Large Enterprise Resource Planning (ERP) projects have both been a necessity and the norm for many enterprises in the past. Primarily driven by IT, global project implementation durations between 2-5 years were not unheard of. But with the rise of Digital Transformation projects driven by the Chief Digital Officer (CDO) aligning CXOs across the organization, the shift to more value-driven projects has taken place. Organizations do not want to wait for too long to see results and want to assess the value delivered as well.
Looking at this from a lens of the implementation approach, the shift from Waterfall to Agile is also taking place. According to McKinsey, Agile ERP projects have reduced project costs by 10%, increased program value by providing visibility by 20%, increased productivity and boosted employee morale. There is clearly a role for Agile delivery in ERP transformations!
In this article, we will examine the trends driving ERP transformations, challenges faced in implementing Agile, and some ways to address those them.
Trends driving ERP Transformations
SAP ERP implementations are quite different from pure software development projects as they include configuration of the core ERP, interface development, data exchange programs, reporting, etc. Traditionally, a “big-bang” approach using waterfall methodologies has been popular in such projects.
Rise of Digital Transformation Projects
Of late, with Digital Transformation projects, the SAP ERP implementation is accompanied by other initiatives in the areas of Robotics Process Automation (RPA), Artificial Intelligence (AI), Machine Learning (ML), Advanced Data Intelligence and Analytics. Examples of such initiatives are: using ML for automating/verification data entry for procurement processes, RPA to build routines to optimize finance processes, and supply chain-related analytics on top of data from both SAP & non-SAP sources.
Impact of Cloud SaaS
The other dimension is the usage of Cloud SaaS that provides more frequent cycles of innovation (3-6 months) but limits flexibility. For example, a large transformation could include SAP S/4HANA Public Cloud solution along with SuccessFactors HCM, Integrated Business Planning (IBP), Ariba which offer varying degrees of customizability. In such cases, the work required on the process simplification & harmonization becomes key.
Emergence of Business Networks
Another trend is the emergence of business networks that work in conjunction with ERPs like SAP S/4HANA. These include Ariba for procurement, Concur for travel & expense management, Fieldglass for contingent labor, Logistics Business Network (LBN) for logistics, and Asset Intelligence Network (AIN) for assets. Most of these are SaaS solutions which come with pre-boarded partners e.g. suppliers in Ariba, airline partners with Concur and last-mile delivery partners with LBN. Depending on what capabilities are required for a customer’s Digital Transformation, the scope could include one or more of these networks and related customizations. These also impact the choice of implementation approach taken in the project.
“Bi-modal” IT
According to Gartner, organizations should adopt a “Bi-modal” approach to modern IT where:
- Mode 1 is optimized for areas well-understood e.g. renovating legacy ERPs
- Mode 2 is for areas that are exploratory, relatively unknown e.g. optimization models in supply chain
As organizations embrace these models, the approach has shifted from a “big bang” to an “incremental” approach where Mode 1 projects are done once in a few years but Mode 2 projects are done more frequently. The impact of Cloud SaaS and PaaS is also of great significance here as the choice for Mode 1 would be ERPs like SAP S/4HANA but choices for Mode 2 would include Hyperscaler technology platforms such as AWS, Azure and Google.
The former are longer-term projects to strengthen the “Core” and the latter are short-term projects to innovate at the “Fringe”. We are now seeing the change from going “Core to Fringe”, towards “Fringe to Core”!
What is Agile Implementation Approach?
Agile advocates the use of small multi-functional teams, planning multiple sprints, evaluating outcomes, and monitoring KPIs set upfront. There are several approaches like Scrum, Kanban, etc. that have primarily been used in software development.
Considerations for Agile in SAP ERP Implementations
Given the benefits of Agile, it is only natural to consider it for SAP ERP implementation projects as well. However, there are a few dimensions to consider:
The “Industry” Dimension
- The readiness of SAP’s software varies by industry. For example, industry solutions for Oil & Gas are not available in S/4HANA Public Cloud version but only in the S/4HANA Private Cloud versions (which are managed by SAP)
- Furthermore, the S/4HANA Public Cloud version could apply to upstream (this is a solution driven by an industry consortium led by Shell with SAP) part of the business but not the downstream
- Therefore, in the same project, there could be a mix of multiple cloud, on-premise and custom solutions and Agile needs to be applied selectively to extract efficiencies
The “Complexity” Dimension
- Complexity in terms of business lines, geographical presence, heavily customized complex ERP landscapes drives the choice of the ERP e.g. S/4HANA Public Cloud is not ready for very large and complex organizations with global businesses
- Once again, a hybrid setup with S/4HANA Private Cloud at the headquarters and multiple S/4HANA Public Cloud solutions in a “two-tier ERP” configuration might also be possible in such scenarios
- The amount of customization or “technical debt” also determines the type of approach. For example, if a medium sized organization is ready to sunsets its customizations and adopt standard processes, then a” fit-to-standard” type of approach is possible and delivery using an Agile-like approach is possible
Key Challenges in using Agile
Lack of Agile Mindset
Mindset and readiness for Agile is the top challenge when it comes to using it in ERP projects. This could be attributed to several reasons:
- Lack of expertise in Agile across clients and implementation partners alike. Many experienced SAP practitioners might fall into traps like “this has always worked before”, “new approaches may be difficult to implement” etc.
- Compressing the project timeline of a waterfall project might seem like a better choice than executing it as Agile.
- Lack of Success Stories of Agile in ERP implementations. There are several high profile projects whose failure can be largely attributed to the improper use of Agile. This might discourage teams to embark on such journeys.
Product Vendor vs. Implementation Partner Methodologies
As Agile became more popular, both product vendors and implementation partners alike have adjusted their approach to incorporate Agile. Consider the example below.
- SAP’s Activate methodology includes some Agile principles e.g. involving users earlier, agility for changes etc. In terms of industry best practices content, SAP advocates the use of Model Company.
- Comparing this to key SAP partners such as Accenture, they include Agile principles in their “_FORM_ methodology” and advocate the use of “myConcerto” as industry best practices content.
Depending on the level of expertise and maturity of the clients, it might be a daunting task to figure out the differences and choose the optimal approach.
Customer Complexity
This is the other extreme where an Agile approach is force-fitted into a customer project! Customer Complexity is often not assessed in detail to see where Agile can be beneficial. The other nuances around the readiness for Cloud solutions, applicability of industry specific content, global rollout etc. also play a role here.
Baseline vs. Sprint Scope
Assuming a client has decided to use Agile in a project, what part of the scope is done upfront and what is left to the sprints? These are important decisions not only in the planning phase but determine the success of the execution. Areas such as Change Management, Data Integration are often ignored in the planning.
Addressing Key Challenges in using Agile
Build the Agile Mindset
Building readiness for the use of Agile in the project could be done in the following ways:
- Upskill the team on skills required to understand and execute the context
- Incorporate change management, organizational design and communication streams into the overall project
- Inspire the team of successes within / outside the organization. This can be done together with the implementation partners and product vendors as well
- Celebrate / acknowledge of successes within sprints and impact of KPIs to reinforce that Agile works!
Partner for Success
Minimally, a three-party alliance is required to determine success including the Client, the Implementation Partner and the Product Vendor.
- It is becoming increasingly important that the Product Vendor shows some “skin in the game” i.e. be responsible for customer success.
- By having a consistent approach and methodology across all three, many pitfalls of adapting Agile for ERP implementations can be addressed.
- Practically, this is easier said than done as there are many factors at play.
“Adapted Agile” Approach
As discussed above, Agile has to be adapted to work in these complex Digital Transformation powered by ERP type of projects. A few key factors to be considered while using an “Adapted Agile” approach for ERP projects are as follows:
- Baseline:
- Process simplification, technical strategy, change planning, organizational design and communications planning should be carried out upfront
- Drive from a standard approach where possible should be taken e.g. in the case of Cloud SaaS solutions
- A Minimum Viable Prototype (MVP) would be an ERP instance pre-configured with industry and customer-specific process content
- Sprints:
- Agile teams should include technical (including data & integration), business, process and change resources in order to have self sufficient teams
- Work on the “Fringe” areas would be more of a direct fit for Agile e.g. RPA programs, interface development, extension development etc.
- Closer alignment between the teams is required in running it Agile
- Empowerment in terms of decision making based on KPIs reported after each sprint is of utmost importance
In a nutshell, there are enough examples where Agile ERP implementations have delivered on the promise of speed, visibility, cost-effectiveness and adoption. However, the approach is an adjusted one taking into account factors like building a robust mindset, flexible decision making and partnerships.