Key Sourcing Considerations in New ERP Environments

by Tony Ioele

Many organizations implementing an ERP (e.g., SAP, Oracle, etc.) plan to partner with 3rd party service providers to contain project costs, fill skill and resource gaps, and ensure strong service levels. It is common for such organizations to consider  an outsourced support model to provide ERP application management and support (AMS) starting immediately after go-live.

When planned correctly, this can be a highly effective strategy. It is WGroup’s perspective that additional factors must be evaluated when developing a sourcing approach in new ERP implementations, as opposed to sourcing support for mature or existing ERP environments.

1. Prepare for System Stabilization Issues & Phased Deployment

  • Typically, ERP functionality is rolled out in phases. Each phase of a new ERP implementation usually encounters issues related to data migration, integration with legacy systems, knowledge transfer, etc., – all of which can negatively impact call volumes and increase support requirements. There will be a potential need for additional “SWAT-team” support resources for 3-6 weeks post-go-live (or longer depending on complexity) to deal with such issues.
  • Plan to retain availability with some portion of the “implementation team” to support the SWAT-team and troubleshoot & fix issues.  Such support must be engaged with an adequate level of contractual rigor and governance oversight to accommodate the selected AMS vendor(s), even if the AMS vendor is the same as the ERP implementation vendor.
  • Be prepared for a period of stabilization that could last ~3+ months post go-live, after which SLA measurement & monitoring of the AMS service provider should begin.

2. Evaluate Change Management Opportunities

  • The potential for business impact (to end users) post go-live, as a result of “new” processes and interfaces, and limited hands-on experience with these processes and systems may be significant.
  • Prior to go-live, support calls and ticket volumes are best guess estimates and service level requirements and implications may not be fully known. Additionally, a spike in call volume and support requests – both from end users (e.g., “how-to” questions) and for technical issues (e.g., integration, data flows, data migration errors) is likely to occur in the first few months of any release.
  • The size, structure, and make-up of the “super-user” group(s), if any, being considered as part of the overall planning for AMS, should be evaluated.

3. Be Thorough with Vendor Selection and Transition Planning

  • Resource ramp-up requirements based on the release approach and schedule must be planned and aligned.
  • Adequate knowledge transfer planning should be ensured with respect to solution design between the implementation team or vendor and the AMS support team or vendor – even if implementation and support requirements will be managed by the same service provider.
  • Select an AMS provider that understands your industry and business processes to support ongoing process improvement.

The sourcing process for new ERP environments is different and more challenging than a typical sourcing project, and therefore the strategy and approach must be adapted. It is recommended that organizations considering sourcing for new ERP environments meet with an IT strategy-based sourcing advisor to ensure the development of an optimal approach, selection of the best-value vendor, and success in a long term relationship with the AMS service provider.  Further Reading: WGroup Case Study – SAP Applications Outsourcing.

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Optimal Framework for Selecting New Enterprise Applications

by WGroup

To meet changing customer demands and evolving business requirements, organizations regularly evaluate and deploy new applications. The accelerating shift in application ownership from IT to the business units coupled with M&A activity has created a new environment where multiple applications may be supporting similar functional requirements. In order to decrease unnecessary costs in software licenses, support staff, MIPS, and server cycles, we suggest following these seven steps when considering new applications.

  1. Analyze your current Application Portfolio. By understanding what is currently in your organization’s portfolio, you may find opportunities to optimize usage of existing applications and software packages.  Utilizing existing applications in new ways may be more cost effective than deploying new applications – especially with respect to database, license, and support costs.    
  2. Develop a business case. Gain support from all stakeholders.  A well thought out business case includes solution solving alternatives with cost-benefit analysis as well as a risk and sensitivity analysis.
  3. Develop decision criteria for application selection.  Coming to agreement early in the project helps to keep emotion out of the selection process.  Project members are more likely to make decisions based on facts like TCO, strategic fit with objectives and alignment to functional requirements. 
  4. Identify key features and necessary functionality.  Consider all stakeholders to determine what features and functionality are most important to the business.  It may be helpful to prioritize requirements and prepare a gap analysis against your current application portfolio.   
  5. Perform a market analysis to determine available options in this solution space.  Research all avenues to understand your options. Make sure you focus on overall value in this market analysis, not just cost alone.
  6. Evaluate options and weigh against the previously developed decision criteria.  Consider how each solution will: support both routine and strategic business requirements, accelerate deployment, maintain compliance with complex and ever-changing regulations, and operate within an enterprise-wide IT architecture that is sustainable. Evaluate which solution will provide the most value in the short and long term.
  7. Implement the chosen solution and define long term governance. Having a well-defined project structure can make or break a successful implementation. Establishing a well thought-out governance process will help to ensure the business achieves the optimal value of the selected solution for many years to come.   

Read more about a recent application assessment WGroup conducted at a leading Fortune 50 retailer – Click Here