DEVARAJAN K | SHALABH DHANKAR | SONAM BHARGAV | AMARENDRA KR.GORAI | BHARATH BALAJI | AKSHATA V M | KARTHIKA S| NEELAM | VIGNESHWAR M | AMOY KUMAR D |
KULBHUSHAN SINGH BAGHEL | MAHTAAB KAJLA
Group III
Managing Technology &
Innovation Case Analysis: SAP America
Saturday, 24 September 2011
Management of Technology & Innovations| SAP America Page 2
Flow of Presentation
Company Brief & product
Introduction
Types of Partners
Key Features of Partnering, Sales and Consulting
Internal & External Forces for Growth and Challenges associated
Evaluation of the new organization
The action plan
Q & A
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Company Background
Founded by 4 ex-IBM software engineers in 1972, Walldorf, Germany World’s 5th largest software firm and leading producer of real time, integrated applications software for client server computing 25% of human resources were employed in R&D; prime focus Flagship product: R/3 Strategic focus is to remain product company with greater market penetration International expansion through foreign subsidiaries as its vehicle
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R/3
It quickly became a dominating product in EIS segment of client server market
Functioned as central nervous system of the company – allowing communication and data exchange at global level instantaneously and seamlessly
A standard software package to help companies to reorganize processes than functions
Employed a 3-tier architecture that allowed to meet the diverse demand of global and smaller customers as well as needs of broad range of industries
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R/3
Massive scope of R/3 helped to link over 80% of all organizational activities Capability of handling multiple languages and exchange rates Open Architecture
Compatibility with multiple platforms, different O/S and rDBMS
Large suit of application modules in 4 broad areas – finance and control, materials management and production planning, sales and distribution, human resources
Automated way of tailoring software to one’s needs without changing the code
Add-ons with new tools and developments
Outperformed its competitors by 300-800% when tested at Chevron
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Types of Partners - Alliance
Characteristics Professional service firms that provide services and resources in sales and implementation of SAP products
SAP certifies Individuals in the firm have sufficient R/3 knowledge
Value to SAP Leverage client relationships Leverage Industry expertise Allow SAP to sell high volume of R/3 fast Allow R/3 to become de facto industry standard
Value to partner Huge, lucrative SAP Practice Area
Example Price Waterhouse Anderson Consulting ICS/Deloitte CSC Index DDS Inc.
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Types of Partners - Platform
Characteristics Provide hardware on which R/3 runs
SAP certifies R/3 runs on the platform
Value to SAP Ensure that SAP’s technology is in sync with current and future platform technology
Provide multiple platform choices Leverage large marketing budgets of platform companies
Value to partner Ensure that its current and future technology will support R/3 SAP is a market leader which drives their commodity product,
part of channel strategy Exploit SAP in their advertising
Example IBM, HP Digital Apple, AT & T Sun Microsystems Pyramid Telemarketing
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Types of Partners - Technology
Characteristics Provide operating systems and databases through which R/3 runs
SAP certifies R/3 runs on operating system or under database
Value to SAP Provide multiple choices to customer Ensure current and future compatibility
Value to partner R/3 is core business application which must be able to support
Example Oracle Microsoft Intel
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Types of Partners - Complementary
Characteristics Wide range of applications and software tools that run on top of or wit R/3
SAP certifies Interoperability of R/3 and third-party software
Value to SAP SAP does not provide 100% of software solution Leverage specialized software expertise of third parties
Value to partner Use interoperability as marketing tool Use SAP as channel to sell product
Example
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Question 1: What are the external and internal forces that explain why SAP America has grown so rapidly? What are the challenges associated with this explosive growth?
ASSIGNMENT QUESTION
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Internal Forces for Growth of SAP America
Dynamic leadership and marketing leadership under Besier as CEO
Commissioned sales force
• Strong sales force to gain market share
• Recruitment from professional sales force
• Aggressive, entrepreneurial sales force
Regional Organization
• Autonomous offices
• Flexibility in decision making
Vertical industry strategy
• ICOE as bridge between R/3 customers and product development organization
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External forces for growth of SAP America
Explosive Market growth
• Assured market acceptance of R3
• Enthusiasm for the product
Partnering
• Leveraging external resources in the sales and the implementation of SAP
• Leveraging alliance partner resources and expertise by leaving 80-90% of the consulting implementation business
Need for redesign, reengineering and BPR
• R/3 embedded redesigned processes in an integrated information system
• Inclusion of industry wide best practices to reduce customization
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Factors influencing resource allocation in the innovation process
External factors
• Looks outside the firm for explanation of the patterns
• Power exercised by significant customers and investors
• Emergence of competitive threatening technologies
Internal factors
• Strategic proposal for resource allocation take fundamental shape at the lower levels of hierarchy
• Impetus by the middle level managers
• Identification of the target market by the top management
• Push to gain the market share and create ideal ecosystem for continuous returns
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Challenges associated with explosive growth
Enormous strain on the organization’s regionally decentralized structure
Managing partners’ business focus in the alliance relationships
Tremendous amount of investment required by
the partners
Obligation to train its partners, maintain quality
standards and keep customer satisfaction above threshold level
Improvement in service and support services
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Question 2: What are the key features of SAP's approach to partnering, sales, and consulting? What are the advantages and potential disadvantages of this approach?
ASSIGNMENT QUESTION
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KEY FEATURES OF PARTNERING
• Alliance (provide services, resources in sales & implementation of R/3)
• Platform (provide hardware on which R/3 runs)
• Technology (OS and database provider on which R/3 runs)
• Complementary partners (software tools running on top or with R/3)
Partnering Categories
Entire system is like an ecosystem
• Leverage alliance partner resources & expertise for consulting implementation
• Substantial investments in partners’ SAP practice (SAP certified consultants)
• Focus only on selling the product and assistance with the initial installation to avoid competition with partners
• Support for new business trend of reengineering and Business process design (BPD) – configuration and best practices
Gaining Cooperation
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KEY FEATURES OF PARTNERING
Flow of knowledge between SAP and its partners (technology and platform)
Partner had dedicated team of knowledgeable
technical and application consultants
Establishment of Competency Centers – to cater to changing capabilities and constraints of partners
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KEY FEATURES OF PARTNERING
Relationship based
on mutual benefits,
No financial ties
• No overstating of
expectations –
trustworthy relationship
• Rights of first refusal to
existing alliance
partners.
Established Rules of
Engagement
• Equal treatment at the same
level
• Making the highest level
partnering status an earned
one
• Clear criteria for promoting
alliance partners to highest
level partner status
• Partner manager – handling
one global alliance partner and
2 or more smaller alliance
partners
Most important criteria
for partnership
termination was
customer dissatisfaction
• Not measured on
SAP related
revenue: ensuring
best solution to
customer
Master Legal
Agreement
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ADVANTAGE AND DISADVANTAGE OF THE APPROACH
Advantage
• Mutual cooperation : 80-90% of implementation done by partners
• SAP could now focus more on selling the product
• Conflict avoidance
• Complementary Benefits
• Revenue generation for SAP
• New business and knowhow for partners
• Not measured on generated SAP related revenue
Disadvantage
• Failure of partners traced back to SAP – not worked closely
• High level of trust required, less Involvement of SAP
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KEY FEATURES OF SALES
Purchasing decision of R/3 a strategic choice for
differentiation
Long Sales cycle – often took a year or more to build
relationships
Identifying, positioning opportunities – building
consensus across divisions
Demonstration , tests and benchmarking required
before sales
Putting together all the above required a lot of time
and work force
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Close relationship with customers
Dedication from partners enhanced sales
Main Customers top tier companies – potential for huge revenue generation
Long sales process (greater than a year to build relations)
Loss of substantial time and money if deal is not closed
Ad
van
tage
Disad
vantage
ADVANTAGE AND DISADVANTAGE OF THE APPROACH
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KEY FEATURES OF CONSULTING
Provided a source of revenue for SAP
High hiring rate of consultants
• Approx. 25% increase in number of consultants from 1995 to 1996 (Exhibit 5)
SAP consultants had more product knowledge than
partner consultants
Basic Consultants
• Functioning and installation of R/3 and its support system. 212 basic consultants in 1996
Application Consultants
• Customize the software according to customer requirement. 634 Application consultants in 1996
Hiring of consulting managers from outside
High attrition rate
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Advantage
• Increased hiring of consultants
• On-job learning (training lasted only 10 weeks)
• In-depth product knowledge of the consultants
Disadvantage
• Because of long Learning curve payback from the consultants is late
• No career path for managers and consultants
• High attrition rate
ADVANTAGE AND DISADVANTAGE OF THE APPROACH
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Question 3: What is your evaluation of the new organization? What problems was it designed to solve?
ASSIGNMENT QUESTION
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OBJECTIVES
Harvest revenue from existing customers more
completely
Increasing customer base to become de facto
standard by moving into the mid-tier market
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ORGANIZATIONAL ISSUES
Learning not being disseminated throughout organization
Wrong Perception about SAP
implementation time and costs
Forming a well trained and
effective Global sales force
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STRUCTURE LINKED ISSUES
Billing & overtime
Utilization of consultants
Training center
efficiency
Duplicacy of work
Knowledge dissemination
Detached ICOE
operations
Career paths and roles
Compensation mechanisms
Not leveraging the organizational size
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STRUCTURE LINKED ISSUES
Utilization of consultants
Non-uniform distribution of work across regions Some regions required 80%-90% while others only 40% Attrition among consultants
Billing & overtime
No consistent approach for billing across organization
Employee overtime was different across different regions
Knowledge Dissemination
Regional units worked independently Knowledge about best practices were not shared across regions
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STRUCTURE LINKED ISSUES
Duplicity of Work
Work responsibilities not clearly defined Several employees end up doing same work Results in cost increase and wastes employee time
ICOE operations were independent of main organization
Co-ordination of ICOE with company was difficult
No clearly defined roles and job titles Compensation and reward mechanisms were not
uniform
ICOE operations
Career Path
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Approach towards vertical industry
Organized around 3 lines of business
1. Sales
2. Consulting
3. Training
ORGANIZATIONAL RESTRUCTURING
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NEW ORGANIZATION EVALUATION
Issue Solved Effects
Utilization of consultants
Dedicated 850 member team was formed under one leadership. Focused on productivity and consistency across regions
Training Centers
Restructured under COO, previously were under regional heads
Duplicacy of Work
Under new structure job responsibilities were clearly defined
ICOE Operations
Restructured under Coote – improved consistency in ICOE operations
Career path/Compensation
Under new structure job titles were clearly defined/ Structured Compensation programs rolled out
Knowledge Dissemination
Solutions guides were prepared which were used by sales persons
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NEW ORGANIZATION EVALUATION
Issue Solved Effects
SAP implementation time and costs
Accelerated SAP through small partners for rapid implementation Strategic placement of global support managers to deal with executive sponsor
Developing Global sales force
Industry expertise by forming virtual organization within global sales team
Reorganization by lines of business helped in the identification of rapid implementation methodology
SAP increased its control in the value chain by shifting the power from the partners
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Question 4: As Eileen Basho, what is your action plan for dealing with the strategic and organizational challenges that you face?
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CHALLENGES
Make SAP the de-factor standard for EIS
Close more larger size deals
Increase sales in Services sectors
Penetrate the mid-tier market
Strategic Challenges
Bring in Professionalization in the Consulting division: Increase Productivity and Consistency
Build Up Focus and Capabilities in Services Consulting
Reduce implementation time and cost to gain entry into mid-tier market
Provide more support to the sales team to reduce the sales cycle
Organizational Challenges
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BRINGING IN PROFESSIONALIZATION
A more structured consulting division with better allocation of resources
Subdivision of consulting into technical, field, principal consultants and GSMs
Technical services group by functional expertise
Defining Career path for the field consultants
Principal consultants allowed to excel in consultancy rather than move into management
GSMs in charge of overall implementation and coordination of resources
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FOCUS ON SERVICES AND MID-TIER MARKETS
Increase collaboration with Emerging markets division
Engage the consultants early and put in a stake
Create ICOEs for services industries and ensure knowledge transfer
Accelerated SAP
Use estimation tool to increase implementation choices
Services
Mid - Tier
Subcontract smaller partners to implement
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REDUCE SALES CYCLE
GSMs at the forefront of sales process to develop overall implementation
Gets the right people on the project and monitors it
Educate the customers on how they can make better use of partners
Create domain experts within the field consultants so that they can provide better solutions and easier to access available resources
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Q & A
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