How to Build A SAP HANA Business Case for Your Investment
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“SAP HANA is really, really fast!”
Unless you’ve missed all the SAP marketing blurbs, analyst reports, and trade articles over the past year, it’s pretty likely that you know that SAP HANA is an incredibly fast database. In fact, SAP HANA is sometimes more than 100,000 times faster than traditional databases for query response times.
In general, “fast” is regarded as a positive attribute for a product. However, that quality alone is seldom suﬃcient to justify a purchase. If you can’t ﬁgure out how a super-fast database can help you run your business better, then how can you justify the expense and effort required to buy and implement it?
The approach to building a business case presented in this field avoids the “speeds and feeds” argument that has long plagued the software industry. Instead, it examines how SAP HANA can enable organizations to execute their business processes more quickly and eﬃciently. It also focuses on the value of the real-time information that SAP HANA makes available, as well as the resulting level(s) of business value it delivers. The primary goal here is to help you address and answer the “So what?” question and to provide some guidelines on how to construct a convincing business case in order to justify an investment in the SAP HANA platform.
Why Do You Need A Business Case, Anyway?
There are various reasons for building a convincing business case, and the relative importance of each reason will vary from organization to organization. Some of the most fundamental reasons are:
- To demonstrate overall business value for the project
- To provide an initial ﬁnancial justiﬁcation for purchase and implementation
- To ensure that the project is aligned with the organization’s business goals and/or initiatives
- To establish the base-line expectations for subsequent assessment of the project’s success
- To provide internal documentation explaining the expected business benefits to users (and possibly to other departments in the organization)
A well-developed business case is not just a collection of data. Rather, it is also a collection of opinions and views from relevant stakeholders — both supporters and detractors — as well as representation from both the business and IT departments.
If the primary goal of a business case project is to calculate total cost of ownership (TCO) and/or return on investment (ROI) of an investment in new software, then that case will likely provide an incomplete and potentially unreliable forecast of the quality of that investment. An eﬀective business case must quantify not only the tangible value proposition of the project but also the intangible value, because both metrics are components of overall business value.
There are typically 4 main parts to the business case:
1. Total Cost of Ownership (TCO) savings
2. Productivity savings
3. Business benefits
4. Project costs
A strong business case for SAP HANA typically includes multiple use cases or projects — concrete examples of how the organization will utilize the product in the course of business. The key here is to “Think big, start small.” The big picture helps shape the long-term value from the investment, but starting small enables you to build in quick wins that establish success early and then continue to build business momentum with later projects.
Going further, some uses cases should reﬂect “stretch” goals — ambitious projects that may span several years. At the same time, they should also include projects that not only can be implemented quickly, but also demonstrate measurable business value. The ﬁnal collection of use cases can then be used to build a roadmap for current and future deployments of SAP HANA. The roadmap will balance each project’s business value against the corresponding diﬃculty of implementation and/or risk involved. This approach will enable your organization to prioritize its various projects in a thoughtful and comprehensive manner, thus maximizing the likelihood that the entire initiative will be approved.
For each business case you build, we recommend the following multistep approach:
- CREATE the storyline
- ADD the financial dimension
- TIE it all together
The ﬁrst step, creating the storyline, is fundamental to any SAP HANA business case. The storyline is what makes the business case unique to your organization. The use cases in the storyline should map to the goals and processes that distinguish your organization from the competition.
After you have created a viable storyline, the next step is to add the ﬁnancial dimension. No matter how impressive the story, by itself it isn’t suﬃcient to obtain funding for the project. Adding the ﬁnancial dimension extends the storyline to the expected business value and provides some quantitative measures that can be used in the evaluation process.
After these two steps have been completed, the ﬁnal step is to package up the business case in a format that is appropriate for the individuals who will evaluate the project.
We will discuss each of these steps in greater detail throughout the segments. Before we proceed, however, we need to consider the fundamental concept of business value.
Levels of Value
We’ve mentioned business value a couple of times already. Exactly what do we mean by this term?
“Business value” actually covers a relatively wide range of beneﬁts, both quantitative and qualitative. Moreover, there are diﬀerent levels, or degrees, of business value. The chart below illustrates a useful model for categorizing these levels. This model identiﬁes three levels: Eﬃciency, Eﬀectiveness, and Transformation. Let’s take a closer look at each one.
The ﬁrst level of business value, Eﬃciency, is the result of doing things the “right way.” Typically this means doing things faster, better, or cheaper or otherwise improving the way you do things (but not what you do). Of all the levels of business value, the gains from eﬃciency are the easiest to quantify. There are two basic subcategories of Eﬃciency: IT Eﬃciency and Business Efficiency.
Organizations are likely to focus heavily on IT Eﬃciency when
(1) the software investment under consideration is part of a broader eﬀort such as creating an analytics center of excellence or shared analytical services and
(2) the main rationale for doing so is to reduce IT costs. At this level of business value, IT is viewed as a cost center within the organization — an expense or overhead item that needs to be managed and contained. The following list identifies some common examples of IT Efficiency.
- Reducing the annual maintenance costs of older applications and databases
- Reducing the internal costs of enhancing or upgrading software
- Reducing the IT FTE resources required to manage older applications and databases
- Reducing the hardware infrastructure to simplify administration and minimize floor space/carbon footprint
The Business Eﬃciency level extends beyond issues that are purely related to the IT department. However, business eﬃciency/productivity is only an intermediate step in assessing the overall value of a project.
Line of Business Examples:
- To better identify the most promising sales opportunities
- To gain an enhanced perspective on cost drivers
- To increase the productivity of knowledge workers
The second level of value — Eﬀectiveness — redirects the focus from “doing things the right way” to “doing the right things at the right time.” To properly assess this level, we need to discard many of the prevailing assumptions that underlie current business processes.
Although eﬃciency can deliver a fair amount of business value, eﬀectiveness oﬀers the promise of much more. In fact, SAP HANA provides organizations with the opportunity to fundamentally rethink their basic business processes (i.e., what they do and when and how they do it).
For example, organizations rarely, if ever, depend exclusively upon a total cost of ownership (TCO) analysis (i.e., Eﬃciency) to justify a business analytics initiative. Although cost is a concern, the top-performing companies in each industry incorporate analytics into their infrastructure in order to create and maintain competitive advantage.
At the Eﬃciency level of business value, business performance is improved ﬁrst through visibility and then through insight. Visibility provides the ability to access relevant information quickly and in context. Then, insight provides a deeper understanding of the underlying causes of a situation or the likely outcome of a course of action under consideration.
Consequently, the business beneﬁts it delivers extend far beyond improvements in IT operations. The examination of eﬀectiveness gains makes the assumption that IT is a strategic enabler and value creator, and not just an organizational cost center.
Although eﬀectiveness gains are usually more diﬃcult to quantify than eﬃciency gains, their monetary value is frequently greater. Instead of precise estimates, eﬀectiveness gains can be expressed as ranges of ﬁnancial value, as illustrated by the following list.
- Higher customer value Improved product mix (margins)
- Better sales pipeline conversion ratio
- Enhanced customer retention
- More accurate demand forecasts
- More successful segmentation
- Enhanced understanding of real costs
- Greater production yields
- More efficient order fulfillment
- Faster collections
- Lower production costs
- Reduced risk/impact of risks
- More timely anticipation of market changes
- More efficient asset utilization
Business Transformation is the highest level of business value, but also the most diﬃcult to achieve. The Transformation goes well beyond Eﬀectiveness by enabling new business models and processes. Sometimes called “innovation” or “The Art of the Possible,” business transformation can generate extraordinary ﬁnancial gains. However, the potential monetary value from this level of business value is the most diﬃcult to quantify. By deﬁnition, Transformation involves things that have never been done before. Consequently, there are no baseline data to use for comparison.
At the Transformation level, the focus is on use cases that involve the invention of new business models and processes by leveraging innovative solutions and technologies, such as SAP HANA. If you are using a SAP HANA database, all transformations will be processed in the SAP HANA database as far as possible.
When a transformation is activated, the system checks whether the transformation can be performed in SAP HANA. If the transformation can be performed in SAP HANA, you can set whether the transformation should be performed in SAP HANA or on the application server. You make this setting when creating a data transfer process.
- Identifying and serving new market segments before your peers can
- Providing personalized customer pricing and services
- Enabling new products or pricing models
- Creating new business models
- Improving time to market
- Reducing inventory
- Increasing market share
- Improving P/E ratio.