SAP users wasting €millions, survey reveals

Strategic metrics are essential to get better value. By Ken Gorf, director and chief finance officer of consultancy West Trax International Ltd.

Ken Gorf

A study by my company recently examined the true value that German customers were getting from their SAP enterprise software systems. The results revealed that some customers with more than 500 users were wasting millions of euros every year. Even in smaller companies there was the potential to save around €500,000 a year.

Industry analysts regularly express doubts about the real value of IT investments. Once a system is in place, many organisations focus on monitoring tactical metrics such as service levels and support costs. There is no test of whether the system is improving business performance in terms of adding value, increasing productivity or maximising competitive advantage.

Strategic metrics are essential to ensure that an implementation of SAP is continuing to ‘do the right things’ in support of the business. Tactical metrics tend to indicate how the IT company is ‘doing things right’ to support the system. But business alignment and value cannot be optimised where the SAP implementation is managed on the basis of ‘doing the wrong things right’.

Study results

The object of the study was to determine the real levels of systems usage. Key performance indicators (KPIs) relating to cost, productivity, performance and quality were calculated. A total of 93 SAP systems in 69 companies and 14 industries were analysed. Additional data gathered from companies in Austria, Switzerland and the UK reinforced the initial findings.

Significant cost saving and improvement opportunities were identified. The study established serious disparities between implemented and used functionality.

Within the surveyed companies more than one third of customised developments were never used but were still maintained. On average only 25% were intensively used. Less than 50% of the standard SAP code that incurred licence and maintenance fees was used. The chief information officers (CIOs) in most of these companies were unaware of the actual usage of the standard and custom transactions. They lacked ‘doing the right things’ metrics.

Figure 1

Getting complacent

Without constant measurement and optimisation, even a well-implemented system will lose its effectiveness. Over the years following the initial implementation, business priorities will drive many changes. Such changes can result in increased operating costs, reduced productivity and poorer system performance. The SAP system may no longer be supporting the business as originally intended and may be failing to deliver its full potential value. The result is an ever-widening gap in alignment between the business and its expensive systems.

SAP customers may be understandably reluctant to re-optimise a production system between major projects such as upgrades. ‘If it ain’t broke don’t fix it’ may seem the safer option from an IT perspective but for the business it may result in continuing to ‘do the wrong things right’.

If CIOs do not at least constantly monitor strategic metrics such as system usage they are unlikely to be fully in control of the value delivered by their systems. They will be at a serious disadvantage when business conditions demand rapid system changes.

Most systems will need to be upgraded once or more over the next few years. Re-optimising a system based on current usage will result in reduced project risk, workload and costs. The optimised, upgraded system will be aligned with the business to deliver best value through the next phase of its lifecycle.

A copy of the study ‘A cost/benefit analysis of SAP systems’ is available from Ken Gorf at kgorf@westtrax.com.

June 2007