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IDC OPINION
WHITE P APER
ERP Blueprint Enriches Engineering, Construction, and
Operations Companies
Albert Pang
November 2005
Buoyed by low interest rates and surging wealth in fast-growing countries, the
engineering, construction, and operations (EC&O) industry is experiencing
unprecedented business opportunities. However, those opportunities may be missed
if a company doesn't have the right systems to accommodate advanced project
management, accurate financial reporting, and growing customer/vendor demands for
real-time data exchanges.
Members of the EC&O industry must step up to today's market demands. For example,
homebuilders that invest in integrated systems can better manage their assets, their
supplier and subcontractor relationships, and their core financial management systems.
This investment helps homebuilders lower costs, boost their profitability, and meet
tough corporate compliance standards. Construction companies that are not willing to
part with their current homegrown infrastructures may find themselves failing when their
fundamentals are undermined by years of system overload, limited spending on project
data maintenance, and general indifference to information consistency.
Similar needs exist across the EC&O industry. Homebuilding, plant contracting, and
construction segments have unique needs, but they all are under the same pressure
to adapt to today's market demands at a time when projects are more complex,
business processes are increasingly streamlined, and the velocity of information is
accelerating. A centralized approach to manage data aggregation and dissemination
is needed to ensure the long-term value of these EC&O firms.
A key to meeting the challenges could lie in the adoption of one of the mySAP All-inOne qualified solutions for the EC&O industry. These solutions combine the mySAP
Business Suite (including mySAP ERP), SAP Best Practices, and the industry
expertise and implementation services of EC&O business partners. This potent
combination of SAP software, Best Practices, and implementation services can allow
partners to deliver industry-specific, low-risk, affordable solutions that can be
implemented efficiently. Leveraging this synergy can help EC&O firms achieve
desirable results. The solutions can accommodate the unique requirements of EC&O
companies in the race to control project costs and can boost profitability through
effective management of assets, resources, and business partners.
SITUATION OVERVIEW
Despite the widespread use and acceptance of desktop computing, instant
information access, and mobile communication devices, an integrated technology
solution often takes a backseat to fly-by-wire business management in the EC&O
industry. Some EC&O companies underestimate the value of a standard information
system, choosing instead to continue using standalone applications that have not
evolved to meet today's challenges. Often these applications consist of a hodgepodge
of customer databases and disorganized data from loosely maintained spreadsheets
tied to untraceable email correspondence.
Back-office operations with its assortment of accounting, human resources, and
purchasing applications is often the last thing on the minds of EC&O executives
when they are rushing to complete multimillion-dollar construction projects. Typically,
it is the responsibility of the business managers, rather than the IT managers, to
complete these megaprojects on time and within budget. They are tasked with finding
the most efficient use of such widely divergent resources as excavation equipment on
the one hand to collaboration-centric project management systems on the other.
Project management is another area in which EC&O companies have been searching
for a blueprint that works for both executives and subcontractors who may have
adopted different systems for planning and tracking a project. In some cases, project
participants from CEOs to facilities directors and from foremen to IT leaders are
left with no choice but to collaborate by passing around hardcopy spreadsheets and
project schedules. Often, this approach leads to version control issues, resulting in
loss of control that may lead to project delays and ballooning costs.
With the booming real estate market and increased demands for complex mixed-use
community projects that often spawn a growing number of project participants,
companies are finding that they can no longer use outdated systems to manage the
onslaught of data. Furthermore, the companies that have adopted better ways to
manage and share their project data will be the ones to survive during periods of
slower growth and stagnation.
Among the savvy EC&O companies, business managers working in conjunction with
their IT teams are recognizing the importance of using the latest software technology
from the advanced computer-aided design (CAD) programs to the most versatile
enterprise resource planning (ERP) applications to manage the information
velocity and data synchronization that are necessary to support mission-critical
collaboration among disparate project teams.
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Policy Control
As fast-growing construction companies tackle increasingly complex projects, the
routine activities are the ones that often trip up even the most seasoned EC&O
executives. Mistakes such as failing to issue purchase orders, fulfilling customer
orders inaccurately, or allowing runaway inventory levels can cost a company dearly.
The culprit is usually an internal system that has failed to keep up with growing
business needs, resulting in critical customer and supplier data that is erroneous,
outdated, or simply missing.
Asset management, for example, is an area in which many EC&O companies can
and should reassert control. If a company succeeds in putting information about its
assets in a single repository through its intranet, it gains greater control over its
financial picture and asset requirements across the enterprise. By tapping into that
data, a company can enforce proper guidelines on when and how to update its assets
as well as to revise its budgeting and planning processes for mission-critical resource
allocation. Such essential organizational support for maintenance planning,
preventive maintenance, and rapid identification of items needing repair boosts
equipment performance and reduces downtime.
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Real-Time Information
It's one thing to consolidate a wide array of information into a single repository; it's
something else to properly manage and update it on a real-time basis. Not only does
the integrated system have to be scalable enough to handle escalating information
demands, it also needs to sustain an abundance of historical data for EC&O
companies to effectively report against and leverage for future projects. EC&O
companies should start benchmarking themselves against key performance indicators
(KPIs), industry best practices, and degree of compliance with government rules and
regulations. In addition, companies must enable their suppliers and contractors to
access this real-time project information to more quickly respond to supply disruptions
or project changes.
The task becomes inherently more difficult as EC&O companies attempt to diversify
their risks by operating in multiple geographies and in different sectors (for example,
condominium development and shopping mall complexes). Integration of views
across projects through a centralized system, coupled with a healthy dose of decision
support and prescriptive analytics capabilities, may well be the key to attain
consistent information on a real-time basis to enable superior decisions for the
company as a whole.
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For EC&O companies, property management has become a legitimate and often
lucrative revenue stream. For example, an integrated project management system at
an EC&O company can provide better insights into demographic shifts and
community planning trends, allowing it to make rent adjustments and lower vacancy
rates for company-owned property and for properties belonging to third parties. Such
a system is likely to facilitate faster completion of an infrastructure project, such as a
mixed-use community, and improve rent collection for mall developers.
Similarly a customer-centric strategy by homebuilders would enable them to gather
and analyze data through systematic survey instruments and analytic tools to
standardize on floor plans, building options, and parts purchases to lower costs and
improve profitability.
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SAP software supports a broad spectrum of EC&O firms' needs from suppliers to
customers. While mySAP All-in-One qualified solutions start with the basic core
processes that EC&O companies need, such as financials and project management,
these solutions can leverage all that mySAP ERP offers with follow-on or concurrent
implementations. Easy integration of additional features provides system scalability
that ensures any explosive growth of an organization can be met by adding new
users, transaction processing capabilities, and complementary modules from SAP
and its partners to form a complete solution with competitive advantage.
In addition to core processes, EC&O companies can examine their operations and
processes for "squeaky wheels" or outright looming disasters and implement
additional modules that make sense at a particular moment. As the capabilities of the
system expand to address additional priorities, EC&O companies can phase in other
functionality as desired to implement a full range of short-term tactical solutions and
longer-term strategic solutions.
SAP and its Business Partner network are well versed in helping EC&O customers
make the right choices and choose the right sequences for staged implementation.
Helping companies make the right selection is a value-add offered by SAP and
mySAP qualified solution providers.
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The Web site of SAP business partner et alia LLC, located in Milwaukee, Wisconsin,
captures the company's approach and what seems to be a common position among
the SAP business partners with which IDC spoke:
"When working with software as robust and functional as SAP's
many solutions, it is extremely important to find a partner who is as
concerned for your business as they are for theirs. When that same
partner can close the gap between knowing the power of SAP and
using the power of SAP, the possibilities are endless."
Many of et alia's implementations have been completed within 16 weeks and under
budget because of et alia's implementation methodologies, including Remote Online
Consulting Service (ROCS), which enables customers to proceed with their day-today operations independent of the software installation. Under the ROCS approach,
et alia has developed remote configuration capabilities to handle the bulk of the
rollout while delivering continued application support through both onsite and
offsite consulting. Some et alia customers indicated that such methods have lowered
their consulting expenses by as much as 60% because they don't need to keep
the consultants on site and therefore pay only for the actual amount of time the
consultants spend configuring their systems remotely.
et alia adds value by becoming the de facto IT department for its clients, handling
such tasks as hardware design and purchase as well as network setup and support.
This service can be particularly valuable to midsize EC&O companies, which typically
have limited budgets for IT operations and dispatch most of their people to the field.
et alia and SAP have completed more than 200 implementations for a variety of
engineering and construction firms and service providers in the telecommunications
and real estate sectors. The et alia implementations are built on an integrated mySAP
All-in-One qualified solution called CREW, which is designed to deliver a real-time
integrated view into the projects, people, and performance that drive profitability for
EC&O companies.
CEO Dana Barron of HB Communications Inc., an et alia customer and a specialty
contractor, fabricator, and installer of custom solutions for audiovisual, video, and
professional audio needs headquartered in North Haven, Connecticut, stated the
following:
"During our selection process, we investigated many software
solutions touting industry-specific project management and job
costing functionality. It wasn't until we investigated et alia CREW, a
qualified mySAP All-in-One solution, that we found the best
integrated solution with substantial industry Best Practice
experience."
CREW meets the needs of fast-growing construction companies by providing their
employees, suppliers, and third-party vendors with an array of data consolidation and
complex reporting functions addressing requirements ranging from rudimentary
access by field workers to the most demanding reporting request from team leaders
and corporate executives.
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CHALLENGES
All IT vendors that offer solutions for the EC&O midmarket are faced with a number of
challenges such as offering affordable, yet comprehensive products and services;
ensuring that channel partners have the necessary resources and qualifications; and
overcoming buyer resistance to change.
Partners typically have fewer resources at their disposal than vendors such as SAP,
so all vendors must offer programs that meet a myriad of partner needs. These
programs leverage vendor expertise and address partner needs for education,
marketing and sales support, event planning and execution, and the like. As with
other vendors, SAP must continue to focus on assisting its partners in bringing new
solutions and offerings to the market, deriving a more rapid return on investment, and
helping them communicate more effectively with their customers.
End customers often need to engage in change management to adapt to new
business processes and technology solutions. SAP business partners are therefore
given the tough job of not just bringing SAP software and/or solutions to an
organization but of making sure that users are proficient enough with the technology
that they see it as a key ingredient to their success.
Additionally, SAP's success in the large enterprise space has given it the reputation of
offering solutions that are complicated and expensive and that take a good deal of time
to implement. The combination of mySAP All-in-One qualified solutions and its business
partner network, focused on delivering industry-specific, defined scope solutions with a
reasonable price tag and timely implementation, should help change this perception in
the eyes of EC&O organizations with direct exposure to these alliances. SAP has been
finding a welcome reception as it targets midsize enterprises, and it must continue to
press its message of success among this untapped market.
With a long track record of selling into the EC&O industry, integration technologies
such as NetWeaver, and a wide array of business partners, SAP should be well
positioned to leverage its expertise and address the challenges it faces. The
introduction of SAP's PartnerEdge strategy earlier this year is a step in the right
direction to make the indirect approach more successful. Customers as well as
partners should benefit from SAP's investments.
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CONCLUSION
Like a symphony, complex engineering and construction projects can be performed
only when everyone involved is playing off the same sheet of music, which is what
an integrated ERP system such as one of the mySAP All-in-One qualified solutions
can deliver.
Integrated ERP systems have been replacing homegrown and single-purpose
accounting, project management, and maintenance support applications in many
asset-intensive industries, and the EC&O sector is fueling the trend. Integrated
systems can create a standardized platform for project stakeholders as well as enable
engineering and construction firms to share information, track and monitor progress to
enhance collaboration, and break down communication barriers that often result in
cost overruns and maintenance delays.
The increased volume of data that flows from project members to outside partners,
from crew members to project leads, and from customers to account managers needs
to be timely, accurate, and consistent. More importantly, an EC&O company needs a
standardized and robust system to handle and harness this cascading data. A lack of
will to create such an integrated environment could spell trouble for many EC&O
companies in the long run.
As a result, the mySAP All-in-One qualified solutions for the EC&O industry, which
have been adopted by many engineering, construction, and operations companies,
may represent one of the easiest ways to start taking advantage of business process
automation and collaborative project management. Key components are industryleading software, preconfigured functionality, prebuilt industry best practices, stable
architecture, and well-oiled implementation services.
The advantages that can be delivered by this combination can include quick
implementation times, reduced user training, optimized usage throughout the
organization, reliable performance throughput, and consistent system interoperability.
Adoption of the right ERP-based solution can serve as a blueprint to simplify an
EC&O company's business processes, tackle operational inefficiencies, and
ultimately establish higher returns on its projects.
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Copyright 2005 IDC. Reproduction without written permission is completely forbidden.
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