On Wednesday 15th April, Investigo’s SAP team hosted a European transformation webinar to discuss current challenges and how businesses can work to overcome them, as well as what the future might hold as the market starts to return to normal. This follow-up to our recent UK SAP transformation webinar was attended by leading SAP and business transformation experts from our European network, and was hosted by Stefano Kyriakou, Manager of our SAP Europe team.
Should projects be put on hold?
Leading the discussion on whether programmes should be stopped in order to conserve capital or whether they should continue, a senior Programme and Project Manager from our network commented, “There’s no one way or other to answer. In the German market, it’s a two-way position. There are companies that are fully shut down, not doing any business and stopping their programmes, and on the other hand the company I’m working for is continuing business and a big change programme. It’s very dependent on the business you’re in.”
The same certainly applies across Europe, intimated Terry Dawson, Director at Investigo. “The industries that seem the least affected are pharma, utilities and food manufacturing. Our contacts in the pharma industry are continuing most of their projects as normal. They’re experiencing challenges around remote working and resources at manufacturing workshops. Food manufacturing companies are in some cases very busy, meaning there’s great strain on supply chains. Projects are being delayed not because there are no finances, but because they’ve had to release people back into the business.” Terry gave the example of a senior UK Transformation Director at a major UK food retailer who’s been stacking shelves instead of running a programme that’s been put on pause.
Several of our attendees have seen continued demand from Switzerland and Scandinavia, but a severe slowdown of projects in Belgium, the Netherlands and Luxembourg due to strict lockdowns. In Italy, one of the most severely affected countries at the start of the crisis, large consumer companies are now starting to release hiring requirements in volume.
Companies will need to be selective in the programmes they continue to run during this time. A Senior Director of IT and Finance said that the medical devices company she works for is focused on customer engagement and supply of its frontline products. Transformation programmes are going ahead to keep improving and optimising their supply chain globally. There’s been a pause on greenfield investment, especially in the company’s planned projects in China and Malaysia, until 2021.
Giving the perspective from the retail sector, a Business Transformation SAP Programme Director saw companies’ revenue “being completely devastated.” Retailers are facing a huge impact on cashflow and capital expenditure, still having to pay their suppliers and system integrators. 60-day payment terms will affect cashflow further, a good reason for putting projects on hold.
So how can you keep programmes running? The answer could lie in your powers of negotiation. “If the CFO’s asking you to put a programme on hold,” he said, “then ask if they’re concerned about current liquidity, cashflow management or something else. Will proceeding with the programme change your strategy or competitive advantage? If the programme’s part of your competitive advantage but you furlough 20-30% of staff, you have a liquidity cashflow problem, so you can’t afford to be impacted by this.” Providing a way to defer all payment for 60 days at no cost could be an answer to keeping programmes running.
“One size doesn’t fit all,” added a Global Programme Director. “It depends above all on the position of IT within the company. Is it just a cost or is the CIO already sitting at the table as a revenue creator for the company?” The CIO needs to work with the key stakeholders in charge of mission critical functions to decide what can continue and what can be put on hold. It all depends on your viewpoint. A Retail CEO that one of the attendees is working with has said, “All the shops are closed, so the priority is not the transformation programme.” Terry referred to the example of one of the world’s largest food services organisations, which is reporting a 40-50% drop in global revenues.
How to successfully manage a programme team remotely
A lot of our work is done through face-to-face interactions, but now we’ve suddenly been thrown into a remote working world. If there was value in implementing SAP S/4HANA before, however, then this hasn’t gone away overnight. A Senior Strategic Executive Advisor said that companies implement S/4HANA because it brings value to change. “In the SAP world,” he said, “we’re used to working remotely. It depends on the company and it depends on which phase you’re at. You need more people in a central location depending on the phase of the project. But we’re doing more virtually today. You need more people onsite if you’re in the prep stage.”
A Global Programme Director agreed that S/4HANA transformation programmes will have to continue one way or the other. “Moving to S/4 is not a technical issue – there’s more to it than that. Companies want to keep their competitive advantage. SAP offers more than a new database and a new platform to run it on. Many other things are possible in the S/4 environment that are not possible in ECC.”
There are cultural factors at play in how effectively companies manage remote teams. The Senior Strategic Advisor has been managing virtual teams for many years and when it comes to the critical stages of a project, there’s only so much you can do remotely. Anything to do with change management “is virtually impossible to do effectively.” In his experience, doing business remotely is easier in Northern European cultures like Germany and Scandinavia than in Spain, Italy and Latin America, where “personal contact is paramount to successful change management.”
“For anybody thinking that social distancing is only there for a few months,” he added, “I think that’s an illusion. Some think it will last one or two years.” Indeed, younger people expect to work from home in general, meaning the workforce is very well equipped to continue functioning remotely. In a contradictory way, being separated from other people has also connected us. “These days, we’re capable of creating relationships virtually. We are more human, asking how people are getting on. There’s been a movement to technology, but a return to humanity.”
It also depends on the organisation’s maturity. Some companies are used to working virtually. Others prefer to see a presence in the office. Some attendees have found that certain customers in the food industry aren’t used to remote working, so it’s still a challenge to get people onboard. At the same time, meetings are now shorter and more to the point, and it’s easier getting a large group into a meeting.
The Senior Strategic Executive Advisor added: “The Chinese word for crisis is wēijī. It’s two words, danger and opportunity. Some companies are not ready for virtual working. The bank I’m working with is not ready to have any Microsoft Teams calls. They’ve never had laptops outside the organisation from a security point of view. A lot of businesses will need to advance themselves after this.”
A strategy for a new ‘normal’
A Senior Programme Director felt that the new normal will involve more working from home. “We won’t go back to working hours in the office as we did before. Companies are going digital and are seeing the benefits of this. Many programmes are slowing down or stopping. Can they continue at the same speed or faster if they have a number of people working from home? What do they do if a project comes to a full stop? They’ll need to re-staff projects to get them on track again.”
Companies will only be affected as much as their clients. The Senior Strategic Executive Advisor added: “The issue’s not our business, it’s our customers’ business. From an SAP or delivery perspective, things won’t change. Our customers’ businesses will change. They won’t be doing business as they used to. Plus fear will increase from the number of people who don’t want to go to the office. It will change. We don’t know exactly how, but it will.”
An Engineering Lead posed the very relevant question of whether people felt comfortable visiting a busy bar, or going shopping, or travelling on an aeroplane. “I used to travel every day but will I go on an aeroplane every day in the next two months, even after the airports have opened?” With employees likely to be reluctant to return to their workplaces even after the restrictions have been lifted, businesses will need to show further flexibility, said Terry. Indeed, Investigo is embedding flexible working practices to help facilitate remote working in the future.
“It will be interesting to see how companies prioritise spending on SAP programmes versus cost reduction, restructuring, finance transformation over the next six months,” added Terry. “Will they put more critical projects in front of technical investment?” There was agreement that it depends on a company’s specific situation, business case and strategy. If a programme started because it’s critical to a business’s development, growth and sustainability, then it has to continue. If it’s just for the sake of moving to a different database, them that’s different. When companies embark on such expensive programmes, there must be a watertight business case for doing so. It’s then important to select the parts of the programme that are essential and which business areas to cover.
The future
How will the current crisis shape SAP and business transformation programmes in 2020 and beyond? Although most organisations are in daily crisis management mode, they’ll need to reconsider their strategy and think about whether they need to move to digital faster. Consultancies can help organisations reshape their business model. SAP’s recent announcement that they will extend support for Business Suites on S/4HANA until 2030 could provide crucial assistance.
Companies first need to rethink their business before they know whether they can continue existing programmes or start new ones. The position of every single company in the world has changed and the business case around SAP implementation has changed too, but a core needs to be in place to allow the company to do business differently. It’s essential to do transaction work quickly and keep track of stock at every minute.
There’s a very strong argument that continuing programmes will be extremely beneficial to businesses from a digital perspective. Transformation programmes such as SAP S/4HANA and Leonardo are tightly linked to digital transformation, argued the Engineering Lead. “ERP is supporting digital. Without that, we can’t have digital. Predictions are based on old economic models such as the Great Depression, but it’s a different world, a different society, a different economy.”
Maintaining momentum
A Partner at a leading global technology company was concerned that “If programmes stop, there’ll be a loss of momentum that’s critical if remobilising programmes. We’re used to working remotely, we do agile development remotely. The issue is readiness and momentum.” Many businesses have been understandably nervous about the future, but there’s a need to maintain impetus so that they’re able to operate effectively when the market returns to normal. Everyone will want to pick up again quickly, but how? Will it be possible?
The Senior Programme Director suggested that slowing down was perhaps not a matter of choice. “Some businesses have been forced to slow down to comply with liquidity and cashflow requirements. Some organisations have asked the big four consultancy firms to secure resources for the future, but not everyone can do that. In general, most projects will continue to slow down or be put on hold. I have no idea what it will mean working with SAP developers in India if the country goes into lockdown.”
As to when people will feel comfortable about returning to their workplaces, this will be down to many factors, such as employers’ attitudes to flexible working, the nature of any staggered easing of lockdown restrictions – whether there’ll be rules around social interaction in public places, for example – and the introduction of a vaccine.
Conclusion
Although monumental, the exact impact of the current crisis remains unknown. But from our interesting discussion with leading SAP professionals, it’s clear that companies will be differently affected according to their location, their industry and their culture. In a world that’s become increasingly accustomed to remote working in recent years, many businesses might already be primed to this mode of operation. Those that are not will need to rethink their ways of working in order to prosper in a new market. That market is challenging, but companies are responding by working harder than ever to generate new opportunities.
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