mti sap america

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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

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Page 1: MTI SAP America

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

Page 2: MTI SAP America

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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Management of Technology & Innovations| SAP America Page 3

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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Management of Technology & Innovations| SAP America Page 10

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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Page 11 Management of Technology & Innovations| SAP America

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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Page 12 Management of Technology & Innovations| SAP America

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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Page 13 Management of Technology & Innovations| SAP America

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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Page 14 Management of Technology & Innovations| SAP America

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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Page 17 Management of Technology & Innovations| SAP America

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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Page 18 Management of Technology & Innovations| SAP America

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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Page 32 Management of Technology & Innovations| SAP America

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