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S/4HANA foundation of company's innovative business model

Zurich-based Swiss Property aims to disrupt the construction industry with a business model that's made possible by SAP S/4HANA.

Being the first to adopt new technology like a software platform can be enormously rewarding, but the risks can be considerable if the platform is not ready for primetime.

This is the case with SAP S/4HANA, which is innovative enough that many enterprises can't see the business case that outweighs the risks and costs of implementing it. So sometimes it takes a company that has a greater vision of the rewards to be the first to take the plunge. Enter Swiss Property, the first company to roll out S/4HANA to develop its digital business infrastructure platform.

Swiss Property would no doubt have gone ahead with its innovative business model without S/4HANA, but it was the ideal platform to make it work, according to Jaan Saar, Swiss Property's head of process and IT.

To fully grasp why, Saar said that it's important to understand the ways in which Swiss Property's innovative business model is different from traditional real-estate and construction business processes. The Zurich-based company was founded in 2013 with the intent to reduce inefficiencies in the industry. "Productivity [in the construction industry] within the last 15 years in Europe has been falling while every other industry has been going up," Saar said. "You have the internet with everything going online and better technologies, but still there's too little productivity, so why is that?"

So Swiss Property established three founding principles intended to disrupt the traditional construction business model. The first brings lean manufacturing processes to construction, allowing Swiss Property to manufacture prefabricated housing in the same way cars are built. The second is total property lifecycle management, where Swiss Property controls the entire development process from finding the property sites through construction and finally managing the buildings after construction and sale or rental. The third principle is standardization, where Swiss Property uses the same building elements for the foundational aspects of construction, which account for 70% of projects, Saar explained.

Comprehensive functionality required

To manage this ambitious and innovative business model, Swiss Property needed an IT infrastructure that could manage all functions of the development lifecycle, including things like financials, planning and estimating tools, project management, supply chain and a data store for every element used in a project's lifecycle. Recognizing these complex requirements led Swiss Property to consider S/4HANA, Saar said.

"Because we do so much stuff, we needed an ERP system that has a lot of functionality," he said. "We do everything ourselves, and we don't use subcontractors, so we eliminate as many stakeholders as possible, which is unusual in construction because everyone's always looking out for their back which leads to various problems. But we don't have that issue because it's all integrated -- all of our teams share information, the design team with the production team, the production team with manufacturing, and so on."

SAP S/4HANA had all the functionality needed, but the case for implementation was not a slam dunk. "We probably would have never considered SAP, because of our size [around 100 employees], but our CEO at the time was very knowledgeable about SAP, and he knew it could be applied to smaller companies as well," Saar said. "We also have great, ambitious plans for growth, so we needed something that could scale with us very quickly."

Small company, complex structure

Another factor arguing for implementing S/4HANA, Saar explained, is that although Swiss Property is a small company in terms of employees, its enterprise structure is fairly complex. The company is based in Switzerland, but maintains two manufacturing facilities in Estonia and has many legal entities. "For every project there's a legal entity, and our head of finance compared our legal structure to that of the Volkswagen group, so that says something about our legal structure," Saar explained. "But the key [to selecting S/4HANA] is really the integration between all these parts of the building lifecycle and having it all integrated with finance and being able to build this single source of truth, which is what SAP excels at."

The company's youth was another advantage for S/4HANA, because it was not encumbered by legacy systems. In the year before the platform's release, Swiss Property evaluated several other systems and did a proof-of-concept with SAP ECC 6, which Saar said might have been safer to implement in some ways because it was a proven, tried and tested platform.

"However, once it came time to do the implementation, we figured we have an opportunity to go with S/4HANA, which was going to be released soon, and we looked at it as being the platform of the future," Saar said.

The pros and cons of early adoption

Being the first out of the gate presents challenges, however. The cons of being an early adopter include such things as bugs, missing documentation and simply moving into the unknown. "We probably should ask for some of the money back from SAP because we did a lot of testing for them," Saar quipped. "But the pro of being an early adopter is the immense amount of support that we got from SAP. SAP Customer Care and the SAP Regional Implementation Group were a tremendous help, and they took our issues very seriously and responded to them extremely quickly."

Being a small company, Swiss Property lacked the IT resources to pull off the implementation project on its own, so it partnered with Intelsys, an SAP partner based in Estonia. Because the system was needed for a crucial project, the implementation had an ambitious deadline and was completed in two months. Saar again attributes the ability to do this in part because of the lack of existing infrastructure. The result was named the Digital Building System, which includes initial functionality for finance, supply chain management, lean production and project management.

"Although we did the implementation in two months technically, to do the change management takes a lot more -- more testing, more training -- so we are still getting everything working and settled in and getting people used to the new software because we didn't have any of that before," Saar said. "We didn't have an ERP system at all, so it was chaos before, but now we are bringing order into chaos, and we're asking the guys to enter a lot more data for each and every transaction. This takes more time, and it's tedious. But in the end, it gives a level of parity and transparency that wasn't there before."

This transparency resulted in the company finding problems in the process that could be fixed relatively quickly and easily, but Saar maintained that they are looking forward to adding functionality that takes advantage of HANA's strengths, like analytics or incorporating internet of things into the supply chain to track shipments. All of this is intended to make the entire development lifecycle process more efficient and cost-effective.

"The idea is to have the entire property lifecycle supported by one single system," Saar said, "where we can gather and store data, then use it and continue to innovate within the Digital Building System."

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