Historical patterns

• Labor arbitrage and scale provided some initial cost relief, but resulted in increased pressure on quality, risk, agility, and internal management.
• Separation between maintenance and continuous SAP value delivery prompted “over the wall” engineering – favoring specifications over perspective, speed over insight. Attempts to supplement resources with skilled talent led to prohibitively high costs – especially for architects, project managers, and senior business analysts.
• Cost, capacity, and contract execution against tactical SLAs drove the agenda, not results and value.
• Deals were structured around business process improvement, but these were rarely achieved. Body count was all that mattered.

What’s different now?

• Cost and scale will always matter, but improvements based on labor arbitrage have hit the wall, with decreasing marginal returns. Limits are being reached on vendors’ ability to achieve further cost reduction – forcing a new focus on operational efficiency. IT Service Management adoption has demonstrated that service-based delivery models can improve IT operations while reducing costs.
• SAP Application Management Services are being extended from operations and maintenance into Application Development Management and IT improvements, as well as broader lifecycle activities.
• Process standardization and maturity, along with improvements in tools, allow AMS providers to build platforms that enable rapid transitioning and drive operations automation.
• SAP Cloud computing creates a new way to pool resources across multiple platforms and customers.
• AMS contracts for SAP can deliver attractive blended rates, mixing low-cost labor capacity with access to highly skilled senior specialists to drive innovation and process improvements
• Organizations are defining value layers and Value- Level Agreements to complement traditional AMS for SAP. Benchmarking and advanced analytics are being used to baseline organizational performance and expected improvements.

Build to run. Run to improve

Companies making the shift to Value Level Management see early benefit opportunities as they climb the value chain. The first comes from adopting a value mindset – understanding that it’s possible to extract more value from the expense base. Everybody knows that’s a good habit to have, but it can be tricky for organizations that have spent years focused on cost reductions at the expense of SAP innovation and improvement.

Next comes defining value at every level of the stack – from business results and innovation at the top, all the way down through SAP applications maintenance and scaling. That’s not hard either. Just do what you know is right. Look for value opportunities at every stage of the technology lifecycle – and make the most of them when you find them.

Some things in business are really complicated – but value-driven AMS for SAP isn’t one of them. Nothing could be more straightforward than tracking value opportunities surrounding valuable assets – and then executing on those opportunities as business conditions require. This is work you do every day. So at the risk of reminding you of something you already know, here’s a playbook for making the shift to value in SAP applications management services.

• Align stakeholder objectives. Sounds like SAP jargon, but it’s fundamental. Lots of people have a stake in applications running smoothly and efficiently. Get them all at the table.
• Assign SAP metrics. Tap into a good catalog of Service Level Agreements and get clear about which metrics matter most for the targeted function in your industry and sector.
• Establish baseline of current performance and benchmarks. Get the snapshot you need going in – so you’ll be able to track SAP improvements.
• Stand up the tools required to manage the metrics. You probably already have most of them in place. Just make sure they’re sharpened.
• Execute on the low-hanging fruit that came out of the first baseline. Companies invariably see immediate opportunities for SAP improvement. Be prepared to move quickly to capture early value.
• Use the metrics to identify and execute on efficiency opportunities in terms of labor leverage, automation, and consolidation. You’ll likely have more opportunities than you know you can effectively handle. Plus, execution in one area will affect operations in another. Keep one eye on the big SAP picture.
• Continue to align and extend the SAP application landscape. Value gets built over time, not in one fell swoop. Don’t turn your back on legacy.

Using value-driven AMS for SAP

The ongoing SAP-based operating model, information assets, and integration plan can be addressed together at the outset – as can be business capabilities, with attention on dependencies and critical relationships. Process owners and business architects are assigned to drive to value, during and after integration. “Steady state” technology, process, and information governance teams work closely with the SAP integration team – delivering a smooth transition to the support organization. Tools for incident, request, change, and problem management are established and leveraged throughout the integration. This enables refinement and continuous SAP improvement once the business stabilizes – all according to the value drivers identified up-front by the business.

Let’s get started

With Deloitte SAP Application Management Services, you can start delivering exponential results throughout the enterprise—by automating layers of processes, radically improving the performance of your SAP application landscape, and uncovering new opportunities for value.

Ready to run a live enterprise that can thrive in SAP-based application landscape? So are we. Connect with us about SAP AMS to get the conversation started and see a demo, or agree for a speaking session to see how Deloitte can help you reimagine everything—an entire universe of possibilities with SAP solutions.