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NO. 71

Breaking the speed-to-implementation barrier


By using SAP R/3 technology to support its business strategy and having chosen eOnline, Inc. as its application service provider (ASP), TechSmart has laid the foundations for continued rapid growth growth that has already seen both revenues and headcount double during the rst phase of its SAP implementation. The very rst thing I did when I joined TechSmart in November 1999 was establish an IT strategy that would encompass our business systems, Web strategy, and underlying IT infrastructure, says Michael Beller, CIO at These three things have remained largely unchanged since they were put into place the end of the year. The challenge for us now is to act both quickly and thoroughly to keep up with our rapid growth. TechSmart offers original equipment manufacturers, lessors, retailers, e-tailers, and large corporations a Web-based asset recovery solution. Such customers are able to manage and resell their returned, refreshed, off-lease, and overstock office technology assets through TechSmarts online auction. Selecting the tools to meet the challenge To help meet the challenges posed by TechSmarts rapid growth, Beller selected ERP software (the SAP R/3 System), an ERP systems integrator (Ernst & Young), and an application services provider (eOnline, Inc.). He opted for R/3 on account of the breadth and depth of the systems functions. Unlike other Internet startup companies, TechSmart not only had an existing brick-and-mortar operation, but also an Internet e-commerce presence. Beller knew that TechSmart needed an integrated package to support its back-office and its e-commerce needs.
PROFILE is a leading business-to-business online auction house specializing in the asset recovery of preowned and office-leased computer and business technology. This Internet startup company with 375 employees has monthly revenues of $1.5 million. By investing in a hosted solution, it is positioning itself to grow tenfold within the next 12 months. Michael Beller, CIO at Just 13 weeks elapsed between the day we selected SAP to the day we went live.

After looking at the tier-one ERP packages, Beller concluded that TechSmart could implement the SAP system faster than any other package and he was right. Just 13 weeks elapsed between the day we selected SAP to the day we went into production with Materials Management, Inventory Management, Sales and Distribution, Order Processing, Shipping, Finance, and Accounting, says Beller, And that includes software negotiations and year-end holidays! In selecting Ernst & Young as a systems integrator, Beller was looking for small experienced core teams where every module would be represented during the rst phase. He did not think that TechSmarts organization could absorb or accommodate a large team and, furthermore, experience had shown small teams to be highly effective in implementing initial releases. Reasons for using an ASP TechSmart opted for an ASP for three reasons it was faster, cheaper, and less risky. It was faster because proper capacity planning, hardware procurement, and hardware conguration alone could take months, not to mention negotiations with the vendor. It was less costly and less risky in view of the personnel that TechSmart would otherwise have had to attract, hire, and retain. Plus, there would have been all the other source-loaded costs related to operations, building the proper data center with the appropriate backup and recovery, and expenditure on proper coverage, support, disaster recovery, and business resumption.

Going with an ASP was less risky for a number of other reasons. First, in-house hosting would have required high-priced, low-availability IT skills, and even if a small company like TechSmart could attract such skills, it would be difficult to retain them. Constant turnover and high salaries would have had a direct impact on the speed and cost of the implementation factors that posed a risk to the business. Furthermore, eOnline is absorbing some of the risk in terms of technology investment, for example, making sure that proper upgrades are made to the hardware systems and to the software. It is also responsible for the ongoing training and career development of TechSmarts staff, again saving costs. TechSmart selected eOnline as its hosting partner for three main reasons: the cost of the hosting solution, the SAP experience, and the cost of SAP licenses. With regard to the cost of the hosting solution, by paying on a per month/per user basis, TechSmart had a low, upfront investment. As Beller says: I didnt have to generate hundreds of thousands of dollars at the beginning of the project to set up a proper data center an important consideration for a small, new startup. This also relates back to reduced risk because I know Im not going to be blind-sided by unforeseen costs. Secondly, eOnline and its consulting community of more than 20 SAP-certied companies provided the necessary SAP experience, and nally, the attractive pricing option of SAP licenses appealed to TechSmart. Adding value through R/3 TechSmart uses SAP R/3 technology to support its business strategy and to process its operations efficiently. If a company is reselling a $60,000 server, it might not have to be so efficient in terms of margin to make a comfortable prot. However, if it is reselling a $600 PC and is spending money on auditing, testing, refurbishing, and reselling, then the company has to be especially efficient. Once an efficient processing infrastructure is in place, it will further enhance growth into other product categories. Automating business practices and procedures to enforce particular business policies and rules helps achieve efficiency. For example, which machines should be repaired? What is the optimum effort in versus value out in terms of process? R/3 also helps TechSmarts e-customers get added value by providing information on which items are selling and the condition of products that have been returned. The R/3 implementation plan changed several times during its 13 weeks. For example, the delay in opening a second facility, which was to have been the production test bed, meant that the existing fa-

cility had to be converted rst. Although this was a necessary decision, Beller believes in hindsight that the company did not focus enough energy on data conversion. This created a number of problems in the rst month of being live. Now, however, TechSmart has the foundations in place for ongoing success. Looking back, Beller is still amazed by what TechSmart managed to achieve in its 13-week-long R/3 implementation. When you hear about other rapid implementations, and then look under the covers, you nd out that they had no legacy data conversions, no interfaces to external systems, no SAP extensions or customizations, and that they had a just limited number of users, he says. At TechSmart we broke through new barriers. s