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Research

Publication Date: 3 May 2010 ID Number: G00175863

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ERP Support: Strategies That CIOs Use to Get It Right

Pat Phelan

This research contains a compilation of strategies employed by CIOs to increase ERP's value to the business. CIOs and application leaders can leverage this research as they devise strategies for improving how application support is managed and delivered.

Key Findings

CIOs and application leaders have been pressured to seek tactical ways to reduce ERP support costs. Enterprises are beginning to shift focus from being primarily on cost avoidance to investing in ERP support services as a strategy for improving business performance.

Enterprises are leveraging changes such as instance consolidation, business growth and globalization efforts as key drivers for implementing new ERP support strategies.

In some cases, ERP support organization strategies are revised to serve a broader end-user community. In other scenarios, the ERP support organization must develop strategies for correcting support inadequacies (e.g., weak governance, wrong staffing levels), which are exacerbated by increased demand when attempting to make business more agile or responsive to customer needs.

Enterprises are employing similar strategies for adjusting the scope of support services, the amount and pace of service delivery, and the quality of support outcomes to improve business agility and business performance.

Recommendations

Enterprises seeking ways to build a business case for changes in the ERP/business application support organization should focus on supporting business improvements (e.g., improving customer service and making the business more flexible) as strategic drivers for change, instead of simply driving tactical reductions in support costs.

When creating strategies for improving how ERP/business application support is managed and delivered, leverage the strategies that other enterprises are using.

Publication Date: 3 May 2010/ID Number: G00175863 of 7

© 2010 Gartner, Inc. and/or its Affiliates. All Rights Reserved.

ANALYSIS

IT Organizations and ERP Support Costs

IT has become the single biggest source of productivity improvements in our economy, yet many business executives view the IT organization as a cost center that should be minimized. This is not surprising since, for many enterprises, annual support costs for ERP and other large business applications can be 10% to 30% of the initial implementation budget (see "How to Start Estimating Software Life Cycle Costs"). At an enterprise level, ERP support costs are highly visible, while ERP benefits are not, so CIOs and application leaders have been pressured to seek tactical ways to reduce ERP support costs. Business executives should shift their focus from cost avoidance to service improvements that enable the business to increase revenue potential, open new markets, or simply make critical business-based decisions on more-accurate and timely information.

Enterprises seeking ways to improve the ERP/business application support organization should look beyond strategies aimed at a tactical reduction in support costs. Instead, they should focus on strategies that improve the support organization's ability to enable business improvements (e.g., improving customer service and making the business more flexible).

We recently conducted a study of 300 Gartner clients who were in the process of changing, or planning to change, their ERP support organization. Our analysis of 100 of those clients shows that 58% of the enterprises were making a strategic case for changing how ERP/business application support is delivered, and only 12% of the enterprises were focusing primarily on changing the support organization to reduce support costs. Change strategies were aimed at enterprises achieving quality improvements or on becoming better-positioned to enable business changes, such as globalization, consolidation or growth/innovation.

Strategies for Improving ERP/Business Application Support

Each organization that we studied focused on at least one, but often more than one, of four types of strategies to improve the level of value to the business from ERP support services.

The strategies included:

Modifying the support organization structure

Formalizing or clarifying the support roles and responsibilities

Defining or modifying support governance processes and mechanisms

Developing or changing the approach to sourcing support services

The most frequent combination, when multiple strategies were used, was modifying the support organization structure and formalizing or clarifying the support roles and responsibilities. This combination was sometimes accompanied by one or both of the remaining two strategies; but, most often, adjusting the organization structure and clarifying roles/responsibilities were the primary focus (see Figure 1).



Figure 1. ERP/Business Application Support Organization Strategic Focus

Source: Gartner (May 2010)

Modifying the Support Organization Structure

Seventy-three enterprises were modifying the ERP/business application support organization structure to improve support services. Most of the enterprises had some type of ERP/business application competence center (BACC) in place and were looking to make adjustments to it, or were planning on migrating to a BACC organization model for managing and delivering support services. A BACC integrates the IT department's traditional application support services with business-led services such as front-line productivity support (delivered via super users), business process analysis and application investment control, and is managed under a single leader, typically (but not always) from the IT organization.

Strategies for adjusting the organization structure to improve support included:

Creating a mix of centralized versus decentralized services

Adjusting the support organization to accommodate maintenance, as well as project support services, under a single leader

Designing support management and delivery processes to accommodate virtualized support teams

Consolidating support service teams and optimizing head count based on skills and support volumes

Formalizing the scope of support and creating a catalog of services included in support



Formalizing or Clarifying Support Roles and Responsibilities

Seventy of the 100 enterprises we studied cited clarifying roles and responsibilities as a critical strategy for improving application support, both from an internal management perspective and as it related to end users' ability to receive timely, high-quality, effective support.

Specific strategies that focused on roles and responsibilities to improve support included:

Increasing user ownership and involvement in support processes

Identifying, proceduralizing, and measuring collaboration between support roles and responsibilities for maintenance versus project support services

Documenting support processes, and identifying responsibility, accountability and participation in process steps

Incorporating end-user and third-party roles and responsibilities in support process definitions

Expanding quality-focused roles to include the proper set of users and others that were affected by changes

Defining or Modifying Support Governance Processes and Mechanisms

Improving (and sometimes implementing) governance over application investments, including support activities, was cited by 34 enterprises as a strategy for making the ERP/business application more valuable to the business.

Specific strategies that focused on roles and responsibilities included:

Involving business leaders in application governance

Formalizing decision-making governance for application investments and changes

Expanding application governance to include a broader set of user groups (e.g., consolidation or globalization initiatives)

Standardizing support processes across maintenance and project services (e.g., change control and release management)

Introducing or strengthening governance over outsourced support services

Developing or Changing the Approach to Sourcing Support Services

Twenty-six enterprises cited changing their approaches to sourcing application support services to improve the value that the application provided to the business. In some of the enterprises, the focus was on which services to outsource to optimize the use of internal staff/skills, improve timeliness and quality of support, and minimize costs. For others, the strategy was to improve the governance, quality and communication with existing outsourced arrangements.

Specific strategies that focused on sourcing strategies included:

Identifying support roles/skills that should be retained and nurtured versus outsourced



Outsourcing "commodity-like" support services that require little enterprise knowledge

Clarifying the services to be delivered by third parties, and creating accountability, communication paths and other mechanisms to manage quality and cost

Creating career development and retention plans for key internal roles and skills

Adding visibility to the lines of separation of services and the interactions needed when services were outsourced to multiple providers

Assessing existing outsourcing strategies, and making revisions to reflect current and future staff/skill requirements

Regardless of the level of outsourcing chosen, Gartner recommends that internal resources should include a highly experienced technical solution architect, and highly experienced functional experts who know the business processes and how the application was configured to support the processes. These resources will serve a vendor management role, as well as play a key role in the change management processes.

Conclusions

This study has provided insights into how enterprises approached, or plan to approach, changing how they manage and deliver ERP/business application support services. CIOs and application leaders responsible for managing and improving ERP/business application support should note that:

Enterprises are making support organization changes earlier in the application life cycle — prior to go-live, rather than postimplementation.

In addition to making tactical support organizational changes to reduce cost, enterprises are making strategic changes aimed at improving the value that the application provides to the business.

Enterprises are typically focusing on four areas when forming strategies to improve the level of value to business from ERP support services: changing the support organization structure, defining or tuning support roles and responsibilities, providing support governance, and sourcing.

Enterprises leverage business changes such as instance consolidation, business growth and globalization efforts as key drivers for implementing strategies that enhance the support organization's ability to serve a broader end-user community, or as a driver for making strategic changes aimed at correcting support inadequacies (e.g., weak governance, wrong staffing levels), which are often exacerbated by an increase in the size of the end-user community. See "Enterprises Are Making a Strategic Case for Changing Support Organizations"for the common drivers that support organizational changes in the enterprises that we studied.

Related Gartner Research

Gartner has published research related to designing, staffing and managing the ERP/business application support organization. Enterprises should review these for applicability to their businesses. In addition, we have published Toolkits that aid in designing or modifying the ERP support organization structure. The most applicable is "Toolkit: ERP and Business Application Support Strategic Staff Planning Tool," which is intended to be used with our BACC design methodology (see "Best Practices for Transitioning ERP/Business Application Support From 'Build' to 'Run'"). The Toolkit provides a detailed explanation of each step in the BACC design



methodology, and guides CIOs and application leaders through support staff planning. It also provides a spreadsheet-based tool for tracking the results of planning decisions. The Toolkit contains master lists of support roles, support services and support skills. To expedite the planning process, the Toolkit also contains a preloaded template of common roles, with services preassigned.

RECOMMENDED READING

"What CIOs Should Do to Prepare for ERP and Business Application Staff Planning"

"How to Choose a Business Application Competency Center Model That Fits"

"Ten Components of Effective ERP Governance"

"Toolkit: Guide to Designing an Effective Business Application Competence Center"

"ERP Support Staffing: Investment Control Role Definition and Key Performance Indicators"

"ERP Support Staffing: A Strategic Approach"

"How to Apply Lean Principles to ERP/Business Application Implementation and Support"

Evidence

The source of information used for this analysis was 300 interactions in 2009 with clients who were designing an ERP/business application support organization, were planning for changes in how business application support that was managed and delivered, or were having issues with business application support service delivery. We examined the interaction notes to determine the most common drivers for changing the support organization. The top five change drivers were so prevalent that we randomly chose 100 interactions for further analysis to determine what strategies were being employed as a result of the change drivers.



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