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Business Value Articulation for Sustenance

The question of business value of IT is a haunting element of the evolution of IT as a business enabler. Be it implementation, maintenance or upgrade assignment, the first challenge remains demonstrating business value to the decision makers.

Before pondering over the role of IT in business value, let us delve upon and revisit the basics of Business value. Michael Porter’s value chain analysis helps in understanding how an enterprise creates value through a set of primary (like operations and sales) and support (enabling) activities which provide competitive advantage to the enterprise and leads to creation of products or services for which customers become willing to pay a price. The support activities include enabling functions like IT. Moving forward with this school of thought, today we have the process view of business where the functionwise activities are transformed into a series of cross-functional steps to form end-to-end business processes, be it Order-to-Cash or Procure-to-Pay.  The incidence of values creation is now considered to reside in the design and execution of these process steps that finally leads to something worthy of its price in the eyes of the customer.

The business value has two facets  - tangible and intangible. The financial performance parameters like Revenue, Profit, Cost, and Market Capitalization are some of the key tangible parameters that constitute business value. The equally important intangible part includes areas like brand equity, competitive positioning, utility of the products or services to the consumers, social standing of the enterprise. All such elements put together lead to the business performance as well as potential of the enterprise. Any activity or arrangement that helps to boost such tangible or intangible elements should qualify as business value add.

In case of SAP ERP instances in steady state, the support activity is subject to operational efficiency like the consumption of Electricity. The basic expectations from the support team become ensuring continuous availability of the application and carry out minor changes to align with the business alterations. When it comes to major enhancement like more than one person-month of effort, it usually qualifies for a ‘project’ funded by the respective business unit. As a measure of business value the ROI and Cost-Benefit analysis are included in the ‘business case’ for any such new project proposed.

Being in the operational efficiency paradigm, the common arrangement of having SLAs for each task and aligning the support team with it helps just to administrate support environment. Beyond the operational efficiency there remains a considerable scope and it leading to innate expectation of business value add from the SAP support team as business enabler.

Let us now look at what it really takes to do business value add and articulate it. The biggest source of ideas on business value as well as a radical prerequisite is the knowledge of the business.  The more the support team knows business processes, the higher are chances of promising improvement idea coming from the support team. I came across a requirement from the business to develop a report that was touching all modules involved in customer demand fulfillment. In Make-to-Order scenario the user wanted a report to know itemwise details in the following sequence – when the sales order was created and transferred for manufacturing, when was the production order created, if it is WIP how far the production order is complete when the report is drawn, if the raw materials required are available in adequate quantity , if the production order  is complete when was the FG confirmed, when was the QM inspection lot created and if it is cleared by QM, if any delivery is created against the sales order, if the shipping activities have started ,and lastly if  it is ready for goods issue or has any hurdle at any point in this whole chain of activities. Needless to mention this was a complex requirement for custom development. Now let us look at it from the Business perspective. The sales representative wanted to update the customer frequently on the progress of the high value orders placed and also wanted to know if there is any hurdle at any stage to follow up with concerned responsible person. Delivering on or before committed time was in tern linked to the KPAs of the sales representative. Hence the requirement was well called for.

In the sequel of this blog I will describe some of the key avenues of adding value to the business and articulating it. Please share your views.

Comments

The key to articulate busuness value lies with the ability to link each application functionality to a business KPI and measure the chane this IT functionality can facilitate. There have been enough instances where every stake holder is convinced that a specific functionality delivers value to business but the lack of clarity and ability to measure the delta on the specific KPI is a main hurdle. Not able to qualitify this in business parameter or in $ term leave IT not gaining the due credit for the same. It also impact the business decisions where a articualted business case faetches more investment than the not so well articulated business case though the actual ability to deliver the value is higher in second case. So all IT managers have to be business process savvy to make the business impact.

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