10 Steps to reduce SAP TCO (Total Costs of Ownership)

Often I’ve heard questions like why we need SAP. Then, with the progress of the project, the question was transformed into “how would we live with this”. And after a year of torment, the question changed to “how to have it if cheaper.”

TCO – Total Cost of Ownership. It’s a financial term which answers the question “how much does this cost”, including all 15 pages agreement written in a small font.

If you do not go into details, then at first it seems that owning SAP system, it’s just the cost of licenses and consulting for implementation. And servers, support, annual maintenance, updates, testing, change management and much more. Will talk about this latter.

Today we’ll try to answer the question “how to own it cheaper”, how to reduce that SAP TCO.

Being honest, there are a lot of solutions, but there is not one single 100% true. I’ll share my thoughts on this, provide some links to curios data and you’ll decide what works for you.

From my point of view, to reduce SAP TCO is to make your users’ daily work simpler in any way. The more simple and smaller an engine, the easier to maintain and own it. Agree, owning an airplane and Toyota car is an absolutely different story. Car needs less attention, repair costs are much less. DIfferent comfort, speed – yes, agree – but to start with your trip a car is a good choice. I’m not saying you need to avoid ERP systems, just use them rationally… So, let’s come to some steps could help you to reduce SAP TCO.

5 steps to simplify SAP System management

  • I’ve heard there are companies with hundreds of SAP servers, dozens of landscapes, hundreds of different OS, Database levels, Support Packages, Notes, Kernel, etc. And it’s all just within one global company worldwide. Simplify landscapes – move what you can move into single landscapes, installations. Align all versions (OS, DB, SAP) to the same level to ease maintenance. Develop a clear procedure and schedule to update the whole landscape to avoid differences. Monolandscapes are easier to support, update, fewer people needed, they are more scalable.
  • Standard. If you rely on global SAP Best Practices, try to stick with standard solutions, reduce custom code. All non-standard changes dramatically increase TCO, not reduce. You can’t easily update landscape, can’t switch to a new release or version. Every single development increase risk to break the process with a new change request or update. Everything needs to be tested which takes a lot, really a lot of time. Every Z should be documented, maintained and watched over the years.
  • An agile approach to any new activities like projects or change requests. If you need something, split it into a small, two week chunks, and implement step by step. Every chunk must be documented, tested, regression tested, user manuals updated. Every, even if it’s just a one tick change request.
  • Review your SAP License Agreement with the vendor. Sometimes customers don’t use all purchased functionality and user licenses. So you can cut costs and overall SAP TCO just reducing developer licenses or user licenses, for example.
  • Practice SAP Automated Testing. I wrote about this before.

5 steps to simplify business routine in SAP

  • Unify. I mean don’t make everything equal, but unify and reduce lists, algorithms, steps, paperwork where it is possible without business disruption. I’ve had a good example how it worked in one large international company. Headquarter implemented SAP in their office, unified everything and then told subsidiaries to use their solution. They cut costs on IT for all subsidiaries. If a local business wanted automation they had an option to use headquarter’s solution at no cost or earn money themselves to run some IT system and report to the headquarter. All subsidiaries decided to move to the single HQ solution and save costs on IT and labor.
  • Simplify processes. Easy to say, buts let’s be open to changes. Review your processes step by step. What can be done in a system? Do you really need these reports instead of providing access to a new user to make him running these reports himself? What would happen if that step is skipped?
  • Simplify interfaces. Hide unused screen fields, delete standard items in lists, setup permissions to avoid data entry errors, reduce the number of clicks users need to hit to accomplish their job.
  • Teach everyone to work with a keyboard instead of a mouse. The mouse is slow, clicking is slow. Users should operate with hotkeys because it increases data entry speed at times.
  • Teach everyone to work with MS Excel. Really, MS Excel is the most powerful ERP ever.

Useful links regarding SAP TCO

http://scn.sap.com/community/it-management/blog/2013/12/02/cios-top-10-measures-to-reduce-tco
http://www.slideshare.net/SymmetryCorporation/six-strategies-to-manage-complexity-and-reduce-tco-in-sap-environments
http://www.r3now.com/3-keys-to-reduce-sap-tco-move-to-sap-roi/
http://www.news-sap.com/lower-tco-of-sap-deployments-and-upgrades/
http://www.egenera.com/blog-sap-optimization