The Landscape of ERP Implementations
ERP systems like SAP are backbones of global businesses, unifying and integrating complex business processes. However, the path to a successful SAP implementation is often fraught with challenges and common pitfalls, primarily due to a company’s unique business processes requiring complex customization of the ERP.
The primary goal of an SAP ERP system is to serve as a pristine system of record. It should be capable of seamlessly getting upgraded to new versions with minimal effort. Yet, many businesses fall into the trap of over-customizing their SAP environment, leading to a rigid system that is hard to update, maintain, or improve upon.
The Common Mistakes: Configuration vs. Customization
A fundamental error in SAP ERP implementations is the confusion between configuration and customization:
Configuration involves setting up the system using built-in tools and options to meet business requirements.
Customization, on the other hand, involves altering the codebase to create functionalities not available by default.
Excessive customization can lead to a plethora of issues such as increased complexity, higher maintenance costs, and severe upgrade challenges involving resources, time and effort. This is where the concept of a Clean Core is crucial – maintaining the SAP system as standard as possible while leveraging external systems for business-specific needs.
Several companies have faced significant challenges and negative impacts due to the customization of their SAP implementations. According to https://whatfix.com/blog/failed-erp-implementation/, Hershey's faced over $100 million in lost orders due to failed SAP ERP implementation. The company's customization efforts led to a complex and disjointed system that couldn't handle their business processes efficiently, especially during their critical Halloween season. Waste Management claimed losses of up to $500 million due to the failure of the SAP system to meet their business needs without significant customization. Lidl, the German grocery chain lost over $580 million and seven years on an SAP ERP implementation that failed due to a mismatch between their unique record-keeping methods and the SAP system. Lidl's insistence on not adjusting their processes to fit the new system (customization) led to significant losses and a return to their old in-house system.
The Hybrid Approach: Combining Your Custom Business Processes with Standard Optimized ERP Workflows
SAP ERP systems are designed to align with the best practices of various industries and functions, aiming to standardize processes and improve efficiency. However, each business has its unique elements that differentiate it from its competitors. Often, these unique elements are embedded within customized processes and workflows, which may not fit perfectly into the standardized frameworks offered by ERP systems like SAP.
The challenge lies in balancing the need for these customized processes, which provide a competitive edge, with the advantages of the standardized industry best practices embedded in ERP systems. The best approach to tackle this challenge using add-ons and integration. Instead of directly customizing the ERP system, use add-ons and integrating with specialized software. This approach maintains the integrity of the core ERP system while providing unique functionalities.
An Ideal Solution: Microsoft Power Platform
Microsoft's Power Platform, comprising Power Apps, Power Automate, and Power BI, provides a robust suite to extend the capabilities of SAP ERP by eliminating customization. This is well-regarded as a technology for add-ons and integration with SAP systems. Here's an overview of how it fares in this context:
Seamless Integration: SAP system can integrate seamlessly with Power Automate and Power Apps through connectors available. They enable straightforward data exchange between SAP and Microsoft applications, allowing businesses to leverage their existing SAP data within new apps or workflows designed in the Power Platform.
Enhanced Productivity and Efficiency: Power Apps and Power Automate integrated with SAP allow companies to automate routine tasks, streamline business processes, and enhance overall productivity. It enables businesses to create custom applications and workflows without extensive coding, significantly reducing development time and effort.
Data Visualization and Analysis: Power BI can connect to SAP systems to extract and visualize data, providing valuable insights and analytics. This allows businesses to make more informed decisions by analyzing their SAP data alongside other data sources within Power BI dashboards and reports. By keeping the data analysis layer separate from SAP, companies can enjoy the benefits of advanced analytics without burdening the SAP system.
Customization and Flexibility: The Power Platform allows high customization and flexibility, enabling businesses to develop tailored solutions that fit their specific needs without heavily customizing their SAP system. This helps maintain the integrity and upgradability of the “clean core” SAP system while still addressing unique business requirements. For instance, approval workflows or data synchronization tasks can be managed via Power Automate, reducing the need for SAP customization.
Cost-Effectiveness: Using the Power Platform as an add-on or for integration with SAP can be cost-effective, especially for businesses already invested in the Microsoft ecosystem. It allows companies to extend the functionality of their SAP systems without the need for significant additional investment in custom development.
User Empowerment: The low-code nature of the Power Platform empowers non-technical users to create solutions and automate processes, reducing the dependency on IT departments and speeding up solution deployment.
By adopting this approach, organizations can maintain a clean core in SAP while ensuring that unique business processes and requirements are effectively addressed.
A Real-World Example: Streamlining Procurement Processes
Consider a typical procurement process in an organization using SAP ERP. Traditionally, any modification to this process might require SAP customization, affecting the system's upgradeability. Instead, using Power Platform, a solution can be architected as follows:
Power Apps can be used to create a user-friendly mobile app for requisition entry, enabling employees to submit purchase requests from anywhere, anytime.
Power Automate can then take these requests, apply business logic (such as approval workflows based on approved budgets, employee roles and expense thresholds), and interact with SAP for record creation or updates. This keeps the workflow logic outside of SAP, maintaining the system's integrity.
Power BI can be employed to track and analyze procurement metrics, offering insights into spending patterns, supplier performance, and process bottlenecks. This data-driven approach aids in strategic decision-making without impacting the SAP database.
Conclusion: The Way Forward with SAP and Power Platform
Incorporating Power Platform into SAP ERP implementations offers a path to flexibility, efficiency, and innovation. By distinguishing between necessary SAP configurations and external customizations via Power Apps and Power Automate, businesses can enjoy a dynamic system that meets their unique needs without compromising on upgradability. Moreover, the analytical power of Power BI enables organizations to harness their SAP data for better decision-making, without overloading the core system. As businesses continue to evolve, the synergy between SAP and Power Platform will undoubtedly become a cornerstone of agile, resilient, and efficient ERP ecosystems.
Contact us at Exult Global so we can help your journey towards higher business agility.