Never before have IT professionals seen such pressures converging on the industry: long enterprise application implementations, exchange rate fluctuations, and rapidly changing business requirements -- not to mention IT labour shortages in a fragile jobs market. The CIO has to balance multiple conflicting priorities.
Once a substantial investment in SAP has been realised, the focus is on sustaining operations. The trade-off now is between operational excellence and continuous improvements versus cost management.
It is my view that engaging external service providers and using their expertise and capacity investments through managed services is an excellent way of achieving this. Service level agreements (SLAs) and key performance indicators (KPIs) will ensure system stability.
However, one size does not fit all. This is because SAP applications are entirely business process-centric. Furthermore, SLAs and KPIs have to be defined by the nature of the business and demands by the user community, not to mention the need for speed and responsiveness.
While the larger third-party advisors do an excellent job of squeezing the best terms for their client organisations from the vendors, for most organisations maintaining, managing and monitoring these SLAs becomes an overhead cost.
How do you measure and match the returns against the cost of managing and maintaining SLA-driven managed services around SAP? This is in addition to getting IT service provider partners to understand the organisation's business dynamics, and the SLAs.
In my experience, an enthusiasm for getting the best out of the vendor relationship and an inflexible SLA regime, coupled with poor understanding of the state of the business and economic environment, has caused service provider churn. This is because of lower returns on SAP investments, high operational cost and reduction in application performance.
In SAP-managed services, a flexible SLA approach for business-critical applications is needed.
Unlike when SLAs are hardcoded at the start of the engagement and have a fixed cost, flexible SLAs are tailored to suit the business-criticality and scenario - aligning cost to the expected service levels.
This allows the organisation to get the best instead of going in for expensive change requests or bidding all over again. SLAs are generally categorised by the application classification, such as Gold, Silver and Bronze, as well as whether they have critical (P1), high (P2), medium (P3) or low (P4) priority.
Organisations should work with their service providers to define SLA categories based on the functional criticality and business need. For example, system performance for batch jobs around financial accounting functionality will be critical for monthly or quarterly activities, but medium or low at other times.
SAP applications are still the backbone of many businesses. It is therefore critical to ensure that flexibility is built into an organisation's contract with service providers. It is also vital to align the service to the business needs, not linear metrics.
If flexible SLAs can help improvements on the bottom line, surely the CIO has more than delivered on his or her commitment to the users and the management.
Ramki Jagadishan is vice president and head of global delivery for SAP at HCL Technologies
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