From the perspective of business cases, which approach that is appropriate for your organization really
is a very unique case by case situation where it's really looking at the degree of change and it's a
risk management exercise.
I won't go through every single option.
I think these options are somewhat self-explanatory in terms of what they are.
You've got wide ranges from fresh implementation or implementation all the way to make a more step by
step go into Hama and then eventually move to as Formula One.
Lesson learned that I really want to very quickly share here is when you're constructing your business
case, it's critical you start out with the right implementation approach that's suited for your organization,
for your situation, whilst maybe not so important at the early stage, is figuring out every single
step that's associated with it.
At least I recently worked with a client who just could not help themselves in terms of getting into
detail.
And then it started going a little sideways in time.
So tried to cover off every technical question, every business question, and rather than focusing
on the task at hand, which is to build a business case for people for all projects and launch the project
successfully based on it.
So to help you avoid getting into those traps, I've laid out a series of questions you may want to
think through as you start to formulate your business case.
It really starts with a business perspective.
What are the reasons you're going?
You want a next generation?
What are the business drivers?
Where are the benefits?
Later on in this video, I'm going to take us a little bit into how we go about identifying the next
set of questions.
You know, what kind of risk, what level of change your organization is able to go through.
There's always going to be competing priorities and being able to balance that will be very important.
And what's really very prevalent now is you're going to a cloud solution appropriate for you or introducing
a private cloud option, as well as public options for as for Hana.
So that's certainly a consideration most organizations will go through.
So the next question, what's the level of remediation?
This is especially important for organizations who have a highly customized ecosystem and they don't
want to see that investment going away.
So we'll get like now as we go to the next one.
So to understand what the level of remediation required to bring those older codes behind a compliant
is something we need to very quickly get our arms around.
The last question is addressing any kind of external event that may affect your overall roadmap and
decision.
If you're in an industry where you have to be in compliance of external regulations, those deadlines
will certainly have an impact on how you plan out your project.
And this may seem like the complication that most of us would actually in reality, like to make the
process easier.
I think many of you have heard about the new privacy, so it's certainly kind of boxes UN and forces
you to do certain things within certain timeframes.
There's no one right roadmap for everybody.
Everyone is using SAP differently.
Your organization is structured not all that similar to your competitors or others in the industry.
It's really good.
We all spend some time to study the decisions that were made by those other companies that have already
made them.
But my caution here to all of you is don't spend too much time on it, take their lessons learned and
move forward and really focus on what your business and your organization needs are, how your SAP system
is supporting your business and your strategy.
Your company's strategy certainly will be somewhat unique and different from all your competitors.
So the decisions made by others are not necessarily going to resonate your organization, it's more
than just your ERP system and the implementation roadmap should reflect that.
You need to consider there are new skills you're going to be acquiring.
What's the effect?
How do you go about supporting the system?
You have to consider how the new business processes or the new functionalities would affect the users,
what kind of training may be required.
So it really needs to be a fully comprehensive, well rounded roadmap to address all of that.
And lastly, just repeating what I've already said before regarding external compliance and regulation.
That's something certainly you'll need to consider as you build up your map.
I hope in these next few slides to share with you an approach to building a business case for Isfahani,
so I like this chart, first of all, just to help present the concept of the business case.
So what we have here is a time based model and you typically include a financial analyst on the team
to help build this model out, most likely to be an Excel based model.
But if you think about it, if you have any capital investment, you have a series of inflows which
are above the line, the central axis and central sciences.
And you have a series of outflows and that over time we have the vertical bars representing the periods
that would typically go over the years.
And I'd say a five year model, normally a 10 year model is a huge investment.
And as for harder, longer is appropriate.
If we take a look at the outflows, first of all, period zero is where we incur the bulk of those costs.
So the largest box in the middle, that's the capital costs.
And included in these costs would be our software licensing, perhaps system integration costs from
the provider like yourselves, for example, and maybe customization costs involved.
And if you're able to stick to the standard, then you'll have lower costs.
But don't forget, change management costs, stakeholder alignment and so on.
And there may be some backfill costs as well.
Alongside the capital, costs will be going will be ongoing.
So Harner costs you'll be incurring software maintenance and perhaps some hosting costs, hardware maintenance,
application support.
And there may be a few others.
So again, period zero is where the capital costs go out.
And there needs to be a team of people involved in pulling these costs together because it will depend
on the chart that we showed earlier on the different options on the face you may want to include in
the model those different options.
Now let's take a look at the business benefits, which are the categories of groupings for the inflows
coming in.
I think this is a reasonable grouping of inflows.
In your case, it may be slightly different, but let's take a look at the benefits.
The first area is the cost avoidance in legacy, its capital costs.
So if you do nothing and you just stay on the current platform, you would have to incur capital costs
on your legacy.
It systems.
Now, to the extent those in materials largely unexpected, you may be able to find them in your three
or five year strategic business plans, and you'd include that as cost avoidance because it helps compensate
for the offset in the capital costs you'll be incurring.
And the way I structured this chart, you can see that I start these benefits in period one and they
start later as you start moving down the time horizon to think about in this chart that I kind of move
from a position of more certain benefits to less certain benefits as you move up the line.
So the cost of going into the legacy, its capital cost is certainly something you'll avoid.
You'll also avoid some cost avoidance in an ongoing operating cost as well.
Maintenance fees, for example, will go away.
Perhaps some of the application support will go away, but they'll be offset by the Harner costs, which
are below the line.
So the first two, these first two bars represent cost avoidance.
The next level of the next four areas are more around benefits, and I've grouped them in this way.
So the first area I chose and grouped is process harmonization benefits, this transformation.
And as for Hana, may enable you to run your business with best practices across the enterprise.
So you may be able to use some shared services or shared service centers.
So as a result of those processes, harmonization is doing things the same way.
Throughout your enterprise, you may be able to realize some significant efficiencies.
Now, that may be in terms of the model that you don't hire into the future at the same rate that you've
been hiring in the past as your business grows.
So you're able to do to more with the same or less expense when you take advantage of some of the automate
or automation possibilities enabled by Hana.
So I think it's essential to get your process owners and to look at those different areas in the enterprise
so that Hana can help.
So that's the process, harmonization benefits and then along with that, our new ERP capabilities.
So Hana has many capabilities that may be relevant to your business.
So that's the next level of benefit groupings.
I have, for example, new capabilities in asset management, faster, more effective MRP.
Now we have embedded A.I.M..
Again, essential to look at those and see if you're able to leverage and take advantage to help calculate
some of the benefit.
The grouping I have is working capital improvements.
Now, I think the reality is that what the benefits to working capital really flow out from the two
previous bars that I've mentioned because they tend to be more one time benefits.
I've treated them as a separate by and I think the major areas would be in your trade receivables,
in your payables and in your inventory or your days stock on hand.
So if as a result of Asfour Hanah, you're able to realize improvements in any of those key working
capital areas, then you'd incorporate those into the model as one time benefits.
And then finally, as for Harner, it's clearly the basis of the new digital core.
It's the foundation for the digital enterprise serving as the basis for business, innovation and simplification.
If as a result of putting in Esfahani, you've planned or intended to take advantage of new capabilities
such as block chain or Internet of things or robotic process optimization, to rely on that, you may
want to also include benefits associated with those process improvements and incorporate that into your
business case.
So just to summarize on this slide then, this is an abstract model of a way of thinking about cost
categories and benefit categories.
And if I jump to the end of a business case, then I have a summary sheet and a summary.
Data visualization could look something like this.
We've got the x axis in the middle, a zero, and anything below the line shows money going out and
anything above the line shows money coming in, even though the numbers don't look anything like that.
These are real categories you need to think through and think about.
Let's just take a look, spend a few minutes on this slide.
On the previous slide, I started with the cash outflow, so you can see these blue boxes here represent
the capital Cullum's going out 18 million and 10 million and again, completely made up numbers and
then the ongoing costs for supporting the Harner platform.
You see them going out one, two, three, four and five.
So those other project outflows in my example here, the project inflows, we have these gray bar areas
which are working capital improvements.
So in this particular business case, working capital is helping to work.
Capital improvements are helping to justify the investment.
And then in the yellow area, we have some improvements through incremental margin, through incremental
sales.
Maybe the digital core has led the way for some omnichannel sales that weren't the ones that were available
prior to ask for Hana.
This is quite a useful way of representing the project, cash outflows and inflows over time and then
overlaid onto that, I like to show the actual net cash flow, which is this blue line here.
The first point is the negative 18 million.
And the next point in year one is about negative two million, which is the sum of the outflows and
the inflows.
And we can plot that over time.
So your executive sponsors can see what's happening to cash in the enterprise.
The other thing we could have done was to plot this on a cumulative basis as well, just by adding these
points together and showing a different rendering.
But I felt it just made the charts too busy.
It'll give you a clear visual view when you actually break even, which in this case, in my example,
is three and a half years.
I also like to present the profit and loss view.
Cash flow is one thing, profit is another, and the red line represents the impact on the profit and
loss account or the net income after tax.
And we can see that's negative in the first couple of periods and then starts moving positive and without
getting too financial.
Why is it so low thus?
Because we have to depreciate the value of the capital investment as an expense against the income from
year one onwards when we go live.
And if you're CFO doesn't like to look at this, then that may lead to some more discussions early on
about how you can change the project or think through and bringing some of these benefits possibly earlier.
And then finally, there are classic project metrics that we use to evaluate your project.
What is net present value and net present value is nothing more than the addition of each of these cash
flow positions each year.
But we actually discount them by what's called the weighted average cost of capital, which I won't
say the details, but it just says money now is more important than money.
Later, we discount future cash flows, add them up and anything above zero is good.
The bigger the number, the better.
If you can generate a positive NPV in five years, then it's a good thing.
This is probably likely to be multi-year.
So 10 years is also appropriate as well.
The internal rate of return is a project measure.
In my case, it's 16 and a half percent.
So if the enterprise is expected to earn 10 percent on its investments, we're returning sixteen and
a half percent.
In other words, anything above the enterprise is weighted.
Average cost of capital is a good thing.
And then payback is looking at these and discounted flows and determining what it what it pays back
earlier is better.
Now, I'd point out that what we're doing with any business case is we're making a lot of assumptions
carrying into the future and figuring out whether or not this investment is going to generate a decent
return or not.
And so you may want to also form what we call sensitivity analysis.
What if capital is five million more than we expect?
What if the benefits, the working capital benefits don't come in as expected?
What if our growth rates that may be assumed are half of what we expect?
So you test it under different conditions to identify the range of returns?
Those two slides are a way of thinking about the categories of costs that you need to include and the
visualization.
Now let's take a look at some of the benefit areas.
So this slide, I think as long as no doubt you'll know every client, every business is different.
And so how do you go about finding those benefit areas that are most appropriate to your business?
Well, the model we like to use is to take a look at your existing paying points.
So if you think of your legacy environment and you think of the way your business runs and you look
at those key areas where you have existing issues that currently affect performance and result in efficiencies,
where you're doing more work than you want to or need to in order to achieve your business results.
So you look at the pain point analysis.
The next level to think about then is the enablers in Harner that exist so that we can address those
pain points.
Now, it may be a change in processes or changing the HANA technology that really can address these
pain points.
And then finally, you think about the future state, and this is where it's so important to have executive
alignment and the global process owners or the process owners engaged and involved thinking about how
the future state should look if we address those pain points.
And then from that you can generate a grouping and a listing of benefits that we can start to think
about how to quantify.
This is just a short rendering of some of the benefits we've seen from existing projects.
For Hana, for example, we've seen it as a 10 percent improvement in sales order accuracy, which is
a great thing.
But what does that mean in terms of bringing numbers and metrics into.
A business case, well, an improvement in sales order accuracy would be an improvement in customer
satisfaction, which likely leads to an improvement in customer retention or may include a result in
an improvement in volume of orders and an avoidance of lost sales.
If you feel and believe that there are some genuine margin and sales volume benefits associated with
an improvement in sales order, accuracy or improved customer retention, then you can model that and
you can incorporate it into your benefits case.
We know that as Falana has done some fantastically powerful stuff with memory computing and has a wonderful
ability to produce reporting in real time, freeing up analytical time to start thinking through how
what the benefits of that are.
Perhaps your monthly close process has improved.
Perhaps you don't need now so many people doing different Reconciliation's because you're able to take
advantage of soft Close's throughout the period.
So what does that mean in terms of your future hiring?
Do you need to take on as many staff as you need to?
And if not, then can you incorporate those benefits?
This one next to a 15 percent cost saving achieved due to cost efficient and resilient cloud solutions.
That's money you can take to the bank and incorporate into the business model.
Another one here, 99 percent quicker payment processing, ensuring that suppliers are paid on a timely
basis with SAP and putting in the right rules.
You can ensure you're paying people according to terms.
And I'm certainly not advocating that you push payment out.
But in one client that I work with, they were paying people earlier than they needed to and not taking
advantage of cash discounts.
There was nothing preventing them from doing it.
So part of the value realization was to make sure that they were paying according to the terms they
wanted to pay to.
So that's an example of some of the Asfour business cases.
Now, in the next section, we'll talk about next generation user experience with SAP fury.
So stay tuned.