SAP and SME: Do They Go Together?

On the face of it, many of you like me would probably answer with a big “No” The 2 words SAP and SME don’t fit together. This view is understandable because many people associate SAP with ERP and large enterprises like Cadbury Schweppes, Unilever, Airbus, and also with a price and implementation cost associated with that sort of customer. Well, at Heathrow on September 9th 2008, SAP SME EMEA ran a customer panel chaired by Hans-Peter Klaey, SAP’s Global President SME with six European SME customers; this resulted in a change of mind for me. You can’t argue with an SME client base of 38,000, SAP and SME do go together!!

SAP’s opening remarks
Klaey opened the forum by talking about the importance of SMEs to SAP. With 38,000 customers, SMEs account for 75% of SAP’s customer base, so they need to listen and to provide the right tools. Eighteen months ago, Klaey shared with the audience, there were only 26,000 customers. In Q2 2008 SMEs represented 27% of overall EMEA order entries. Klaey explained that 84% of that SME customer base had come through SAP’s partner ecosystem. SAP’s SME strategy was Klaey explained based around 3 pillars:

SAP is for all sizes of businesses;
To help SMEs, SAP has developed 3 different solution portfolios, which allow the organisation to find one that suits their business sceanrio; and
SAP uses a multi-channel approach; in other words it works with partners to sel and implement these solutions.

SAP Business One provides a single solution to manage an entire business providing support for customer relationship management (CRM), purchasing, inventory, operations, financials, and HR. The business information is captured in a single system. There are over 450 industry-specific solutions that have been added over the top of the base system by SAP’s partners.

SAP Business All-in-One includes:

Enterprise resource planning (ERP) – manages financials, human resources, operations, and corporate services.
Customer relationship management (CRM) – manages all aspects of customer relationships from marketing, to sales, to service.
Business analytics – tools and reports for financial and operational reporting.
SAP Best Practices – industry-specific configuration and business processes based on SAP’s experience.
SAP NetWeaver technology platform

SAP Business ByDesign is SAP’s SaaS offering. It provides services that the user can select as appropriate to their needs from financials, CRM, SCM, human resource management, project management and supplier relationship management.

The Customer Panel

The customer panel consisted of:

Yury Makarov, Sales Manager for Mettler-Toledo Vostok is the Russian subsidiary of the well known Swiss industrial instruments company. The subsidiary is responsible for sales in 12 of the former Soviet countries with 3 sales offices. The business is very B2B with sales to any organisation wanting measuring instruments. Their business strategy is based on keeping sales growth whilst keeping costs down. The subsidiary is using SAP to consolidate business processes and give users access to the necessary data without delays.
Ignacio Simon, the IT and Quality Manager of Axima who are a Spanish leader in heating, ventilation and air conditioning (HVAC) and maintenance in Building and Industrial market fields. They implemented SAP’s Business All In One about a year ago to improve profitability and improve client competitiveness. The company uses SAP to control the process from tender to completion and then into maintenance. There are around about 300 users; some of whom are mobile and need access on client sites. Simon stated that he saw “SAP as a Process tool”. During their implementation they didn’t change any of the underlying processes in SAP but did some customization of the user interface. Their IT department consists of 2 people: one of whom looks after SAP, whilst the other looks after PCs!
Jonathan Schaffer, Managing Director of Plum Products who are a UK garden furniture wholesaler. The business started some 200 years ago and has now reached a turnover of £12m with 40 staff. The company deals with all the major retailers in the UK as well as major garden centres and certain specialized retailers. In 2005, the company decided to buy its own warehouse space rather using contracted logistics. They quickly realized that they needed their own WMS software and also that this was going to work with their current financial package, so they made the decision to implement an ERP solution. The company since that time has also expanded sales operations into the Southern hemisphere to counter UK seasonality. They implemented SAP’s Business One in January 2007 to support their expansion plans. Schaffer explained that that system had come into own during the current economic downturn when stockists didn’t want to carry stock, they were still able to deliver electronic orders the next day and that this included working with their logistics carrier to even deliver to the actual home of the final buyer.
Nicholas Lindrop, the General Manager of Pentagon: a UK chemicals specialist was established in 2002 from a management buy-out from Dow Chemicals. They have a turnover of around £40m with 200 employees in the UK. They have a joint venture in Saudi and are following an acquisition strategy with the aim of doubling profitability by 2010. The business exports a high proportion of its products to the European market with sales also going to the US and Asia. They have been able to establish 3–5 year supply contracts, which has not only helped to ride out the economic downturn but makes it easier for them to plan their supply chain and get the best price. Pentagon are implementing SAP’s Business ByDesign so they can better manage and control costs
Chris Robinson, CIO and Partner in charge of Property Procurement for Davis Langdon, a UK construction and property consultancy company. The company was founded some 100 years ago and now has some 93 offices around the world, employing some 6,000 employees. The period between 2005 and 2007 saw substantial growth in the company in terms of revenue and this caused the drive to make changes in the way they used IT. Robinson joined the company to help them select an ERP solution. The project started in 2007 and went live with Business All-in-One in February 2008. Their business strategy has meant that they need to present a more regional and sector specialization to their customers and SAP has enabled them to integrate more tightly with customer and supplier systems, thus supporting this change.
Allan Dowie, the Financial Director of Clyde Pumps: a UK specialist pump manufacturer established some 135 years ago. They have a turnover of £100m with around 650 employees. They manufacture not only in the UK but also in China and India. Clyde made the choice to go SAP after some 15 years of no real investment in IT and it aligned with their acquisition business strategy where they saw the need to have a common single platform across the business to “provide one version of the truth”, as well as supporting the drive for operational efficiencies. They are due to go live with SAP’s Business All-in-One in 5 weeks time having kicked off the implementation process in February 2008.

The Questions and Answers

Has SAP’s acquisition of Business Objects had any effect on you?

Robinson expressed an interest after seeing the product at the last Sapphire conference. No one else seemed to have an interest. Klaey expressed the view that SAP saw this as an opportunity to work with their customers to bring further opportunities around business intelligence. SAP is working with their partners to make the introduction of Business Objects into the standard SAP offerings as seamless as possible. Klaey said that currently the SME market was one that hadn’t been a large market for Business Objects before.

How important is measuring the payback (ROI) from your investment in SAP?

Lindrop stated that they had selected SAP based on functionality and the ability to take IT cost out and that ROI had not been a driver. Schaffer explained that had not spent a lot of time working on ROI, their approach could be seen as seat of the pants. He then expanded on this by illustrating how the introduction of SAP had lead to an ability to take an order and pick for it faster. He did say that this speed had led to other issues in that it was harder for customers to change their orders! Makov described how they had set up a discount authorization system in SAP and had analyzed how this had worked to find that they had made quite an impact on the bottom line. Dowie answered the question by stating that it was important for them to get free flow of information. Robinson’s response really got to the heart of the matter about ROI in SMEs, in that you could use formulas as large enterprises do but their sophistication was far less. The key was that management was closer to the business and that therefore you got a handle of what was working and what wasn’t far quicker. Simon explained that they had set up measurements and this had allowed him to compare the cost of IT support in his company to another company in the group providing similar services but not using SAP. The results showed that his cost were half of the other companies.

Did you consider fixed price contracts with implementation partners?

Most of the customers either looked at or wanted to take this option, however all but Simon and Lindrop ended up with some sort of times and materials based on the need for customisation.

Other than Pentagon, did any others of you consider Business ByDesign?

Dowie stated that it hadn’t come into consideration; they went for the template available from their implementation partner that sat on top of Business One. One of the reasons was that Business ByDesign didn’t fit their needs. Robinson explained at the time of their selection—2006—Business ByDesign was in its early release and they hadn’t considered it. When asked what he might do now, he replied that he would certainly consider it as an option.

What did the SAP brand mean to the decision to select?

Robinson stated that it had meant a fair bit, even to the point that other partners in the company made the suggestion as why look at anything else! Schafer said one of their key selection criteria was the need for the chosen company to be at the forefront of application development and like to stay in the game as they wanted to be future proof. He also remarked that the majority of their clients were running SAP. Lindrop made a very telling point in that he felt that the choice of SAP had increased the valuation of the company. Dowie added that with his company having a very aggressive acquisition strategy, they had looked at what systems potential targets had to find that the highest proportion had SAP.

What was your biggest challenge during implementation?

Lindrop stated that they had made a conscious decision for the project team to appear to make the decision having given them 3 months to assess the fit. This, in addition to involving employees in being able to input their requirements, meant that they had buy-in. The real big issue had been in the availability of their own resources during the implementation phase particularly during July and August—with tongue in cheek he added that they even had considered stopping holidays! Robinson described the issue of a package taking away what had appeared to many partners and employees their personalised way of doing things. They had implemented SAP in a fairly vanilla fashion, and the biggest complaint was the regimentation of the UI. Schaffer concurred that getting staff buy-in was very important, so therefore getting them involved in putting their suggestions for requirements was key to their success. They also didn’t customize, but rather changed their processes to fit the package. The real big issue for them was transferring their old data to the new system. Makrov expounded on this theme of people hate change, but key for the success of their project was having a good working relationship with the partner so that there was always a win-win approach. Simon talked about their first hurdle being price, in terms of finding a partner who was willing to offer rates appropriate to working in the SME space. Then, like all the other panel members, they had to overcome resistance to change and their final hurdle was training. They used video and were able to reduce training to 2 days with a test at the end in which, with his quality manager’s hat on, he insisted on 9 out of 10 mark!

How well do SAP’s solutions understand business processes?

All the panel members expressed the view that the standard business processes in SAP meant that they could implement without any customization. It was where either there were special regulations due to country—for instance financial reporting in Russia—or customer facing processes which differentiated them from their competition—like discounting or the supply chain process where customization was needed. This meant that implementation could be fast and that costs due customization could be controlled.

Summary
It is always a risk to expose customers to a bunch of journalists and industry analysts, particularly when the format is based around questions and answers, thus resulting in no control about what is asked! SAP must have come away feeling that session had gone well and certainly, from my perspective, their customers had certainly added proof that SAP and SME do go together!