and adjust. “And we haven’t found any leakage since the adoption of SAP S/4HANA,” says Kelliher.

Automating Customer Acquisition Amortization

The amortization of customer acquisitions is one of the largest items on Vivint’s balance sheet. It requires capitalizing commissions, equipment costs, installation costs — anything associated with bringing new customers into the fold — and uses a unique amortization of a 240% declining balance over 15 years.

With legacy systems, Vivint had to take activity from hundreds of general ledger accounts, turn it into an asset, and then amortize. “This involved massive spreadsheets with all kinds of formulas,” says Kelliher. “It was very prone to error.”

With SAP S/4HANA, the entire process was automated. “Now we can basically just push a button, and the system automatically transfers the expenses from those G/L accounts, creates the asset, and starts the amortization,” says Kelliher.

Better Reporting from Better Data

In addition to the operational improvements, Vivint’s management has seen much better reporting to aid in decision making. “Our old system had a rigid chart of accounts,” says Kelliher. “It did a pretty good job in terms of legal entity and external reporting, but when we wanted to turn that into management reporting, we had to do all kinds of manual journal entries and allocations.”

SAP S/4HANA includes a universal journal that aims to eliminate the inconsistencies that often arise in multiple systems, providing a single source of truth for management reporting. “The universal journal has multiple attributes that you can report off, and you can use it to generate multiple different hierarchies,” says Kelliher. “We have a lot more flexibility — it’s a lot easier now to look at different cuts of the business, and as the business changes over time, management will have that flexibility to look at the business in different ways.”

The company also embedded employee-initiated spend into finance and management reporting through the use of SAP Concur. With better controls on and visibility into this expense, planning and forecasting was made easier. And the integration of an additional finance controls and automation platform from an SAP partner complemented the SAP S/4HANA implementation by automating account balance and transaction reconciliations, strengthening controls, and streamlining core close tasks, driving continuous improvement across the finance organization.

Clean Roles for Better User Access

A growing business means more users, and a changing business means new processes and operating models. To ensure that the right users have the right access to the right systems and processes, Vivint installed SAP governance, risk, and compliance (GRC) solutions, including SAP Access Control, to better manage user access.

With how complex security issues can be across a technology landscape, ensuring clean roles was vital for Vivint now and in the future. After installing SAP S/4HANA, Vivint’s security authorizations needed to be managed across three layers on SAP Fiori-based apps: the SAP Fiori ABAP front end, the SAP S/4HANA ABAP back end, and the SAP HANA database.

“It was a whole new set of user access to take into consideration with SAP Fiori apps,” says Kelliher. “We wanted to be able to know that if we gave someone a role, it wasn’t going to create any sort of conflict, so business users can achieve what they need to and perform their functions without interruption.”

The company didn’t stop at user roles: It’s working on implementing functionality for access review management.

Building on the Foundation

Vivint’s implementation has been a success, but it’s just the beginning. Up next are implementations of more functionality, including modules for revenue accounting and reporting and SAP Integrated Business Planning, as well as additional GRC functionality.

“What we implemented was the foundation, and now we’re building the walls,” says Kelliher. “We have SAP solutions now as something we can build off, so we are implementing other modules and solutions for more functions. Before, everything was disparate and distributed, but now everything gets looked at through the lens of SAP.”

 

Vivint Smart Home

Headquarters: Provo, Utah

Industry: Smart home

Employees: 12,000

Revenue: $757.9 million (2016)

Company details:

  • Owned by the Blackstone Group
  • Founded in 1999 as APX Alarm Systems
  • Deployed over 18 million devices to more than 1.2 million customers
  • Announced AI-based home service called Sky in 2017
  • Named one of the world’s 50 most innovative companies of 2017 by Fast Company

SAP solutions:

  • SAP S/4HANA
  • SAP HANA Enterprise Cloud
  • SAP Access Control
  • Concur

 


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