SAP Support Costs

Am I Paying too Much?

Agenda

Company Background

SAP System Details & Support Model

Base Line Cost Assessment

Evaluate the Options

Redesigned Support Model

Service / Cost Comparisons

Performance Metrics

Other Tips

Company Background

Joint Venture Company

Primary Business: Oil Refining

1200 Employees + A Variable Number Contractors

236,000 barrels per day

Revenues = $1.0 billion (approximate)

Converted to SAP in 1999

SAP System Details

Release 4.6C IS-Oil

Operating System: IBM AIX (4.3.3)

Database: Oracle (8.1.7)

Hardware: IBM RS/6000

Number of Servers = 12

Production Data Base = 89 Gigabytes

Total Storage = 0.6 Terabytes

SAP System Details (cont.)

Modules: FI, CO, AM, MM, PM, PS, SD, HR

1 company code

3 Core Modifications

1670 Custom Programs (< 100 used)

28 Interfaces

800 Licensed Users

Peak Concurrent Users = 120

Support Model -History

1998

-Implementation Team Transition

-Hardware / Software Acquisition

-Outsourcing Agreement (BPM)

1999 - 2001

-Implementation Steering Team (Business)

-Minimal In-house IS support staff

-Application Support = 12.5 FTE’s (outsourced)

Support Model –History (cont.)

2002

-Upgrade from 3.1H to 4.6C

-Application Support = 10 FTE’s (outsourced)

-Some Production Support Transitioned to In-house Upgrade Team

2003 “Transition Year”

-Business Process Leads

-In-house Support Team

-New Outsourcing Agreement

Baseline Support Costs

SAP Annual Support Cost - 2002

4%

2%

31%

57%

6%

Hardware Depreciation

Hardware Maintenance

Technical Support

Application Support

Licenses

Baseline Support Costs

Observations

Application Costs Not Adjusted for Current SAP Market Conditions

Technical Landscape Outdated; High Maintenance Effort

Minimal Knowledge Transfer Occurring

Few Process Improvement Initiatives

SAP Strategy Not Well Defined

Metrics tracked were of minimal value

Baseline Support Costs

Observations (cont.)

Support work processes not well defined

Users interacting directly with 3rd tier support staff

Evaluate the Options

Attempt to Re-negotiate with Current Outsourcing Vendor

Initiate “Request For Proposals” Process

Redefine In-house Staffing – How Big?

Move to a “Fully Hosted Solution”

Change Management – Gauge what the Business Will Accept?

Redesigned Support Model

Attempt to Re-negotiate with Current Outsourcing Vendor

Initiate “Request For Proposals” Process

Redefine In-house Staffing – How Big?

Move to a “Fully Hosted Solution”

Change Management – Gauge what the Business Will Accept?

Redesigned Support Model

End Users

Information Systems Dept.

Process Owners & Process Leads

SAP Team

3rd Party Outsourcer(s)

OperationsSAP

Supp

ort L

evel

Service Level

Agreement

Low

High

Technical Functional Mai

nte

nan

ce

Agr

eem

ent

Power Users

Service Level Agreement(s)

Service / Cost Comparison

AIX/Oracle or Win2000/SQL?

Fixed Price For Base Maintenance and Support “All Inclusive”

Enhancements on a Time & Material Basis

Quality of Service Expected to Improve

In-house Staff Focused on Improving ROI and Alignment With Business Initiatives

42% Reduction in Annual Support Cost

Baseline Support Costs

SAP Annual Support Cost - Projected3%

1%

22%

66%

8%

Hardware Depreciation

Hardware Maintenance

Technical Support

Application Support

Licenses

Performance Metrics

Bug Fixes

 

Description Metric Resolution Time

Critical 100% Within 24 hours (clock time)

High 97% Within 2 business days

Medium 90% Within 5 business days

Low 90% Within 7 business days

Performance Metrics (cont.)

AvailabilityProduction = 99.25 %Non-Production = 97%

Response Time (User Dialog)95.0% within 1 Second97.5% within 2 Seconds

Critical Business TransactionsSet User ExpectationsWork toward continuous improvements

 

Tips

Evaluate operating system options (AIX vs Win2000)

Be selective on 3rd Party Software

Assess impact of custom development

Define “Steady State” services and RFP for lowest cost

Shop for best resource(s) to do enhancement work and apply project management principles

Lowest cost per hour does not always translate into lowest total cost

Tips (cont.)

In-house staff are best positioned to drive process improvement efforts but may need a jump start from an outside consultant

Establish Cost Indicators in order to evaluate efficiencies (i.e. Cost Per Concurrent User)

Select an outsourcing vendor who has a good relationship with SAP

Conduct operations and efficiency audits

Frequently assess business needs

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Session Code: 2811