Transitioning from a $10 billion industrial gas and chemical company that predominantly sold large volumes of customers relatively inexpensive products — such as cylinders of pure oxygen, nitrogen, hydrogen, and helium — to an independent $1 billion company selling a handful of customers specialized and highly regulated mixtures of gases and chemicals would require a tremendous amount of transformation in people, processes, and technology. Versum Materials was born in October 2016 when its parent company decided to focus on the core business of industrial gases and divested the specialty gas and chemical division, which sells primarily into the semiconductor industry serving the chip manufacturing process. The products it supplies include chemical mechanical planarization slurries, ultra-thin dielectric and metal film precursors, formulated cleansing and etching products, and delivery equipment for semiconductor manufacturing. This spun-off company had a blank IT canvas — and there were critical decisions to be made and a tight timeline to get off its transition services agreement.
“Our goal was to stand up our own IT infrastructure from scratch, build the services organization to support our billion-dollar business, and get off the transition services agreement within 18-24 months,” says Sally Giamalis, SAP Program Director of Versum Materials. “During the transition and throughout the implementation, we followed the mantra of consistently asking why standard best practices wouldn’t work for us.”
The project to implement SAP S/4HANA kicked off January 2017 and was complete 15 months later in April 2018 — after spending four months in the design phase, 11 months on building and testing, and five days to cutover to the new SAP S/4HANA system.
Choosing SAP S/4HANA as the Platform for the Future
When it came to the decision of what ERP system to put in place, Versum Materials considered a few options: 1) cloning the existing 20+-year-old SAP ERP system and running a copy of the existing environment; 2) bringing over the same customizations and functionality into a new SAP ERP system via a brownfield development; or 3) starting from scratch with a greenfield option complete with new servers, software, and processes. “We elected to go the greenfield route because it allowed us the opportunity to clean up our system, wipe the slate clean, and implement processes that worked for our business,” says Giamalis.
Prior to the divestiture, the SAP ERP environment was heavily customized through various upgrades over the years. As it only represented a tenth the total company’s revenue, the materials division wasn’t necessarily leading the business’s decision making or process orchestration. Therefore, the industrial gas business drove the customizations to the ERP system.
“We questioned why industry-leading best practices wouldn’t work for the way we do purchasing, ordering, or invoicing, as opposed to the customization we had in the previous system,” says Giamalis. “We didn’t want to take that system in kind and continue to use it when it was not ideal for our business.”
To find the new and ideal system to run the business, Versum Materials looked at different ERP providers and products, but ultimately elected to stick with SAP software because it ticked all the right boxes regarding the industry’s legal regulatory requirements and from a change management perspective, according to Giamalis. “With all we had to do in a compressed timeframe, if we had tried to put in a non-SAP ERP system — making people learn a whole new unfamiliar system — I don’t think we would have been successful from a design perspective,” she says. “It was the right fit and a good business decision to go with SAP software. We had all that tribal SAP knowledge, and at the core, taking an order is still taking an order, regardless of any customizations. If we had put in a totally new package, the training and the issues with people’s understanding and knowledge would have dramatically impacted the business.”
With everything we had to do in a compressed timeframe, if we had tried to put in a non-SAP ERP system — making people learn a whole new unfamiliar system — I don’t think we would have been successful from a design perspective.
— Sally Giamalis, SAP Program Director of Versum Materials
Rather than following the previous practice of managing an SAP ERP system in a data center of its own, Versum Materials opted to partner with a hosting provider that would manage the private cloud SAP S/4HANA instance remotely from a data perspective, according to Giamalis. “From the get-go, we didn’t want to have our own data center, which is a very costly proposition with diminishing returns on that capital investment,” she says. “We wanted to have a hosting partner take ownership of the on-premise physical data center, and we picked SAP S/4HANA as the platform to set ourselves up for future success.”
Establishing and following four guiding principles — standardize (leverage SAP and industry best practices), harmonize (create consistent processes across business units), simplify (keep it simple to start and enhance over time), and scalable (support future growth) — helped keep people focused and embracing changes from the way things used to be done. In keeping with the simplify principle, Versum Materials opted to follow a “bring your own device” model to minimize the infrastructure and IT support services that would be required to manage and control application delivery to users. The business also relied on SAP MaxAttention support and the SAP Value Assurance service for the program until go-live and the SAP Customer Care Office once it was up and running.
A Big-Bang Go-Live
The typical SAP implementation is rolled out in phases country by country. And for companies that have global supply chains where materials or products are manufactured or shipped from one country to another, it’s crucial to integrate supply chain data from the old system to the new system quickly and cleanly to keep the products flowing and the supply chain intact. Because Versum Materials has a global supply chain that involves more than 10 countries, a phased rollout would have required putting temporary interfaces in place to feed data from the previous system to the new system to allow for a country-by-country go-live. That was not an option based on the transition services agreement so big bang was the only option for the rollout.
According to Giamalis, that situation of being forced to rip the Band-Aid off all at once ended up being advantageous for the company because it kept the rollout simple and virtually problem-free. “Dragging the program out — and rolling out Taiwan one month and Korea the next, for example — would have taken much longer and been much more complicated,” she says. “As it was, we didn’t have any show-stopping or earth-shattering problems, such as issues taking orders, creating purchase orders, or shipping products to customers. I fully expected to have problems, but our go-live was ghostly quiet.”
The go-live involved not just a rollout of SAP S/4HANA 1610, but a variety of other SAP solutions — including SAP Business Warehouse optimized for SAP HANA, SAP Business Planning and Consolidation, SAP Global Trade Services, SAP Gateway to support SAP Fiori, the SAP Advanced Planning and Optimization component of SAP Supply Chain Management, SAP Solution Manager, SAP Process Integration, SAP Data Services, and SAP governance, risk, and compliance (GRC) solutions — and a host of other SAP solution extensions and non-SAP applications, a combination of familiar and new solutions.
Valuable Lessons Learned
There were many lessons that Versum Materials learned along its SAP S/4HANA journey:
Don’t underestimate data transformation
“Data is always harder than you think, so start cleansing immediately — no matter how clean you think your data is,” says Giamalis. “We had cleaned up our data from a usage perspective and had good invoicing, address, and contact information. But we did two data cycles and realized we weren’t clean enough to go live so we added another cycle.”
But the cleansing wasn’t the biggest challenge when it came to the data transformation process. Transforming the data structure from SAP ERP to the structure in SAP S/4HANA was unbelievably difficult, according to Giamalis. “Material data is usually the most complicated load process, but for us, iterating through the Customer data load process was the longest pole in our data tent and the biggest challenge from a load perspective,” she says. “I’ll offer that warning: Don’t underestimate the transformation from your Customer structure in SAP ERP to a true Business Partner structure in SAP S/4HANA.”
The challenge was due to the new hierarchical Business Partner structure. In SAP ERP, the Customer structure (i.e., ship to, bill to, contact, and vendor) consisted of all different data objects. In the new SAP S/4HANA structure, all those different data objects are under a new object (i.e., Business Partner) that contains a hierarchy of sub definitions under it. “In the old structure, a customer and a vendor could be the same thing, but they were two different numbers. Whereas, in the new structure, if I sell to a customer but also buy from them, they are a vendor – it’s under one Business Partner record,” says Giamalis. “We didn’t know the new Business Partner hierarchy well when we were making the decisions on how the data was being transformed. Had we known that was the case in advance, we would’ve put more resources on the design and spent more time evaluating what that transformation needed to be — so that it would’ve gone more smoothly.”
Stick to standard, even if it’s challenging
Throughout the implementation, the project team ardently stuck to the “why not standard?” philosophy and, in keeping with this strategy, decided to overlay the industry-specific chemicals template from SAP on the foundation of its SAP S/4HANA implementation. Versum Materials also worked with Accenture, which provided its own chemicals template that helped give the implementation a leg up. Working off already developed guides and minimizing custom coding was a key success factor for the program, according to Giamalis. “It’s important to govern and prioritize customizations and engage partners to help,” she says.
Proactively review security design changes
Most SAP ERP customers have historically followed user-based security models where users have transaction codes assigned to their ID in the SAP system. In this model, two people who perform the same job functions can have different transaction codes based on their access granted, and any segregation of duty conflicts are monitored and flagged accordingly. In moving to SAP S/4HANA and following along with industry-leading best practices, Versum Materials opted to change its security model and adopt a role-based design in which every job function has the same access as the other people with the same role.
When the project team started to build the new job functions and security roles, it was challenged by a lack of understanding of the new security model, how the roles should be built and tested, and what exactly would be impacted. At go-live, several issues were uncovered. Some people hadn’t been given the right job role they needed, and compounding the situation were communication challenges that arose, according to Giamalis. “People didn’t speak the same language anymore,” she says. “When users would request certain access, they would request it by transaction code because that’s what they were used to in the old world — whereas, now they needed to talk in terms of a job function. We had to do a lot of remediation training with our power users so they understood the new way we were doing the security roles. I’d advise that while moving from user-based to role-based authorizations, it is important to engage business early to design and test roles.”
Use the SAP Product Availability Matrix
SAP maintains a support portal where it regularly publishes information about SAP software releases types, maintenance durations, planned availability, and upgrade paths for SAP customers with valid credentials. “All the module versions of SAP solutions don’t work together — for example, you need a certain version of SAP GRC or SAP Solution Manager to work with the other modules,” Giamalis says. “SAP Product Availability Matrix is a helpful tool that evaluates your system and tells you what you need to upgrade or what version of a solution is compatible with another.”
Early adoption has pluses and minuses
“If you’re going down the path of implementing SAP S/4HANA, whatever version it is, you have to understand that it’s still new — SAP has done a good job of it, but there are still pieces where you’re going to find issues,” says Giamalis. For example, since go-live, Versum Materials has continued to have challenges in the finance space closing the books since the ledger for materials was rewritten in SAP S/4HANA for cost-based versus product-based accounting. “In changing over from one model to the other, we have seen a lot of product issues coming up during the close process and continue to hit bugs and not close as timely as we want to,” she says. “But now we have better visibility to these problems, and currently, we are conducting pre-planning activity for an upgrade to SAP S/4HANA 1809 — with a goal to release that in May 2019 — and our hope is that this more mature product will be more stable and resolve our issues from our financial close perspective.”