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Issue date: 2 September 1999
Article source: Computer Weekly News
Bang & Olufsen sounds a discordant note with SAP
As the Danish hi-fi company breaks the unwritten rule about keeping the lid on,
Cliff Saran takes a look at the public falling out
The public criticism of the SAP enterprise package from Danish hi-fi
manufacturer, Bang & Olufsen, has opened up the debate over whether it is wise
to allow business to rely on ERP.
To combat potential problems with its existing Y2K system, Bang & Olufsen
embarked on the fraught SAP project in 1997. The DKK30m (£2.7m) move had three
main goals: to protect the company against Y2K problems; to replace the existing
IT system, and to enhance working procedures.
However, the project has encountered problems and is running late. Moreover, SAP
has been blamed for damaging Bang & Olufsen's supply chain, resulting in a lower
cash flow.
Poor supply
In its 1998/99 financial statement published on August 17, Bang and Olufsen said
failures in the SAP implementation included, "a total stop on deliveries lasting
eight days." It also reported an unsatisfactory supply situation.
Significantly, Bang & Olufsen is one of SAP's references in Denmark. It even
gave a presentation of its implementation during the May Sapphire SAP conference
in Nice.
When Computer Weekly quizzed SAP Denmark, the ERP company denied it had previous
knowledge of the problems Bang & Olufsen were experiencing.
In fact, Birger Bieum, a marketing manager at SAP Denmark said the first he
heard of the problems was when the news broke.
Following implementation of the new system in February 1999, Bang & Olufsen said
it had primarily focused on getting the production and logistics modules up and
running in order to ensure full control of productivity and economy.
But to quote the financial statement, "Although improvements continue, the
system is neither sufficiently robust nor efficient."
Along with logistics and production modules, the hi-fi manufacturer has also
implemented human resources and a module which handles time registration during
production.
It said further work is necessary to increase the speed of the system and
facilitate integration with other company IT systems.
Nigel Wood, a research director at the Gartner Group said that one of the most
important decisions a user must make when implementing SAP is choosing the right
systems integrator. SAP relies heavily on such integrators to implement the
package.
With customisation being a costly way of building a SAP system, users have to
weigh up the benefits of large scale customisation with the work that will be
required if the modifications needs to be altered.
"The best systems integrators push the limit of how you use the system while an
average system integrator may never achieve the full potential of the package -
which can be critical to a project's success," Wood explained.
Another area of contention for companies is with the internal team used to put
SAP in place. "You need to extract the best IT and business people from the
organisation," Wood noted. The company then needs a strategy for filling these
vacancies so that those who remain are not over-worked.
Put on hold
Wood said that on one SAP implementation he was aware of, the project had to be
put on hold for two weeks while the top business mangers who were on the project
team, went back to their normal jobs to draw up business plans for the following
year - such was the calibre of the business managers working on the project.
What makes Bang & Olufsen's problems particularly important is that problems
with SAP or other implementations of enterprise packages, are often never made
public.
To blame the SAP R/3 application for what it describes as "a lack of overview"
in its financial affairs is a brave move for a user organisation, given the
hush-hush nature of such implementations.
SAP has asked to see the senior management at Bang & Olufsen. It was due to meet
the company's production director last week.
Only time will tell whether this very public denouncement of the R/3
applications will lead SAP, the implementation partners, and the user community,
to develop a better method of implementing this complex package.
Modest implementation - or just bad advice?
Looking at the facts as they stand, Ovum analyst Duncan Chapple said, "It looks
to me like Bang & Olufsen has given itself quite an ambitious time table for
implementing SAP."
Chapple pointed out that electronics giant Philips has a three-year SAP project
with on-going development, and it is adding more and more SAP modules during
this time.
He added that even the AcceleratedSAP programme, which is aimed at reducing
implementation time, can take a year to complete. AcceleratedSAP offers users
off-the-shelf templates.
While these can help reduce implementation times, Chapple noted that such
templates can cause end-user companies problems if they do not match the way
businesses operate.
Chapple added, "Either Bang & Olufsen's implementation was modest or it got bad
advice."
Among the issues Ovum sees users facing with SAP implementations is that the
software is vast and very hard to implement. Another factor is the proprietary
nature with which the software handles workflow.
SAP provides Bapis - or business APIs - which enable users to program into the
SAP system. But, as Chapple notes, "The Bapis are relatively limited."
This can cause problems, particularly in integrating supply chain applications
which tend to require a lot of expertise.
Chapple said users need a way for their distributors and third party suppliers
to place information into the SAP system - but the only way in is through the
Bapis.
Best practices for implementing enterprise packages
Pick the right package - one that does not require a vast amount of
customisation to work within your organisation
Use the most appropriate systems integrator to implement the software - an
average systems integrator will never achieve the full potential of the package
Extract the best people from the business to work on the project - people are
taken out of the business full time, so vacancies need to be filled
Data migration and integration with legacy code is considerably important - with
inconsistent data the SAP processes will not flow properly
The hardware and software platform must be scalable - under-sizing the machine
is an absolute killer
Source: Nigel Wood, research director at the Gartner Group
computerweekly.co.uk
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