The CFO’s Plan B - Save or Spend?
The uncertain economy calls for caution in IT spending, but companies must also guard against cutting back too much. Ken Gorf, director of West Trax, looks at how companies can gain a competitive advantage by optimising their SAP system.Date: 16 Jun 2008
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The board has responded to the difficult economic climate by cutting budgets, freezing recruitment, postponing IT projects and basing decisions on short-term tactical criteria. Pundits claim that IT expenditures will actually fall during 2008-09. The CFO is both watchdog over the new financial controls, but also the victim of the consequences – typically postponing plans for implementing, extending, or upgrading the organisation’s SAP system. "The smart CFO adopts Plan B, recognising that far from being a fallow year, 2008-09 is an opportunity to reduce recurring costs and optimise the SAP system."
However, the smart CFO adopts Plan B, recognising that far from being a fallow year, 2008-09 is an opportunity to reduce recurring costs and optimise the SAP system. How much does the actual ROI of the SAP system match up to the promises of the original business case? How effectively is the system aligned to the business today? What actions could be taken now to optimise the system? To undertake such a review and respond with positive actions requires a fresh approach. However, reorganisation is not recommended – this just delays constructive work by six to twelve months. Rather, consider forming ‘core teams’ from the existing staff, focused on four major areas, and with the CFO and the CIO as members. Be really bold and appoint team leaders from outside the finance/IT functions – business managers and internal auditors would be good choices. INVESTMENT With budgets cut or frozen, funding must be found elsewhere for the Plan B. Reducing existing costs and diverting the savings to productive activities is the fastest route to success. All SAP systems have the potential for savings – the most fruitful is an attack on the unused custom software within the system. Often, this represents 25% – 40% of the system code, yet it continues to attract maintenance and other overheads – in many organisations, this has been measured at £250,000 to over £1m per annum. Identifying the size of this opportunity and then eliminating the code can be achieved in just a few weeks. The benefits are:
RETURN ON INVESTMENT How well is the SAP system currently supporting the business? This is not a question about service level agreements or project deadlines, but a top-down snapshot of the effectiveness of the system. Metrics are required that provide business managers with the basis on which to make operational and strategic decisions. "Now is a good time to check with all stakeholders about their user experiences and fix any problems."
As a start, how much of the SAP licensed software is actually used? What is the potential to use more of the software relevant to the business? How does the organisation compare with similar organisations – in the same industry, and same geography? What is best practice, and therefore a realistic objective for improvement? Do the business managers appreciate the opportunities available from the SAP standard functionality? Do all companies, divisions, or business units across the organisation uniformly exploit the SAP software? (We know the answer is no, so this is a real opportunity to improve the ROI). Have the business processes been harmonised with the SAP software, and does the current release upgrade plan include a target for exploiting future functionality? Find the answers to all these questions, and then make the changes with priorities determined by a cost/benefit analysis. USER EXPERIENCE In busy times, user complaints and helpdesk problems do not enjoy high priority. Poor response times may be caused by over-dependence on custom software. IT may argue that this is due to factors such as reports running overnight as background jobs – and therefore not important. But poor response times become increasingly problematic in a 24-hour global operating environment, and in the extended enterprise this could include customers and suppliers. Now is a good time to check with all stakeholders about their user experiences and fix any problems. GOVERNANCE, RISK & COMPLIANCE "The smart CFO can achieve some remarkable results from closely examining the organisation's SAP system."
Transparency of the SAP system is essential if you want to monitor both value and risk management. Over-dependence on custom code is a major risk – why not adopt a zero tolerance strategy for those workarounds, shortcuts and off-line spreadsheets? How do the CEO and CFO attest to their internal controls where ‘shadow data systems’ and ‘spreadsheet creep’ are rampant? Often, the finance function is the worst offender for these bad habits – now’s the time to fix the problem. Value management of the investment in SAP is all about continuously monitoring the ROI, ensuring that all stakeholders agree that the investment is making an effective contribution to the business. BENEFITS OF PLAN B In spite of the difficult financial climate, the smart CFO can achieve some remarkable results from closely examining the organisation’s SAP system. This work can be self-funded, and produce cost savings that continue into future years. The system can be optimised and more closely aligned to the business, thereby improving the ROI. Internal and external users can enjoy improved service and productivity. Compliance exposures can be identified and tackled. Finally, the SAP system is in a better shape for the next business challenge – whatever that is and whenever it arrives. |
