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Al Speranza, Vice President, Channel, SAP Americas

Al Speranza, Vice President, Channel, SAP Americas

By Al Speranza

For some time, government agencies have been attempting to move away from heavy capital expenditure, shifting IT expenses to a new operating model that enables the addition of new capabilities, more easily and in far less time, than traditional application architectures would have needed. The management benefits are obvious and have played a big part in the push for consuming technology solutions via the cloud.

For years, public sector CIOs have faced unrelenting pressures to do more with less, but at the same time they’ve been unable to afford big-bang, transformational change in order to meet these demands. This challenge is especially acute in smaller agencies and in local government.

In this context, the appeal of incremental change, and a gradual move toward purchasing IT as a service via the cloud, is strong. An incremental approach minimizes rollout risk – problems, however unlikely, are contained and can be addressed with less trouble along the way. The wait for ROI is dramatically decreased as solutions are run in a controlled and pre-configured environment. Over time, and leveraging the cloud as a conduit to quickly adopt new technologies, customers can scale from small initial projects to large enterprise deployments with next to no risk.

The per-usage pricing model fits well with the capital and resource constraints of agencies , but for all its appeal, it can be a challenge to gradually move sensitive agency operations (and in the public sector, all operations are sensitive) into a service-based model.  The best service-based solutions also have their own licensing costs, although these are now carried under operating expenses as license fees in smaller annual increments.

IBM and SAP have partnered to make it easier for agencies of all sizes to access SAP’s world-class public sector solution portfolio with the economies of scale provided by a shared-service model. The shared service model is increasingly popular with large IT spenders for its economies of scale, but is not always accessible to smaller buyers. Under this agreement, agencies can essentially pool their spending power in a hosted IBM environment, maintaining their own SAP environment, however small, in this larger hosted context.  Agencies that might not have considered best-in-class solutions can now run portions of their agency or their entire agency on an SAP environment.

Public sector buyers will benefit from a stable, affordable, and low-risk approach to modernization and operational streamlining projects – gradually, rather than overnight, with the costs spread over years as part of operational expenses. Best of all, these projects are backed by two of the most trusted names in the industry – IBM + SAP.
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8 Comments
 
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December 30, 2013
12:55 pm

Hi Doug, thanks for joining the conversation. Obviously every implementation has its own successes and challenges. The shared services trend is still in its infancy so many in the industry are closely following the progress of these projects; customers are expressing a great deal of interest in the potential ROI.


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Posted by: sap fico online training
 
December 27, 2013
9:54 am

This article makes numerous arguments about the ROI of SAP used for shared services in the public sector, yet few facts. Shared services as an approach to increasing the value for money in government remains unproven. Most of the case studies out there are about potential savings rather than realized saving,

There have been numerous cases of Tier 1 ERP cost overruns and failed implementations in government. One of the difficulties has been managing code customization because of unique government regulations and mandated processes that are not supported out of the box from generic ERP. This becomes particularly difficult when trying to support processes across many ‘lines of business” and organizational sizes. The result can be diminishing returns. Standardization introduces inefficiency in some organizations.

Shared services for ERP seems to make more sense when supporting many like organizations such as a shared service for multiple municipalities.

This notion of low risk for SAP implementations seems to fly in the face of current market trends. There is significant risk in any large public sector IT project and in any project that requires a large customization footprint. Public sector requirements tend to change over time which can be difficult and expensive to support in Tier 1 ERP.

It should also be noted, that despite all the fanfare, SAP is built on legacy proprietary client/server code, ABAP. This limits adaptability and increases the data centre footprint.

It would be instructive for IBM to describe what shared services scenarios have proven to be effective and how IBM reduces the risk in SAP government implementations. Is this shared services portfolio focused in specific countries or levels of government? How does IBM reduce customization costs? How are processes rationalized and standardized (if at all)?


Posted by: Doug Hadden
 
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