Centers of Excellence Optimize Your Business and IT Value

8/6/2019 Centers of Excellence Optimize Your Business and IT Value

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CENTERS OF EXCELLENCE:OPTIMIZE YOUR BUSINESSAND IT VALUE

2006 ASUG/SAP Best Practices Survey

SAP INSIGHT


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Table of Contents

Executive Agenda 1

COE Success: Alignment of Business and Information Technology 3

Factors Driving COE Implementation 4

COE Maturity Matters 5

Key Approaches to COE Best Practices 7

Conclusion: Key Best Practices 13


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Given the impact of IT, many companies are starting

to think differently about their IT investments and

strategies. Rather than grudgingly viewing IT as a

set of tools necessary for doing business and

sometimes as an expensive and cumbersome set of

tools many companies are looking instead to gain

value from their IT investments. They are focusing

on reengineering and optimizing their support

processes and on driving IT to enable their

businesses and improve their operations as well as

their bottom lines.

A recently completed ASUG/SAP Best Practices

study (see sidebar for study details) shows thatcenters of excellence (COEs) are the primary vehicle

for delivering industry-led project and program

excellence. Centers of excellence provide a

standardized approach across an entire organization,

with strategies and templates designed to facilitate

and enhance project management processes and

approaches. Staffed with knowledgeable business

and IT teams, these centers are company resources

for current practices, technologies, and emerging

trends, and they are designed to enable joint IT and

business solutions with greater value, consistency,and efficiency.

The study identified three main factors that inspire

companies to institute centers of excellence: the

desire to manage and lower total cost of ownership

(TCO), the need to increase the value of their IT

investments, and a drive to focus on customer

satisfaction.

The study also found that among well-integrated,

mature COEs, certain best practices winning

strategies, approaches, and processes that produce

superior performance in an organization correlate

with success. The best-performing companies

minimize TCO by optimizing their COEs,

centralizing the organization, standardizing ITsystems across the enterprise, managing

performance, and focusing on customers. Finally,

the study found that cooperation between business

operations and IT is crucial to the successful

implementation and operation of COEs.

EXECUTIVE AGENDA


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A centers of excellence (COE) best practices

survey conducted by SAP and the Americas

SAP Users Group (ASUG) from March to April

of 2006 covered a wide sampling of businesses

across several disparate industries. Fifty-nine

companies took part in the study and came from

a broad range of industries, including retail and

wholesale, public sector, manufacturing,

banking, and health care. Participants spanned

the globe, with operations in Asia, Africa, the

Middle East, Europe, South America, the United

States, and Canada.

Businesses also varied in size as measured in

terms of the number of full-time equivalent (FTE)

employees dedicated to their centers of

excellence. The smallest, representing 25% of

those surveyed, had from 1 to 10 FTEs, and the

largest, 8% of the companies surveyed, had

more than 150 FTEs. The number of years of

operation of the COE was surveyed as well: 44%

of companies had COEs in operation for less

than 1 year; 15% for 1 to 2 years, 12% for 3 to 4

years, 15% for 5 to 6 years, 6% for 7 to 8 years,

and 8% for more than 8 years.

Survey respondents were given scores based on

responses to questions about their individual

level of best practices adoption in five key areas:

total cost of ownership, organizational level,

systems standardization, performance

management, and customer focus. Companies

were then assigned a level from one to five,corresponding with the maturity level of their

COE best practices adoption score: level one,

marginal; level two, implementing and refining;

level three, repeating performance; level four,

excellent and quantifiable performance; and level

five, optimal performance.

2

Figure 1: Companies of all sizes and years of experience with their COE participated in the

survey. In total, 59 responses were submitted.

Overall Size of COE in FTEs Geographic Coverage

Industry Mix

Australia, 5%

Greater than 8 years

8%

3 to 4 years

12%

Less than 1 year

44%

% of overall responses, N=59

Years of COE Operation

5 to 6 years

15%

1 to 2 years

15%

7 to 8 years

6%

Africa, 2%

Middle East, 4%

Asia, 7%

1-10 FTEs

25%

11-25 FTEs

29%26-50 FTEs

15%

51-75 FTEs

10%

76-100 FTEs

6%

101-150 FTEs

6%

>150 FTEs

8%




Discrete Manufacturing

14%, 8 companies

Process Manufacturing

14%, 8 companies

Services (Banking,Professional, Healthcare)

30%, 18 companies

Public Sector

5%, 3 companies

CPG

11%, 7 companies

Retail/Wholesale

7%, 4 companies

Other

19%, 11 companies

United States

31%

Canada

15%North America

15%

South America

9%

Europe, 11%

ASUG/SAP CENTERS OF EXCELLENCE SURVEY


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In looking in detail at centers of excellence, our

recent ASUG/SAP Best Practices study found it is of

paramount importance for successful centers of

excellence (COEs) to ensure that business

operations and IT are fully aligned and in synch.

Such cooperation harmonizes business processes

and corporate strategy with IT investments and

strategy, maximizing effectiveness, success, and

efficiency. This theme occurs again and again

throughout the study results and has a profound

impact on all aspects of COE operations.

Indeed, its crucial to directly involve business

operations in the design and scope of a center of

excellence. After all, the business is and should be

the main beneficiary of the work performed,

enabled, and enhanced by a COE. The study clearly

demonstrates the need for a balanced perspective

between the overall business organization and IT in

developing the center. And finally, a strong business

focus is key to meeting and exceeding customer

expectations.

COE SUCCESS: ALIGNMENT OF BUSINESS AND

INFORMATION TECHNOLOGY


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4

FACTORS DRIVING COE IMPLEMENTATION

The best practices study found that three crucial

needs initially drive companies to implement

centers of excellence:

Managing and lowering total cost of ownership

(TCO)

Enhancing value

Focusing on customer satisfaction

Moving beyond these three initial needs, key

objectives of COEs include enhancing IT investment

value, improving governance, managing change,

improving support, and managing and loweringTCO.

The study revealed that as centers of excellence

become more mature, more accepted, and fully

integrated into the operational fabric of the

organization, these initial drivers evolve and become

part of the core of its operation. As we will see in

more detail later, this leads to the development of

the right skills and talents to support the needs of

the business in a cost-effective and efficient manner.


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Capability/Maturity

Time

Level 5: Optimal Performance

Level 4: Excellent / Quantifiable Performance

Level 3: Executing / Repeating Performance

Level 2: Implementing / Refining Performance

Level 1: Initial / Marginal Performance

Level 5: Optimal Performance

Level 4: Excellent/Quantifiable Performance

Level 3: Executing/Repeating Performance

Level 2: Implementing/Refining Performance

Level 1: Initial/Marginal Performance

Figure 2

Maturity

Levels of

Centers of

Excellence

The study shows that a number of factors influence

the success of centers of excellence. The COE

organization model, the IT system landscape,

performance management processes and strategies,

and sharpness of customer focus all contribute to

the success or failure of a COE.

In addition to these factors, study findings indicate

that companies with more mature COEs achieve

higher levels of value by implementing best

practices.

LEVELS OF COE MATURITY

The survey assessed the maturity of participants

COEs, ranking each into one of five levels, as shown

in Figure 2.

The study paints a picture of organizations by the

level of maturity their COEs have reached.

In the marginal or initial stage, level one, companies

identify business processes and establish a COE

organizational structure. IT generally uses a whats

available instead of a whats best approach to

systems implementation. Companies identify

business processes, but they do not generally

standardize or establish business processes across the

organization, and they perform work on an ad hoc

basis. Companies define process ownership only

minimally, and they do not share documentation.

They fail to establish performance measurement

practices, and they do not define key performance

indicators (KPIs). Project teams often follow

informal practices, measuring only the basics, such

as costs and schedules. Level one companies do not

establish a customer focus as a primary driver, track

and report on customer satisfaction, or report on

performance management. Leadership is usually

aware only of key milestones. Finally, these

companies communicate with customers

informally and in an unstructured way, and they

lack clearly defined issue resolution practices.

As COEs develop and mature (levels two and three),

they make improvements across the board. TheCOE organization tends to centralize. IT systems

evolve, instituting more definition and planning of

functional and technical work. Business processes

become standardized and documented, and process

ownership is held by both the business units and the

COE.

At the highest levels of maturity (levels four and

five), study findings showed companies reporting

excellent COE performance. Organizations follow

resource management plans. IT has centralized andstandardized systems. Business processes are

standardized with the enterprise, shared,

documented, and measured. A dedicated

performance team ensures that the company reaps

the expected value. Formal performance

management practices, training, and

COE MATURITY MATTERS


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communications are in place, and KPIs are refined,

targeted, managed, monitored, and analyzed. A

clear user governance structure is in place, and a

transformation in thinking means that users are

treated like partners. Most important, major

changes are implemented through the lessons

learned throughout the development and

deployment of the COE.

As COEs become more mature and optimize the

adoption of best practices, making them core to

COE operations, companies discover a need to

develop talent to sustain the changing needs of the

business in the most cost-effective manner. By thetime a company has reached level five, it has fully

adopted and internalized a center of excellence

culture that helps optimize the IT systems, overall

organizational performance, and customer

satisfaction.

GREATER COE MATURITY =

INCREASED BEST PRACTICES

ADOPTION

Nearly 36% of the companies in the survey

demonstrated a high level of maturity in their

COEs. These companies have adopted best practices

that improve acceptance of IT systems across the

organization, shorten project times, control project

costs, improve strategic management decision

making, and increase return on investment.

According to the study, companies that have

adopted the most COE best practices have COEs that

are:

Centralized, either with or without satellite

offices, a clear key contributor to a lower TCO

Implemented during the initial adoption and

installation of their SAP solution

Organized to include a key user program in

which lines of business employees take the lead

on facilitating the COE in their departments

Aligned with a high level of standardization bothwithin business units and across the entire

enterprise

Less likely to permit undue customization of

systems

Focused on the customer and adhering to the

overall corporate mission and strategy

Companies ranked by the survey at the highest level

of maturity earned many key and valuable results.

With a mature and fully integrated COE, a company

can realize a higher level of acceptance of its ITsystem, faster project completion, controlled

project costs, and improved strategic management

decision making all benefits that contribute to an

improvement in ROI.

Tellingly, study findings showed that 62% of level

four and five companies incorporate continuous

improvement practices and programs into their

business approach, whereas for 72%, COEs drive a

strong alignment between the business and IT and

ensure equal participation with the business.


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The study found five key actions in which the

adoption of best practices has been shown to enable

companies to optimize processes, meet their

business needs and improve their bottom lines.

These five actions are:

Minimize TCO with an optimized COE

Centralize the organization

Standardize IT systems across the enterprise

Manage performance

Focus on the customer

MINIMIZE TCO WITH AN OPTIMIZED

COE

The study identified a number of key benefits

realized by adopting COE best practices. The first

benefit is a reduced TCO the cost of

implementation, execution, and maintenance

directly due to the enablement of centers of

excellence.

Optimal COE performers, the survey found,

significantly reduce TCO by centralizing to a highdegree; standardizing system landscapes and

business processes; minimizing software

installations; and following a strategy of managed,

limited systems customization.

Make no mistake: managing TCO is important. But

lowering TCO at the expense of the other four

actions would clearly be shortsighted. The

companies surveyed all recognize that COEs are

instrumental in improving the return on IT

investments. The study also found that SAP-certifiedCOEs perform better than noncertified COEs.

Successful centers are found in companies that

implement strong lessons-learned approaches and

that have a well-documented knowledge

management process in place. Returning to an

essential point, centers of excellence were shown

not to be successful in companies without an equal,

well-established partnership between the CIO and

the business organization.

However, even when a companys IT plan makes

sound strategic and tactical sense, with a clear and

compelling business case for the investment, several

key barriers to achieving optimal value from an IT

outlay still exist. Our survey revealed typical barriers

whose effects can be ameliorated with an optimized

COE:

Unclear program value imperatives

Executive disconnects on key business case

assumptions

Lack of value readiness due to entrenched

organizational culture and technological factors,

such as legacy systems

Lack of program metrics keeping the focus on

budget and deadlines

Lack of ongoing value reviews to ensure that new

IT capabilities deliver measurable value

These barriers can lead to prohibitive costs and lost

time due to IT changes, and they are a direct resultof a lack of alignment between business and IT

strategies. Quick fixes then result in higher long-

term costs and decreased functionality, with more

and more of the budget up to 80% according to

our survey spent on simply maintaining the

technological status quo. This leaves a company

caught in a spiral of spending without achieving the

results and return on investment it needs.

The lack of an effective COE organization and

processes leads to a failure to achieve businessresults, excessive TCO, and delayed realization of

the value of IT investments. The study indicated

that COEs enabled companies to reduce the TCO of

their system applications. Indeed, survey

participants achieved significant reductions, as

shown in Figure 3.

KEY APPROACHES TO COE BEST PRACTICES


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Total cost of ownership is one of the most difficult

metrics to benchmark. Even when using the most

common metrics cost per user, full-time support

employees per 100 users companies often dont

obtain adequate results, or the results of their

analyses are misleading. For example, consider the

often-used TCO metric of lowest cost per user. Well-

designed IT solutions often decrease the number of

users needed to support business processes. But this

highly favorable outcome typically creates a higher

cost per user. The same is true of the converse. If a

company has too many users, perhaps because of

poor process structures or training, it achieves a low

cost per user but this low value is misleading

because it is due to undesirable factors. This does

not imply that per-user metrics lack value; it merely

suggests that companies require multiple metrics to

make valid, balanced business decisions.

The survey identified specific best practices crucial

to clearing these barriers to reducing total cost of

ownership:

Certification of the center and equal partnership

between the business organization and the COEregarding daily operations

The institution of value checkups that ensure

value is being achieved and that lessons learned

are being adopted and incorporated

Strong continuous improvement practices

Strong alignment between business and IT and an

equal partnership in the business

CENTRALIZE THE ORGANIZATION

Organizations with centralized COEs, the survey

found, have better consistency and coordination,

leading directly to less duplication of effort. These

organizations configure and develop their IT

systems by process or functional area instead of by

business unit, leading to more efficient, more

streamlined systems operations. The survey results

are clear on this subject: 87% of all respondents

COEs are centralized, and this percentage climbs to91% for the best-performing companies. A higher

percentage of these mature companies address the

full solution life cycle in the scope of their COEs.

Furthermore, 46% of COEs address the full solution

cycle, from business case development to

continuous improvement and support.

These best-in-class COEs evaluate the impact of

changes on all areas of the business and efficiently

allocate support services across their areas of

responsibility. Organizations that have aligned

resources with either new projects or support

initiatives are more likely to contribute directly to

lower staff turnover, ensuring that they retain talent

and mitigate the risk of knowledge loss.

The survey shows that the development and

deployment of a key or power user program is

Cost per Concurrent User FTE/100 Concurrent Users

No COE No COECOE COE

13%Cost is 13% higher

for those withoutCOEs

It is 17% more expensive

for those without COEs17%

Figure 3

The Impact

of COEs on

the Total

Cost of

Ownership


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This concept, understandably, applies to system

upgrades as well. Over 70% of companies that

reported late or over-budget projects did not have a

COE in place. Simply put, COEs help ensure on-

budget, on-time upgrades by facilitating the clear

definition of an upgrade plan and path.

The survey highlighted the importance of several

best practices regarding systems standardization:

Align noncore business with best practices to

minimize customization

Manage road maps and strategies, making sure

they are in place and updated periodically

Standardize system setup, applying it across the

enterprise to the greatest extent possible

Minimize the use of third-party applications

Implement and follow system upgrade plans

MANAGE PERFORMANCE

Where performance management is concerned, thestudy found top performers consistently track

operating costs and COE investments according to

plan. This must be accompanied by consistent and

frequent reporting so that companies can take

corrective actions to avoid overruns.

The survey reported that 37% of respondents have a

formal process in place to measure COE

performance and that most reviews are conducted

quarterly or twice yearly. Top-performing

companies demonstrated a clear advantage here,

with 58% of level four and five companies reporting

that they have a formal performance management

plan in place.

It is also important to be selective and keep a sharp

focus in performance measurements measuring

too many metrics can be counterproductive. One

third of companies in the survey said that they

measure four to six KPIs per project.

0

% of companies with a highdegree of standardization % of companies with road maps

17%

81%

Levels 4 and 5

63%

81%

Levels 4 and 5All companies All companiesFigure 5

Standardi-

zation and

Road Maps

in COEs


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The survey identified a number of performance best

practices adopted by top-performing COEs:

Ensure strong performance management

approach for the COE

Link performance management to the business

case to ensure ROI is met and report on results

Establish common rules and practices for

measuring performance

Periodically review KPIs to ensure that they

actually measure performance and promote

appropriate behavior Measure value, customers, operations, and

resources

Develop service-level agreements (SLAs) in an

ongoing dialog with customers

Track and communicate key metrics

% of companies measure performance

37%

58%

Levels 4and 5

Allcompanies

Figure 6: COE Performance Management

% of companies meet/exceedcustomer focus requirements

% of companies reportingcustomer satisfaction

% of companies with businessinvolvement at biweekly

review or feedback meetings

83%

100%

Levels 4

and 5

All

companies

54%

67%

Levels 4

and 5

All

companies

21%

33%

Levels 4

and 5

All

companies

Figure 7

Customer

Focus and

Satisfaction


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FOCUS ON THE CUSTOMER

Both COEs and the IT group must keep their focusever on the bottom line. This essentially means that

a project must achieve high customer satisfaction

ratings to be deemed successful.

The survey findings showed a seemingly obvious

correlation, but one that is important and

sometimes missed: frequent communications with

customers contribute to improved customer

satisfaction levels.

The ability to track and report on customer

satisfaction is also a contributor to ensuring thatfeedback is made available to the COE and that

corrective actions can be taken in an appropriate

and timely manner. Most companies reported a very

high level of customer focus, but, perhaps

surprisingly, only 54% of companies surveyed

explicitly report on customer satisfaction. Even

among those that do report explicitly, very few

involve customers in the review and feedback

communication cycles.

We found that while 83% of companies reported

that their COE meets or exceeds their customer

focus requirements, COEs are not generally well

connected with business customers. Limited

business involvement at all levels leads to lower

customer satisfaction. Only a third indicated

business involvement in the steering committee,

and bimonthly stakeholder participation is even

more limited at only 17%.

The survey identified a number of customer focus

best practices adopted by top-performing COEs. Top

performers:

Achieve high customer satisfaction by ensuring

active business involvement with the core team,

steering committee, and stakeholders

Establish a user governance structure

Use SLAs to facilitate communication with

customers

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Your company can derive many direct benefits from implementing a certified center of excellence,including the following: Providing a proven approach for the effective implementation, maintenance, and improvement of

business solutions A familiar and clearly defined starting point for business users, providing assistance with application

and support issues and supplying up-to-date product and business process information Management and easy availability of experience and expertise to every corporate unit in equal

measure Fast adoption of the business solution to meet changed market requirements or internal changes Roll out of best business processes in the corporate units Increased COE competence and expertise through training and experience Close, individualized end-user support through the in-depth knowledge of COE staff about customer-

specific situations and the position within the group Clear definitions of measurable expectations that are then communicated and monitored to ensure

consistency in standards of quality and customer focus

The Benefits of a Certified COE

CONCLUSION: KEY BEST PRACTICES

The ASUG/SAP survey made three overriding

factors abundantly clear. First, companies with more

mature COEs can keep their eyes constantly on the

prize of managing customer satisfaction without

losing focus on TCO. Second, COE models that are

formed in a spirit and atmosphere of collaboration

and cooperation, aligning business and IT, can

better address issues of continuous improvement,

leading to an effective COE with optimized

operation. And third, companies that deploy centers

of excellence realize a lower TCO of their enterprise

IT system.

OVERALL KEY BEST PRACTICES

Several critical best practices emerged among the

highest ranked companies (level five). The

performance drivers that have the highest impact

on COE value achievement are the following:

Centers of excellence affect on-target, on-value

performance when they manage all processes and

functions from problem definition to resolution

including support-level functions and roles,

escalation procedures, corrections, interface

handling and error correction procedures, help

desk training, performance metrics definition and

problem analysis, road map strategy, and design.

A documented knowledge management process

drives on-time and on-budget performance and

needs to include knowledge repository build,

documentation requirements for support and

knowledge packaging, training and help desk

routing, and resolution certification.

A centralized COE design drives effective delivery.

This centralized structure is a key contributor to

lower TCO.

Limiting the amount of customization

contributes to a faster time to market because it

simplifies and shortens the testing and

implementation phases.

Centers of excellence are most effective when

enacted during the initial system implementation

phase.

Business-owner involvement in decision making

drives on-time, on-budget performance. All

optimal COEs have adopted a business process

owner model.

Formal power user programs significantly

influence programs achieving their expectedgoals and value. All organizations with optimally

performing COEs have a power user program in

place. Staffed by the business unit outside of the

COE, power users provide the first line of support

to the business user community.


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Centers of Excellence Optimize Your Business and IT Value