What could a fast-growing frozen yogurt retail chain possibly have in common with a wholly owned subsidiary of...
The Dow Chemical Corp.? Pinkberry Inc., with more than 1,000 employees and more than 100 stores around the globe, and Safechem North America LLC, a newcomer to the United States and a player in the metal degreasing industry, illustrate the two primary use cases SAP is targeting for SAP Business ByDesign, its Software as a Service (SaaS)-based ERP offering.
For Safechem, a 20-year veteran in Europe but operating as a startup in the North American market, SAP Business ByDesign offers a way into a two-tier ERP approach. With this scenario, the corporate entity, Dow Chemical, runs the more monolithic R/3 and SAP ECC platforms, while Safechem exploits the flexibility, scalability and fast-track deployment of the SaaS version with key integrations to the enterprise system.
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In Pinkberry's case, SAP Business ByDesign delivers more of the traditional benefits associated with the SaaS ERP model, including a reduced IT support burden, less time to implementation and the ability to scale the ERP platform to keep up with the company's aggressive growth plan.
Here's how two very different entities with different deployment models were able to get going with SAP Business ByDesign:
Safechem's two-tier ERP approach
Although Dow Chemical is big and stable, its Safechem subsidiary, launching as a startup in North America, needed to be nimble and quick. Safechem's European operations ran a custom ERP system. With operations in 159 different countries, the group also has dozens of point solutions across the globe -- a mix-and-match ERP architecture it didn't want to carry over to its newly launched North American operations, according to Dennis Strahl, financial systems architect at Safechem.
At the same time, Dow Chemical's corporate SAP instance was far too rigid to accommodate Safechem’s different business model -- not to mention that it would be time and cost-prohibitive to take on a long, multiyear ERP rollout.
"We needed something we could implement quickly … and a system that could accommodate the way we work," said Strahl.
Safechem’s business model is focused on delivering services to smaller customers and includes a Web presence for ordering spare parts and scheduling deliveries. "It's just not the way the core Dow companies do business. You don't sign on to the Web to buy five rail cars of polyethylene."
Recognizing early on that Safechem would need a different ERP approach to take it to the North American markets, the division considered the earlier version of SAP Business ByDesign, but it didn't pull the trigger because of perceived problems with that platform. It also looked at ERP versions from smaller companies, but the systems often lacked the global scale Safechem required.
When the new SAP Business ByDesign came out in January 2011 and addressed the group's concerns, Strahl's team worked with SAP to implement SAP Business ByDesign as a two-tier architecture with key integrations between Safechem and Dow's core SAP enterprise platform.
One of the key enablers for the successful two-tiered ERP rollout was managing the integration points carefully and not overtaxing Safechem’s system with too many requirements from corporate. From the start of the project, Strahl's team worked as part of Dow's enterprise architecture group to define the key areas of consolidation and establish the level of visibility Dow corporate would have into Safechem’s financials and operations data.
"You have to manage the integrations so you don't bring so many onerous requirements from the corporate parent that you strangle the flexibility you are trying to give the new child," he explained. Once Safechem gets to a certain size and scale, the team will revisit the integration points and add new ones to give corporate more oversight.
The other major issue for deploying SAP Business ByDesign was managing scope creep. Given that the Dow and Safechem groups were well-versed in what SAP ERP platforms can offer, there was constant pressure to add more capabilities to the original roadmap.
"Managing scope was a very intense thing we had to do in order to hit our timelines and stay within budgets," Strahl said, adding that the rollout took only around six weeks. "It took longer to get contracts figured out," he quipped.
Pinkberry scales with SaaS ERP
Frozen yogurt chain Pinkberry found itself growing out of its custom ERP platform, making it difficult, if not impossible, to produce consolidated financials or scale to support its expanding operations. The firm settled on a SaaS ERP approach from the beginning and opted to go with SAP when it was able to come on board as an early SAP Business ByDesign customer. In fact, Pinkberry helped shape the new offering, according to Judson Wickham, manager of business systems.
"We don't have the support staff here to do a huge on-site solution -- we're just two guys in the IT department, so the first thing we do is look to SaaS because it's easy to support and implement," Wickham said.
Pinkberry's aggressive target of adding 100 stores annually across the globe also dictated a scalable approach.
"We needed to bring on more and more locations and people without spending a lot more money," he said.
Working with SAP's service organization, Wickham's team examined SAP Business ByDesign's standard business processes and sought feedback from its business users early on to see if there were exemptions that needed to be taken into account. Soliciting user involvement in the blueprinting process was critical, Wickham said, as was preparing users for the cultural changes associated with putting a formal ERP platform in place.
"Business ByDesign is a much more controlled and regimented environment than what they were used to," he said. "Everything is an end-to-end process and connected so they can't skip steps when doing things, which is something they weren't accustomed to."
While a SaaS system is easier to manage and takes less time to deploy than traditional ERP -- the Pinkberry deployment took 11 weeks, from requirements gathering through implementation, including modules for human resources, CRM, payroll and financials. It's a mistake to think there is no heavy lifting involved, Wickham said.
"You still have to do things like configure the system to your processes, create a chart of accounts, and define payment terms," he explained, adding that the customer, not a consulting team, is typically responsible for the deployment. "But you don't have to do all of the customization and report design, and there is no hardware to look after -- all the stuff that takes a long time in the traditional ERP world."