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8 ways you can reduce SAP costs

8 ways to reduce SAP and S/4HANA costs

A practical guide to eliminating waste for SAP customers

SAP has never been cheap to implement. The capital costs are often amortised over five to ten years and on top of this you have the ongoing operational costs of running, supporting and maintaining the system. In the current climate, with the dramatic reduction in demand across many businesses, controlling and reducing these costs is essential to their survival and future success.

Running counter to this, SAP skills are becoming also scarcer and more expensive. SAP isn’t the cool kid any longer with new entrants to the IT industry preferring to get involved in the shiny world of web or ‘app’ development. The decrease in the supply of skills has also coincided with an increase in demand due to the impact of Brexit and the burning S/4 upgrade platform.

It is also notoriously difficult to demonstrate the benefits and return on investment from a SAP programme making the business case for spending additional money an issue and the need to control existing spend and save money critical.

So how can you start to identify potential savings on your SAP running costs?

Gartner undertook a benchmarking exercise a few years ago with wide range of SAP customers and they identified the three big areas that contribute to the ongoing running costs of your SAP estate:

  • 66% - Staff and Skills
  • 24% - Licensing
  • 10% - Hosting

What are the main causes of waste and cost in SAP systems?

Using Muda to reduce SAP TCO

A number of the Resulting team come from a Manufacturing background and quite often on consulting engagements we bring in metaphors or techniques from manufacturing.

Japanese manufacturers have focussed on the reduction of a concept called ‘muda’ for many years. There isn’t an exact translation of ‘muda’. It means wastefulness, uselessness and futility – the opposite of value-addition, where value-added work is a process that adds value to the product or service that the customer is willing to pay for.

The Toyota Production System identifies eight types of ‘muda’ that are the root of all unprofitable activity that need to be eliminated:

  1. Defects – effort caused by rework, scrap and incorrect information
  2. Overproduction – making more than a customer requires
  3. Waiting – wasted time waiting for the next step in a process
  4. Extra Processing – higher quality than required by the customer
  5. Transportation – unnecessary movement of products and materials
  6. Inventory – excess products and materials not being processed
  7. Motion – unnecessary movement by people
  8. Non-utilised talent – under-utilising people’s talent, knowledge and skills

8 ways to reduce your SAP running costs

By plotting these against the main SAP costs, we can start to see where our SAP ‘muda’ might be hiding and start to drill down and identify ways to save money.

8 wastes in SAP and how they affect your budget

If you want help to eliminate waste and reduce your SAP running costs, come and talk to us about reducing SAP costs.

Next: Learn how to avoid defects in SAP and S/4HANA


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