Business Process Transformation in the Software Industry€¦ · But Process Efficiency is Integral to 2008 Goals Build on our achievements! Highest market share Strongest customer

Business Process Transformation inthe Software Industry

ASUG 2008, Orlando

Mark ScavilloHead of Process Governance

May 4, 2008

Business Process Organization

© SAP 2008 / Page 2

1. Why does SAP need to Transform?2. What is BPM? What are the Benefits?3. SAP’s BPM Transformation

Agenda


Agenda

© SAP 2008 / Page 3

The As-Is Situation is too Costly…There are at least 8 de-centralized Program / Process Offices at Board Level in addition to other departments andinitiatives performing individual process activities.

LéoApotheker

GerhardOswald PTUs Werner

BrandtClaus

Heinrich

GCOProcessOffice

GSSProcessOffice

Operations/Program

Office

F&A PMOBusinessProcess

Org.

Currently BPM is executed….at higher overall cost

Parallel process activities takingplace across the company

….with less overall effectivenessNo consistent approach regardingBPM standards and guidelinesObsolete and redundant processeswithin SAP cannot be discoveredquicklyNo central best-practice repository ofprocessesDependency on individualemployees’ process knowledge

…. leading to a lack of trans-parency on process cost,time and quality

Effe

ct

Departments / Initiatives

BPM@FS

MCOProgram

Office

Program / Process Offices

COO Offices

© SAP 2008 / Page 4

… But Process Efficiency is Integral to 2008 Goals

Build on our achievements!Highest market shareStrongest customer baseAnd the best team in place

Face the challengesTurn the strong top-line growthinto a stronger bottom-line growthBuild a profitable volume businessMake the Business Objectsacquisition a success

Continue to shape the futureLeadership through innovation

Relative Market Shares in EMEA(Rolling four quarters as of Q4 2007)

65% 69%

30%25%

6%5%

2005 2006 2007

Source: Henning Kagermann Keynote, FKOM 08 Barcelona

© SAP 2008 / Page 5

And SAP's Aspirations Require Effective Processes

ASPIRATION 2010

~ €75bn size ofaddressable market

> €2bn midmarketlicense revenue

> 100.000customers

Upper MidsizeEnterprises~60,000 firms

Small Enterprises~55 million firms

Large Enterprises~20,000 firms

Lower MidsizeEnterprises

~1.2 million firms

~$30 billion market

~$19 billion market

~$14 billion market

~$10 billion market

© SAP 2008 / Page 6

1. Why does SAP need to Transform?2. What is BPM? What are the Benefits?3. SAP’s BPM Approach

Agenda

© SAP 2008 / Page 7

What is Business Process Management?

Business Process Management (BPM)

Business Process Management (BPM) refers to the integrated and continuousanalysis, design, implementation, execution, measurement and monitoring of business processes inorder to increase effectiveness and efficiency with respect to the corporate strategy.

BPM also covers the process-related environment, such as organizational structures, people, andtechnology. In particular it deals with cross-functional and inter-organizational business activities.

Process Management Lifecycle (PML)

PML is SAP's BPM model. It covers the wholelifecycle of a business process and can thereforebe used within process projects. PML can also beused during the execution and monitoring ofexisting business processes.

© SAP 2008 / Page 8

… with the rightmaterial, resources, equipment,

people…

… with the right tools…

… with the rightmethods, instructions &

documentation…

… with the right (IT & Process Office)support…

… with satisfied (internal & external) customers.– Success!

SAP’s BPM = Process Management Lifecycle (PML)

With theProcess Management

Lifecycle (PML)running SAP’s

Processes is like…… building a

shelf.

Customer Process Owner

Customer Process Owner

Employee

EmployeeEmployee

Create successful processes…

© SAP 2008 / Page 9

IT

Identified Potential Benefits for SAPBest Practice Benefits1)

4 of the 5 benchmarked companiesreported at least a 25% improvement in:

Productivity

Employee competency

3 of the 5 benchmarked companiesreported at least a 25% improvement in:

Revenue

Margins or profits

Time to market

Customer satisfaction

Quality (reduced defects/errors)

Employee moral

1) Source: APQC Benchmark Study

Companies benchmarked were Air Products and ChemicalsInc., Coors Brewing Co., Deere & Co., Northrop Grumman SpaceTechnology, and Operations Management International Inc.

Hundreds of millions of Euros in savings fromimproved reliability and efficiency – and ongoingsustainability of processes

Relief for employees overburdened byopaque, confusing and ineffective processes –increasing productivity and morale

Greater effectiveness of knowledge transfer

Improved quality of products and services – moresatisfied customers

World-class compliance (SOX, ISO, etc.)performance

Central repository for metadata about infra-structure, applications, web services, inform-ation flows and the information architecture

What are the Benefits?

© SAP 2008 / Page 10

BPM Success Stories:Toyota and BMW use BPM successfully, resulting in revenue, margin and share price growth while also improvingcar quality

Margin Growth 2)

(Percentage, 2000 - 2006)Revenue Growth 1)

(Percentage, 2000 - 2006)

Quality Improvement 3)


Toyota

Share Price Growth 4)


BMWFord

GM

39

-512

63 157

-281 -169

142

44

49 48

38

37

-25 -20

124

Toyota BMW

Ford GM

Toyota BMW Ford GM Toyota BMWFord GM

BPM success requires:

BPM integration in thestrategy and philosophyof the company

A BPM culture that allemployees understand

Focus on long-termstrategy, not quick wins

Source: The Toyota Way

Sources:1) Company annual reports (2000 – 2006)2) Company annual reports (2000 – 2006)3) JD Power Vehicle Dependability Index

2000 – 20064) Yahoo Financial Services: closing stock

quotes on Dec. 31 2000 - 2006

© SAP 2008 / Page 11


Agenda

© SAP 2008 / Page 12

4-Step-Approach: The BPM Transformation

2008 - 2010 ongoing2006 - 2007

© SAP 2008 / Page 13

1 2 3 4

STRATEGY SET-UP TRANSITION CONTINUOUSIMPROVEMENT

Change Management

Communication and training

Link to Strategy

Building Blocks

Transition Path

Fit-Gap Analysis

Foundation Concept

Analytical Concept

Methods and ToolsConcept

Terminology

Process-Centric IT

The Basis

The Analysis

The Portfolio

Process Optimization

Institutionalize theTransition

Add PerformanceManagement

Expand CorporateProcess Reporting

Allocate Budget &Costs

Perform Audits

The Transition PhaseThe BPM Transition has four steps that need to be completed to ensure a culture of continuous process improvementat SAP

Process projectProcess project

Process project

Drive prioritized Process Projectswith high attention

Analyze and measure as-is process maturity

Based on Process Audit Methodology by Michael Hammer

Re-design SAP Process Map, assign ProcessOwners and define comprehensive PPIs

Prioritize Processes for Improvementprojects

Proc

ess

Mat

urity

Process TypeLo

wH

igh

Core Context

Bubble Size indicates Business Impact

© SAP 2008 / Page 14

The SAP Process MapCreate a true end-to-end value chain enterprise process landscape for SAP that defines actions(“Purchase goods and services”) versus functions (“Purchasing”)

SAP ProcessMap

2.0Create new

products & services

Cor

e Pr

oces

ses

Cor

pora

te S

ervi

ces

Suppliers

&

Partners1.0 Develop and monitor strategy

SAP Customers

&

PartnersSt

rate

gy

3.0Create market and sell

products & services

4.0Deliver

products & services

1.1 Define company strategy 1.2 Cascade company strategy 1.3 Control company strategy

2.1 Define products and services portfoliostrategy

2.2 Develop products and services2.3 Validate the products and services

3.1 Develop marketing distribution, andchannel strategy

3.2 Perform advertising, pricing, andpromotional activities

3.3 Develop sales opportunities andpipeline

3.4 Execute sales orders

4.1 Identify and schedule production orresources

4.2 Provide the products and services4.3 Support and maintain the products and

services4.4 Phase out the product and services

5.0 Manage the ecosystem

6.0 Develop and monitor financials & control

7.0 Recruit, develop and retain staff

9.0 Purchase goods and servicesCor

pora

te S

ervi

ces

8.0 Deliver IT services

© SAP 2008 / Page 15

Example: Purchase Goods & ServicesThe SAP Process Map provides employees the information they require to perform their daily workeffectively. In addition, it is collaborative and allows employees to provide feedback on the process.

SAP ProcessMap

© SAP 2008 / Page 16

Clarify process scope (e.g. define start- and end-point of all involved processes, interfaces to other processes / work-streams)

Identify and define adequate Process Performance Indicators (PPIs)

Determine to-be values of PPIs, consider benchmarks as far as possible

Evaluate measurement of as-is values of PPIs (e.g. read timestamps in systems)

Record cycle time of all involved sub-processes (complete coverage of process chain)

Prerequisites for Process Performance Measurement

Costs Time

Quality

TRADE-OFF !

Volume Efficiency

Process Performance Dimensions

How can the end-to-endcycle time bemeasured?Cycle time for all sub-processes needs to becaptured to allow end-to-end process timeaggregation fromCampaign to CashAre process interfacesaligned?What is the to-be cycletime? Are there anybenchmarks /best-in-class values?

TimeHow is the processquality measured?Which quality is aimedfor?Which quality doothers reach?

QualityHow can costs beallocated directly orindirectly to theprocess (laborcosts, costs forinfrastructure,…)

Costs

Which volume doesthe process need tohandle? (e.g. # oforders)Are these itemscounted?

VolumeHow can processefficiency bemeasured (e.g.conversion ratios)?Which efficiency isaimed for?Are there benchmarkvalues?

Efficiency

ProcessPerformanceMeasurement

Determining Process PerformanceOnly what gets measured, gets done!

© SAP 2008 / Page 17

Example: Measuring Purchasing ProcessesFor the pilot, five performance indicators were defined


© SAP 2008 / Page 18

New Functionality

A culture ofheroes

Processes areimproved at the workgroup or department

level

Processes areorganized and

redesigned at theenterprise level

Processes aremeasured and

managedsystematically

Process Teamscontinuously improve

processes

Determining SAP’s Process MaturityThe Process Maturity was assessed based on a proven CMMI measurement method.

No organizedprocesses

Level 1 Some organizedprocesses

Level 2 Most ProcessesOrganized

Level 3 Processes aremanaged

Level 4 Processes arecontinuously improved

Level 5

BusinessresponsivenessChange businessprocess quickly andeffectively

BusinessoptimizationIncrease decisionqualityOptimization acrossboarders of Bus.&IT

Transformation fromreactive to real-timeIncreaseTransparency

IT cost reductionand controlReduce time-to-marketDocumentedprocesses

ProcessMaturity Plan

© SAP 2008 / Page 19

Example: Initial Process Maturity ResultsResults show that SAP as a whole is not a mature process organization. Process

Maturity Plan

The current Maturity Analysiscovers processes of HR, PIL andIT

~ 35 processes were analyzed

Most of the processes areactually on Level 1 or 2. Onlythe PIL processes are alreadyon a higher level.

The major gaps across allanalyzed processes areProcess Measurement andvery often Process Ownership.

The processes of some otherareas are currently notstructured in a way that can beanalyzed -> no end-to-endprocesses.

0

5

10

15

20

25

30

35

10

17

6

20

35

Number of Processes

Maturity Levels

Most processesare actually on

Level 1 or 2

© SAP 2008 / Page 20

Process Management MethodsThe Process Management methods are based on SAP’s Business Process Managementapproach – the Process Management Lifecycle.

One general model forSAP

Concrete views forBusiness and IT

Interconnection ofviews to ensurecorporate effective-ness and efficiency

Definition ofdeliverables butflexibility on themethods to achievethem

Assignment of BPMand PM methods to thedeliverables and to-do’s of PML phases

General IdeasPML

concretize &interconnect

assign

BPM Methods Portfolio

PM Methods Portfolio

Analyze Design Implement Run/Monitor

Business

IT

PML Interaction

Bus

ines

sIT

Analyze Design Implement Run/MonitorProcess Management Lifecycle

Bus.Proc.Analysis

Target PPIs(Bus.)

ProcessAnalysis

Run/MonitorProcess/Systems

SLA

Continuously improve process

Systemoptimization

BusinessProcessAnalysis

Version for manual processes(no IT support planned)=

Run/MonitorBusinessProcess

ProcessDesign

ProcessImplemen-

tation

Bus

ines

sIT


Bus.Proc.Analysis

Target PPIs(Bus.)

ProcessAnalysis


SLA


Systemoptimization


Version for manual processes(no IT support planned)=Version for manual processes(no IT support planned)=


ProcessDesign

ProcessImplemen-

tation

BPM Methods

© SAP 2008 / Page 21

PML Interaction of Business and IT

Bus

ines

sIT

BusinessStrategy

processrelateditemsother

casc

adin

gMonitor

BusinessProcess

Initiate Business Process Reengineering

Senior Management

ITStrategy

IT re

late

d ite

ms


Bus.Proc.Analysis

Target PPIs(Bus.)

ProcessAnalysis


SLA


repo

rt

RiskManage-

ment

Systemoptimization


Version for manual processes(no IT support planned)=


ProcessDesign

ProcessImplemen-

tation

Bus

ines

sIT

BusinessStrategy

processrelateditemsother

casc

adin

gMonitor

BusinessProcess

Initiate Business Process Reengineering

Senior Management

ITStrategy

IT re

late

d ite

ms


Bus.Proc.Analysis

Target PPIs(Bus.)

ProcessAnalysis


SLA


repo

rt

RiskManage-

ment

Systemoptimization


Version for manual processes(no IT support planned)=Version for manual processes(no IT support planned)=


ProcessDesign

ProcessImplemen-

tation

BPM Methods

© SAP 2008 / Page 22

Cus

tom

er

Overview of PML Phases

1. AnalyzeEvaluate strategy, environmentand processesIdentify business goals & definerequirementsPrioritize improvement areas &perform scopingDescribe process goals

2. DesignEvaluate potential solutionsDesign one or more solutionsDefine PPI’s & reportingEstimate impact of alternatives onKPIs, PPIs and environmentDecide on implementation

As-is ModelsAs-is model Process Process goalsOwner n.a. lead to PPIs

In use Manage process Measure&report

4. Run/MonitorExecute the business processMeasure & monitorGather and analyze variancesPerform consequence managementInitiate a process optimization cycle

Published Approved Implemented Maintained

To-be Nominated PPIs Described &model defined decided

3. ImplementPrepare for and realize theimplementation projectEnable measurement of KPIs, PPIsPerform change management andestablish process ownershipProcess roll out

Q-Gate

Q-Gate

Q-Gate

BPM Methods

© SAP 2008 / Page 23

The BPM RoadmapWhere SAP stands today

Process projectProcess project

Process project

Drive prioritized Process Projectswith high attention

Analyze and measure as-is process maturity

Based on Process Audit Methodology by Michael Hammer

Re-design SAP Process Map, assign ProcessOwners and define comprehensive PPIs

Prioritize Processes for Improvementprojects

Process Type



Roles andTasks

SAP ProcessMap

CorporateProcess

Reporting

DecisionMaking Bodies


BPM Methods

Proc

ess

Mat

urity

Low

Hig

hCore Context

Bubble Size indicates Business Impact

© SAP 2008 / Page 24

© SAP 2007 / Page 25

Thank you!

Mark ScavilloHead of Process Governance

Business Process Organization

SAP AGDietmar-Hopp-Allee 1669190 Walldorf

T +49 6227 7 62698F +49 6227 78 39784M +49 171 308 5340E [email protected]

SAPPHIRE 2008Cubicle 2 Meeting Room, 3:00 – 4:00 PM

Objective: Share experiences on implementing BPM

SAP PRESS BOOKRoadmap to Business Process Management

Planned Release Date: September 2008To Order: https://ssl.galileo-press.de/international?titelID=1849

mailto:[email protected]

https://ssl.galileo-press.de/international?titelID=1849

Back Ups

© SAP 2008 / Page 26

BPM Building Blocks at SAPFour elements always need to be considered in the implementation of Business Process Management!

Budget andCost Allocation


ProcessProjects

Roles andTasks

OrganizationalStructure

DecisionMaking Bodies

ProjectPortfolio

Management

ServiceManagement

SAP ProcessMap

ToolConventions

OrganizationalInteraction

ProcessTerminology

BPM Methods

BusinessProcess

Execution

SystemArchitectureManagement

BPM ToolLandscape

IT Support

IT ServiceExecution

Processoriented Strat.

Planning


CorporateProcess

ReportingPerformanceManagement

Human CapitalAllocation

Skill Profiles

Training

KnowledgeManagement

Communication

Processes StructuresPeople

BusinessProcess

OperationsStrategy Organization Guidelines &

Standards

Technology

PersonnelDevelopment IT Operations BPM

Enablement

Auditing

Transition Roadmap & Change Management

© SAP 2008 / Page 27

Process Ownership is a means and key enabler to 1) continuously improve SAP processesaccording to changing business needs and 2) increase process efficiency in a sustainable way

SKILLSKnowledge of businessprocess managementmethods (e.g. PML, SixSigma)Ability to convince functionalmanagers and executors ofprocess goalsKnowledge of the process

MANDATESAddress resource requestsfor improvement projects tofunctional managersAccess to process relatedbudget to optimize processMembership in steeringcommittee in all relevantprocess improvementprojectsChange the process

Process Ownership

DEFINITIONThe process owner is the central point of contact for a specific business process with an end-to-end responsibility for the wholeProcess Management Lifecycle to ensure a best-in-class process.The process owner is designated explicitly by the board with decision power independent from functional priorities to control andoptimize the business process continuously and reinforce process thinking to the executers. With proven experience, the processowner is also the interface between business and IT.

TASKS & RESPONSIBILITIESDrive improvement projects (PML)

Identify customer (internal or external) requirements(Analyze phase)Analyze and document as-is process and processinterfaces (Analyze phase)Discover process gaps (Analyze phase)Derive improvement potentials (Design)Establish process performance measurement systemto be able to constantly control and report end-to-endprocess performance (Design)

Continuous improvement derived from performancedeviation regarding customer requirements (Run/ Monitorand Analyze phase)Contribution to process communityProvide process reporting to SAP Process Office

The SAP Process OwnerRoles and

Tasks

© SAP 2008 / Page 28


PPI Reporting vs. AnalysisOnly what gets measured, gets done!

Analysis

drill-down

Reporting

A dashboard should contain the KPIs and PPIs that arecrucial to run your business and process independent ofthe general information need which diver from the pointof interest (Business & IT). It should not be overloaded

with ‘nice to have’ information.

Process Analysis in difference to reporting allows thepossibility of analyzing to the point the reasons ofsuccess or failure of specific PPIs. It is possible to

directly detect bottle-necks within a process or whichpossible variations within a process are mostly followedby the users. The standard tool for SAP is PPM by IDS.

Reports portray decision relevantinformation out of reckless

databases in a consolidated formwith the possibility. The exchangeof each reported dimension (PPI)

within the report should be possible(multi-dimensional). The standard

tool for SAP is the BW.

© SAP 2008 / Page 29

Cycle Time SC Creation to PO Send per CommoditySAP AG 0001

Benefits:

Provide transparency onprocesses on a global, regional andlocal level

Support Buyers in managing theirdaily workload and give them timeto focus more on strategic issues

Support Project Leaders in runningSAP Sigma projects moreeffectively

Provide our customer a higher levelof service (time to process aPurchase Order)

Implement best-in-class purchasingprocesses for benchmarking andsales arguments

Identify weaknesses inside theprocesses and improve processautomation

Example and Usage of Process Cycle TimeMeasuring processes provides numerable benefits for Purchasing


© SAP 2008 / Page 30

Level 1: 100%Level 2: 85%Level 3: 10%G

ener

alP

PIs

Strategy Develop Sell Deliver

Process PlanLevel 1: 100%Level 2: 90%Level 3: 15%

Level 1: 100%Level 2: 20%Level 3: 0%



Process Ownership


Process Performance Indicator Definition


Process Performance Indicator Measurement


Process Maturity













Process Performance CockpitCore Processes

Ø Level: 2/5 Ø Level: 1/5 Ø Level: 3/5Ø Level: 2/5

Level 1: Business ScenarioLevel 2: Business ProcessLevel 3: Business Process Variations

< 25%99 – 75%100%

G Y G

CorporateProcess

Reporting

© SAP 2008 / Page 31

Sources: APQC Business Process Management, Gartner

SAP Process Office

SAP IT

Process Owner E2E AProcess Owner E2E BProcess Owner E2E C

…

LOB 1Process Owner E2E AProcess Owner E2E BProcess Owner E2E C

…

LOB 1

Bus. Process Owners

LOB 1


…

LOB 1Decentral PO’s

Business


…

LOB 1Process Owner E2E AProcess Owner E2E BProcess Owner E2E C

…

LOB 1

IT Process Owners

Service Line 1

Process/IT ProgramCommittee

Process/IT Leadership BoardSAP Executive Board, SAP Process Office and

SAP IT

Develop BPM and IT Roadmap related toSAP’s vision and strategy

Reporting

Reporting

Execute on the BPM and ITStrategy

Responsible for ProcessLandscape, BPM Framework andProcess Standards & Guidelines

Provides guidance in Process Projects

Supports ProcessOwners in completingProcess Projects using

BPM Framework

Project Execution

ReportingProcess Standards

CommitteeReview & approve guidelines

and standards

Decision-making Bodies

BPM Decision-making BodiesMust fit together for the SAP Process Office, Business and SAP IT and have to be assigned.

© SAP 2008 / Page 32

SAP Executive BoardHead of SAP Process OfficeChief Information Officer (CIO)

SAP Process/IT Council

BP ArchitectBP ExpertProcess Integ. OfficerHeads of Decentral POs

Process StandardsCommittee

BP Program ManagerLoB RepresentativesIT Management

Process/IT ProgramCommittee

Determine how BPM will supportSAP’s longer-term strategies andlooks atstrategy, policy, investment andaggregate funding issues

PurposeEnterprise business vision/strategy

BPM Strategy

Overall funding

Enterprise oversight

Tasks

Execute SAP’s plans for businessprocess change andimprovement, deal withconflicting priorities andescalation issues

PurposeProcess initiative oversight

Project priorities and measurement criteria

Resource and funding allocation

Issue resolution

Tasks

Review and approve guidelinesand principles formethodologies, standards andtools

Purpose

Process architecture

Project management practices

BPM tools and standards

Tasks

BPM Bodies – DetailsEach BPM body focuses on different stakeholder groups with common interests in BPMissues.

Decision-making Bodies

© SAP 2008 / Page 33

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Documents

Business Process Transformation in the Software Industry€¦ · But Process Efficiency is Integral to 2008 Goals Build on our achievements! Highest market share Strongest customer