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SAP INSIGHT
CENTERS OF EXCELLENCE:
OPTIMIZE YOUR BUSINESS
AND IT VALUE
Table of Contents
Executive Agenda 1
CENTERS OF EXCELLENCE:
OPTIMIZE YOUR BUSINESS
AND IT VALUE
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EXECUTIVE AGENDA
Given the impact of IT, many companies are starting The study identified three main factors that inspire
to think differently about their IT investments and companies to institute centers of excellence: the
strategies. Rather than grudgingly viewing IT as a desire to manage and lower total cost of ownership
set of tools necessary for doing business – and (TCO), the need to increase the value of their IT
sometimes as an expensive and cumbersome set of investments, and a drive to focus on customer
tools – many companies are looking instead to gain satisfaction.
value from their IT investments. They are focusing
The study also found that among well-integrated,
on reengineering and optimizing their support
mature COEs, certain best practices – winning
processes and on driving IT to enable their
strategies, approaches, and processes that produce
businesses and improve their operations – as well as
superior performance in an organization – correlate
their bottom lines.
with success. The best-performing companies
A recently completed ASUG/SAP Best Practices minimize TCO by optimizing their COEs,
study (see sidebar for study details) shows that centralizing the organization, standardizing IT
centers of excellence (COEs) are the primary vehicle systems across the enterprise, managing
for delivering industry-led project and program performance, and focusing on customers. Finally,
excellence. Centers of excellence provide a the study found that cooperation between business
standardized approach across an entire organization, operations and IT is crucial to the successful
with strategies and templates designed to facilitate implementation and operation of COEs.
and enhance project management processes and
approaches. Staffed with knowledgeable business
and IT teams, these centers are company resources
for current practices, technologies, and emerging
trends, and they are designed to enable joint IT and
business solutions with greater value, consistency,
and efficiency.
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Figure 1: Companies of all sizes and years of experience with their COE participated in the
survey. In total, 59 responses were submitted.
Retail/Wholesale 5 to 6 years
Process Manufacturing
7%, 4 companies 15%
14%, 8 companies
CPG
3 to 4 years
11%, 7 companies
Services (Banking, 12%
Public Sector Professional, Healthcare) 1 to 2 years
5%, 3 companies 30%, 18 companies 15%
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Maturity
Levels of
Capability/Maturity
Centers of
Excellence
Level 5:5:Optimal
Level OptimalPerformance
Performance
Level 4:4:Excellent
Level Excellent/Quantifiable
/ Quantifiable Performance
Level 3:3:Executing
Level Executing/Repeating
/ Repeating Performance
Level 2:2:Implementing
Level Implementing/Refining
/ Refining Performance
Level 1:1:Initial
Level Initial/Marginal
/ Marginal Performance
Figure 2
Time
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communications are in place, and KPIs are refined, According to the study, companies that have
targeted, managed, monitored, and analyzed. A adopted the most COE best practices have COEs that
clear user governance structure is in place, and a are:
transformation in thinking means that users are
Centralized, either with or without satellite
treated like partners. Most important, major
offices, a clear key contributor to a lower TCO
changes are implemented through the lessons
learned throughout the development and Implemented during the initial adoption and
deployment of the COE. installation of their SAP® solution
As COEs become more mature and optimize the Organized to include a key user program in
adoption of best practices, making them core to which lines of business employees take the lead
COE operations, companies discover a need to on facilitating the COE in their departments
develop talent to sustain the changing needs of the
Aligned with a high level of standardization both
business in the most cost-effective manner. By the
within business units and across the entire
time a company has reached level five, it has fully
enterprise
adopted and internalized a center of excellence
culture that helps optimize the IT systems, overall Less likely to permit undue customization of
organizational performance, and customer systems
satisfaction.
Focused on the customer and adhering to the
overall corporate mission and strategy
GREATER COE MATURITY =
INCREASED BEST PRACTICES Companies ranked by the survey at the highest level
ADOPTION of maturity earned many key and valuable results.
Nearly 36% of the companies in the survey With a mature and fully integrated COE, a company
demonstrated a high level of maturity in their can realize a higher level of acceptance of its IT
COEs. These companies have adopted best practices system, faster project completion, controlled
that improve acceptance of IT systems across the project costs, and improved strategic management
organization, shorten project times, control project decision making – all benefits that contribute to an
costs, improve strategic management decision improvement in ROI.
making, and increase return on investment. Tellingly, study findings showed that 62% of level
four and five companies incorporate continuous
improvement practices and programs into their
business approach, whereas for 72%, COEs drive a
strong alignment between the business and IT and
ensure equal participation with the business.
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The study found five key actions in which the well-established partnership between the CIO and
adoption of best practices has been shown to enable the business organization.
companies to optimize processes, meet their
However, even when a company’s IT plan makes
business needs – and improve their bottom lines.
sound strategic and tactical sense, with a clear and
These five actions are:
compelling business case for the investment, several
Minimize TCO with an optimized COE key barriers to achieving optimal value from an IT
outlay still exist. Our survey revealed typical barriers
Centralize the organization
whose effects can be ameliorated with an optimized
Standardize IT systems across the enterprise COE:
Manage performance Unclear program value imperatives
Focus on the customer Executive disconnects on key business case
assumptions
MINIMIZE TCO WITH AN OPTIMIZED
Lack of value readiness due to entrenched
COE
organizational culture and technological factors,
The study identified a number of key benefits such as legacy systems
realized by adopting COE best practices. The first
benefit is a reduced TCO – the cost of Lack of program metrics keeping the focus on
implementation, execution, and maintenance – budget and deadlines
directly due to the enablement of centers of Lack of ongoing value reviews to ensure that new
excellence. IT capabilities deliver measurable value
Optimal COE performers, the survey found, These barriers can lead to prohibitive costs and lost
significantly reduce TCO by centralizing to a high time due to IT changes, and they are a direct result
degree; standardizing system landscapes and of a lack of alignment between business and IT
business processes; minimizing software strategies. Quick fixes then result in higher long-
installations; and following a strategy of managed, term costs and decreased functionality, with more
limited systems customization. and more of the budget – up to 80% according to
Make no mistake: managing TCO is important. But our survey – spent on simply maintaining the
lowering TCO at the expense of the other four technological status quo. This leaves a company
actions would clearly be shortsighted. The caught in a spiral of spending without achieving the
companies surveyed all recognize that COEs are results and return on investment it needs.
instrumental in improving the return on IT The lack of an effective COE organization and
investments. The study also found that SAP-certified processes leads to a failure to achieve business
COEs perform better than noncertified COEs. results, excessive TCO, and delayed realization of
Successful centers are found in companies that the value of IT investments. The study indicated
implement strong lessons-learned approaches and that COEs enabled companies to reduce the TCO of
that have a well-documented knowledge their system applications. Indeed, survey
management process in place. Returning to an participants achieved significant reductions, as
essential point, centers of excellence were shown shown in Figure 3.
not to be successful in companies without an equal,
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Total cost of ownership is one of the most difficult Strong alignment between business and IT and an
metrics to benchmark. Even when using the most equal partnership in the business
common metrics – cost per user, full-time support
employees per 100 users – companies often don’t CENTRALIZE THE ORGANIZATION
obtain adequate results, or the results of their Organizations with centralized COEs, the survey
analyses are misleading. For example, consider the found, have better consistency and coordination,
often-used TCO metric of lowest cost per user. Well- leading directly to less duplication of effort. These
designed IT solutions often decrease the number of organizations configure and develop their IT
users needed to support business processes. But this systems by process or functional area instead of by
highly favorable outcome typically creates a higher business unit, leading to more efficient, more
cost per user. The same is true of the converse. If a streamlined systems operations. The survey results
company has too many users, perhaps because of are clear on this subject: 87% of all respondents’
poor process structures or training, it achieves a low COEs are centralized, and this percentage climbs to
cost per user – but this low value is misleading 91% for the best-performing companies. A higher
because it is due to undesirable factors. This does percentage of these mature companies address the
not imply that per-user metrics lack value; it merely full solution life cycle in the scope of their COEs.
suggests that companies require multiple metrics to Furthermore, 46% of COEs address the full solution
make valid, balanced business decisions. cycle, from business case development to
The survey identified specific best practices crucial continuous improvement and support.
to clearing these barriers to reducing total cost of These best-in-class COEs evaluate the impact of
ownership: changes on all areas of the business and efficiently
Certification of the center and equal partnership allocate support services across their areas of
between the business organization and the COE responsibility. Organizations that have aligned
regarding daily operations resources with either new projects or support
initiatives are more likely to contribute directly to
The institution of value checkups that ensure lower staff turnover, ensuring that they retain talent
value is being achieved and that lessons learned and mitigate the risk of knowledge loss.
are being adopted and incorporated
The survey shows that the development and
Strong continuous improvement practices deployment of a key or power user program is
Figure 3
COE No COE COE No COE
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crucial to the overall excellence and success of Build COEs as early as possible
COEs. Power users are employees of a business unit
Bifurcate support and new project work
who are proficient in the use of the IT system, with
a higher level of applications knowledge and
STANDARDIZE IT SYSTEMS ACROSS
experience than their peers. These power users are
THE ENTERPRISE
responsible for helping their coworkers effectively
use the software and correctly execute business The degree to which IT systems are standardized
processes and functions. As the first level of support, across the entire business organization plays a key
power users reduce the number of calls into the role in the successful implementation of COEs. The
COE for help and result in labor cost savings. Our study revealed that a high degree of process
study found that 62% of COEs have key or power standardization, a minimum of application and
users in place. solution installations, and limited systems
customization are all crucial to establishing and
The survey identified an important area for driving effective control of IT and business costs.
improvement: the alignment of the corporate
organization. Only half of companies report that This reduces operating costs, ensuring that
they are aligned by business process, revealing that measurable value is realized. While 17% of all
there’s still room to improve IT efficiency by companies reported a high level of standardization,
aligning systems by functionality. an impressive 65% responded that upgrade plans
were in place. Sixty-three percent of companies have
Key best practices found among COEs with optimal system road maps in place, with the degree of
organization include the following: planning ranging from a current view to five-year
Centralize centers of excellence, both pre- and future views.
postimplementation Echoing a central theme revealed in the study, an
Build an optimal team with a strong power user effectively optimized COE takes the standard IT
program in place that is staffed by the business support model a step further than the norm –
becoming proactive and forming a partnership with
Ensure COEs address the full solution life cycle the business unit. This partnership delivers
from business case development to continuous solutions that are true collaborations of IT and the
improvement and support to achieve the business unit, resulting in solutions with greater
expected ROI value, consistency, and efficiency.
Figure 4
All companies Levels 4 and 5 All companies Levels 4 and 5
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Minimize the use of third-party applications It is also important to be selective and keep a sharp
focus in performance measurements – measuring
Implement and follow system upgrade plans too many metrics can be counterproductive. One
third of companies in the survey said that they
measure four to six KPIs per project.
63%
17%
Figure 5
All companies Levels 4 and 5 All companies Levels 4 and 5
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% of companies meet/exceed
Customer customer focus requirements
Focus and
Satisfaction 100% % of companies reporting
customer satisfaction
83%
% of companies with business
67%
involvement at biweekly
54% review or feedback meetings
33%
21%
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The ASUG/SAP survey made three overriding A documented knowledge management process
factors abundantly clear. First, companies with more drives on-time and on-budget performance and
mature COEs can keep their eyes constantly on the needs to include knowledge repository build,
prize of managing customer satisfaction without documentation requirements for support and
losing focus on TCO. Second, COE models that are knowledge packaging, training and help desk
formed in a spirit and atmosphere of collaboration routing, and resolution certification.
and cooperation, aligning business and IT, can
A centralized COE design drives effective delivery.
better address issues of continuous improvement,
This centralized structure is a key contributor to
leading to an effective COE with optimized
lower TCO.
operation. And third, companies that deploy centers
of excellence realize a lower TCO of their enterprise Limiting the amount of customization
IT system. contributes to a faster time to market because it
simplifies and shortens the testing and
OVERALL KEY BEST PRACTICES implementation phases.
Several critical best practices emerged among the Centers of excellence are most effective when
highest ranked companies (level five). The enacted during the initial system implementation
performance drivers that have the highest impact phase.
on COE value achievement are the following:
Business-owner involvement in decision making
Centers of excellence affect on-target, on-value drives on-time, on-budget performance. All
performance when they manage all processes and optimal COEs have adopted a business process
functions from problem definition to resolution owner model.
– including support-level functions and roles,
escalation procedures, corrections, interface Formal power user programs significantly
handling and error correction procedures, help influence programs achieving their expected
desk training, performance metrics definition and goals and value. All organizations with optimally
problem analysis, road map strategy, and design. performing COEs have a power user program in
place. Staffed by the business unit outside of the
COE, power users provide the first line of support
to the business user community.
ABOUT ASUG
ASUG is an independent, volunteer-run association
that facilitates knowledge transfer among the
community of SAP customers by providing
customer-driven educational opportunities,
professional networking, and a forum to influence
the future product and service direction of SAP
year-round.
ASUG maintains a unique position within the SAP
community through its combination of highly
focused education tools, access to both subject
matter experts and SAP executives, and personal
networking opportunities. As a result, members
from any size company continuously solve their
SAP-related business problems more efficiently and
cost-effectively, realizing a significant return from
their membership. For more information, please
visit www.asug.com.
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