Stories of failed or complicated SAP ERP implementations are less common than they used to be, but that doesn’t mean these massive software projects have become a breeze to pull off.
At SIMposium 2014, a conference for CIOs and IT leaders hosted by the Society for Information Management held in Denver earlier this month, an audience member asked a panel of veteran IT leaders about their experiences with SAP implementations. He, for one, hadn’t seen many companies make returns on SAP. How about them?
The short answer? It’s complicated.
“I think it really comes down to [two] key components,” said John Shellenberger, vice presidentand CIO at Johns Manville, a manufacturer of insulation, roofing materials and engineered products.
First, IT professionals must determine if there is a “case for change,” he said. In other words, is there a clear reason why and how SAP ERP would benefit the company?
“In our situation we had some very old legacy technology that was very expensive to run but really didn’t position us where we wanted to go strategically from a business perspective,” Shellenberger said. “And I felt firmly that unless we made some … modernization, we would not be able to run the business. So that was a pretty significant case for change.”
Patricia Coffey, senior vice presidentat auto, life and home insurer Allstate Insurance Co., said that Allstate’s implementation of SAP was driven by a need to have a comprehensive view of its spending. “We were inefficient in that we weren’t using the power of volume buying to get discounts,” Coffey explained in an email exchange after the session. In fact, the company couldn’t even answer the question of whether they had multiple contracts of the same technology from the same vendors or multiple contracts with multiple vendors, she said. So, the need was there.
Still, SAP implementations are big ticket items and sometimes companies need to get creative in order to find the money to be able to do it, Coffey said.
At the SIM session, Coffey shared the story of how the CFO of Allstate at the time, now chairman of the company,found the funding for an SAP implementation, which was geared towards financials. (It’s “not what I would call a traditional ERP,” Coffey said in an email, since Allstate doesn’t deal with supply chain, logistics etc. like a manufacturing company would.)
The CFO decided to centralize Allstate’s procurement organization, a necessary change that provided enough of a cost savings to offset the company’s investment in new SAP technology.
“Since the mechanizing and consolidating of financials was more of a ‘must do’ than ‘value add’ he found a way to pay for it by consolidating procurement and capturing those savings to offset the cost of the implementation,” Coffey explained in an email. “In other words, he found a way to get additional benefit in order to create maximum value. Sometimes you have to look hard to find the value.”
Focus on business values
But once SAP is installed, how does a CIO figure out whether that implementation was justified and is benefiting the company?
Shellenberger said he did a thorough appraisal after their deployment to answer that question.
“I will tell you we got benefits in all the areas we didn’t expect and the areas where we expected to get benefits we didn’t get as much,” Shellenberger said. “But in total it was still pretty strong.”
A final piece of advice? If you’re thinking of implementing SAP, do not embark on the journey without your business partner by your side, urged Ian Patterson, CIO at Scottrade, an investment company that offers brokerage and banking services. CIOs don’t want to get stuck holding the bag for problems that are due to the business, not the technical requirements.
“If you don’t have your business partner with you, it’s your project. And why is SAP your project? Or why is any of it your project? Because delays aren’t always technical delays,” Patterson said. “You have to make sure that [you and your] business partner [are] defining the metrics up front together.”
Added Coffey: “The point is there should be [focus on the] business values… it’s up to [CIOs] to shift the conversation.”
So, is it settled? Is the CIO the defacto leader of digital innovation?
Somebody has to be in charge of digital innovation, and according to Forrester Research, that somebody should be the CIO, not the chief digital officer.
That’s the word from Forrester’s “Predictions 2105: CIOs Accelerate The Business Technology Agenda” report:
“Although some firms have appointed a chief digital officer (CDO) to lead that effort, 2015 will be the year that CIOs — in partnership with CMOs — prove that the CDO role is unnecessary.”
The report argues that 2015 will be a defining year for CIOs, as their companies “pursue digital transformation and customer obsession.” By customer obsession, the report is referring to Forrester’s argument that because of technology, in particular digital technology, customers are now calling the shots and businesses must pay heed. To wit: “Your technology-empowered customers now know more than you do about products and services, your pricing and your reputation. Your competitors can copy or undermine the moves you take to compete. The only way to win and retain customers is to become customer obsessed,” Forrester states.
Buddy up to the CMO
CIOs have the “technical expertise and cross-functional business purview” to drive digital innovation,” the report insists, but they will have to assert themselves.
The first step in assuming the mantle of digital innovation leader, according to Forrester, is to “turn fledging relationships with CMOs into functional partnerships.” As CEOs increasingly realize that the future is digital, they will expect their CIOs to work with other business leaders, especially chief marketing officers, in leading the transition to digital business. Says Forrester: “Already CMOs and CIOs in leading firms like adidas and Caterpillar have merged their unique competencies to form a partnership with shared goals and business results.”
The big caveat? Many CIOs are still viewed by their businesses as the leader of a cost center, according to the report.
Gartner also weighs in on CIO as digital leader
Forrester isn’t the only IT consultancy making the case for CIO as digital leader. A recent Gartner CEO survey found that CEOs rely on their CIO more than any other executive to lead “digital innovation” — above their CMOs, business unit leaders, COOs, chief digital officers and so on.
But are CIOs, in general, trained to be digital innovators, and if not, how do they get that skill?
I asked that question of a panel of CIOs and CEOs at the recent SIMposium conference in Denver, put on by the Society for Information Management. Stay tuned for their answers.
The big news this week is that Microsoft has decided to change up its software strategy. The software giant is now offering free Office apps for iPhone and Android users and has even made a deal with Dropbox so that Office users can access the storage service with their mobile device.
If the king of enterprise software is changing up its software strategy should CIOs be doing the same? That’s the question SearchCIO’s Fran Sales explores in this week’s Searchlight News Roundup.
She argues that Microsoft’s move is reason enough to think long and hard about BYOA (bring your own application) — the inexorable push by employees to use whatever apps they feel they need to get their jobs done, corporate-sanctioned or not.
Of course, embracing BYOA can be tricky. Sales’ column provides tips from O’Sullivan and Blue Hill Research’s Chief Research Officer Hyoun Park to help you get started.
In other news this week, Workday is incorporating big data analytics into its products, Facebook placed an “I’m a Voter” button at the top of their page this week (to sway the elections perhaps?), Google is playing catch-up with amazon (announcing that they are adapting their cloud services to allow customers to set them up more quickly), and more in this week’s Searchlight.
Hackers have become highly organized and specialized — so much so that some hacked into the White House’s unclassified computer network earlier this week. Luckily, the administration’s cybersecurity teams were able to mitigate the threat and no serious damage was done.
The attack might have some CIOs wondering how they stand a chance against such sophisticated hackers. The key here, Associate Site Editor Fran Sales reports, is constant vigilance. We’ve said it before and we’ll say it again: Hackers are persistent, which means you have to be persistent, too. Sales provides a list of helpful tips.
In other news this week: Apple CEO Tim Cook came out in an essay published in Bloomberg Businessweek; the mobile payment war continues for Apple Pay and CurrentC; Google announced that its Google X lab has been secretly working on a wearable device that works with nano-pills to detect cancerous cells; and more in this week’s Searchlight.
Another 2015 prediction poll is in, this one from CEB, a member-based business advisory firm, and the outlook is positive. According to the firm’s polling, CIOs are more optimistic than in recent years about their 2015 budgets, predicting a 3.3% increase. That’s up a smidge from the 3% budget gain they estimated for 2013-2014, and a notable step up from the 1.8% increase they predicted for 2012-2013.
The budget estimates do not account for the money CIOs estimate is being spent on technology by departments outside IT, said Andrew Horne, managing director at CEB. Finance leads the pack with 4.5% of its budget allocated to technology, followed by HR (4.3%), marketing (4%) and operations (3.5%).
“It’s not cannibalizing IT but increasing the overall amount spent on technology,” Horne said. Indeed, he’s pretty sure the CIO estimate is low, and said he is working with CEB business members in these areas to get firsthand figures. “When we did this last year, we found out that many of those departments were actually budgeting twice as much as the CIO thought they were,” he said.
Maintenance budgets decrease (Hello, cloud)
So, budgets are increasing and the overall spending on technology keeps rising, a trend consistent with IT’s intercalation into just about every aspect of the business. Here’s the more interesting news from the CEB benchmark:
CIOs in general are making steady progress in reducing the money they spend on keeping the lights on: maintenance accounted for 57% of budget in 2014, compared with 63% of budget in 2011.
Moreover, a select group of companies in the benchmark, 17% to be precise, had reduced maintenance spending to about 44% of total IT budget.
“We think they are the trailblazers,” Horne said, adding that CEB checked the variables that might have accounted for the double-digit difference, including whether these companies were predominately startups with no costly legacy systems. They were not. “They looked like the other companies.”
This cohort is aggressively using the cloud to drive down maintenance costs, coupled with “flexible budgeting,” Horne said. “They are much better at moving money around throughout the year, and much more opportunistic about saving money where they can on the maintenance in order to focus on building new things,” he said.
Budgets shifting to technologies that ‘touch the customer‘
Another characteristic of the under-45% group? They make IT services transparent to the business, which allows the business to better understand what the IT function is doing but also exposes those services that are not supporting a business outcome. “This makes it easier for IT to have conversations with the business about sunsetting certain systems or reducing support,” Horne said.
So how are CIOs in general using the money they saved on maintenance? Spending on collaboration, analytics and customer interface technologies increased in 2014 and is expected to continue to rise, while the amount spent on process automation is going down. “They are spending more on technologies that touch the customer,” Horne said.
Read more about IT 2014 – 2015 trends in SearchCIO’s coverage of the annual TechTarget IT Salary and Careers Survey:
- Cloud, security projects are top two priorities for CIOs in 2015
- IT executive pay up 8% in 2014
- Innovation drives job satisfaction for IT execs
Week after week a new breach is reported, followed by more advice on how best to protect yourself. But as this week’s news roundup from SearchCIO’s Fran Sales shows, the degree to which companies are unprepared for cybercrime is downright scary. She recounts the story of one organization that didn’t know it had been hacked until the FBI was at its door with bad news: The company’s network defenses, such as they were, had been breached and intellectual property stolen.
CIOs should take it as a good sign that the Feds came calling. When you read about what Sales heard from security experts this week at a cybersecurity conference in Boston, it’s clear that fighting cybercrime will take a concerted, coordinated effort by both the private sector and the government. These criminal networks are organized, specialized and highly efficient. Staples realized this when it sought the help of the FBI this week in response to a possible breach of its systems. Experts strongly suggest other companies should follow suit.
In other news this week, robots may be able to help in the fight to contain Ebola, Apple’s quarterly earnings report is out (and it’s not too shabby), IBM is selling its unprofitable chip manufacturing business, and more in this week’s Searchlight.
Not so long ago, SearchCIO cautioned CIOs to hold off on replacing PCs with tablets. Despite all the user-friendliness of tablets, there was not a whole lot of heavy duty work that we business workhorses could do on them. Then Apple and IBM announced a partnership to provide enterprise software services for the iPad, offering up the possibility that the tablet could be more than just a handy gadget for C-suite executives and mobile sales forces.
This week, on the heels of unveiling the iPhone 6 and iPhone 6 Plus, Apple introduced the iPad Air. And who knows? Maybe the era of tablet productivity may really be upon us. But as Associate Site Editor Fran Sales reports in this week’s Searchlight news roundup, it won’t be the device’s sleek exterior that wins over the business crowd.
In other news this week: Google introduced Lollipop (version 5 of its Android OS), which includes a way to remotely wipe your phone if it falls into the wrong hands; Facebook and Apple will cover egg freezing expenses for female employees; and Dropbox dodges a bullet. Find these stories and more in this week’s Searchlight.
By 2020, Gartner predicts that smart machines, which use machine learning to complete tasks humans would otherwise perform, will have a widespread impact on the business. And, in less than three years — by 2017 — virtual personal assistants will begin making a mark on the enterprise.
Here’s an example of how machine learning is impacting one organization: Through a partnership with MIT, Beth Israel Deaconess Medical Center in Boston is exploring how to exploit nursing expertise in the labor and delivery department by using machine learning algorithms.
“It turns out, on the labor and delivery floor, when babies are born, it looks a lot like an air traffic control system,” Julie Shah, assistant professor in the aeronautics and astronautics department at MIT, said. One nurse allocates resources for the floor and figures out which patients go where, who needs what, and helps determine when reinforcements should be called in, according to Shah.
“Some people are really good at it, and some people are not good at it all,” she said. “And the people who are really good at it can save millions of dollars just by making better decisions — because they have the whole picture or more expertise or have been around longer.”
But, the most experienced nurse is not always the one calling the shots. “So the question is, how can we support nurses in training or nurses who are newer to the role to be as efficient as the most experienced nurses?” Shah said. An answer could be machine learning.
Everyone has been buzzing this week about HP’s split into two smaller companies. The general consensus on the spilt? Smart move, HP.
It’s clear consumers favor social, mobile, analytics and cloud technologies, Associate Site Editor Fran Sales reports, and all consumers have their unique needs and preferences. It seems enterprises are catching on, as they should be.
SearchCIO expert Niel Nickolaisen says it well: “You might be able to remain competitive as a generalist, but I think it will be increasingly difficult as you compete with specialists.”
Key words being used to describe HP’s move, in addition to “specialized,” include “smaller” and “nimbler.” Now, it seems, HP will be able to focus its investments and more effectively drive innovation.
In other news this week, Samsung’s Q3 profits are estimated to be the lowest in three years; there are vulnerabilities in Mozilla’s bug-tracking tool; and an AT&T employee gained access to the telecom customers’ social security numbers, drivers’ licenses and purchase data. That and more in this week’s Searchlight.
Aaron Levie, the voluble, vivacious 29-year-old co-founder of Box with an estimated worth of $100 million, spends 50% of his time on the road meeting with customers. He’s been to construction sites, movie studios, GE, Toyota, Eli Lilly. “I was at Sea World a couple of weeks ago,” said Levie at the recent EmTech conference, where he was interviewed on stage.
His nine-year-old company had trained itself to be more customer-focused about four years ago, Levie said. But his own intense customer focus was fairly recent, started about a year ago after he met with people he considers mentors — “my enterprise software heroes” — in what sounded like a taking-stock exercise. These heroes, as the story goes, asked to inspect his calendar then told him he wasn’t spending enough time with customers. He should be doing at least a client call a day, if not more.
“We started out as a very product-focused company,” Levie said of the cloud storage company. All the company’s time and all of his time was spent on product innovation, on perfecting the underlying stack of the Box service. Then a funny thing happened on the way to doing business with the likes of Disney. A “robust and differentiated technology” gets you in the door at the Fortune 500, he said, but unless “you spend time with them and know their environment and can work at their level,” you won’t become one of their trusted vendors.
User-centric or bust
What has Levie learned by spending time with his customers?
“The single most important feature of this next-generation IT is that it is user-centric,” Levie said. The CIOs he meets with are asking “‘What is the problem the user is trying to solve — with technology to do that,’ as opposed to ‘Here is my existing set of technologies and what can I cobble together?'” The old “system-centric” approach to solving business problems is no longer viable, or shouldn’t be.
Keep in mind that Levie, whose wild-and-crazy-guy coif is going gray at the temples, is a good talker (and very conversant in IT-speak, too). He also likes to drop names –.e.g. “What we saw happening with a lot of leading CIOs at companies like Netflix and Procter & Gamble and ….”
In addition, the company’s IPO, which was filed last spring but delayed because of a weak market for technology stocks, is expected to launch later this year or early 2015. So, whatever he’s learned by spending 50% of his time with customers is also what he thinks investors want to hear. Indeed, an important feature of the “next-generation IT” these big-time CIOs are using are best-of-breed tools like Workday and MobileIron and Box.
All that said, who can argue with the idea that in order for IT organizations to solve business problems, IT organizations must look at the problem through the lens of the business customer?
Nimble and able: Bring on ‘nimbility’
Levie was asked one hard question by his on-stage interlocutor, Jason Pontin, editor-in-chief and publisher of the MIT Technology Review. Box does business in a very crowded market, Pontin said, competing at one end with the likes of Google, Amazon and Microsoft on storage and at the other end with startups such as Quip, a cutting edge collaboration app that is getting (mostly) rave reviews.
“Where does Box fit into that? And how can it compete with these big-ass companies offering free services on the one hand and a lot of very nimble startups on the other?” Pontin said.
The question seems particularly relevant this week, with the news that HP has decided to split off its consumer and enterprise businesses in a bid to become both a more able and more nimble enterprise IT services provider.
For the record, Levie gave the right answer. The company aims to outdo the big guys on nimbleness and partner with the up-and-comers. “We have to balance user experience and security and compliance in a way that few of them can.”
Email Linda Tucci, executive editor at SearchCIO, or find her on Twitter @ltucci.