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Selection of Best IT Vendor for your SAP Business Transformation Project

In 2009, I was invited to a dinner with a CIO of a fortune 500 company that was planning to implement SAP in the following year. One of the topics he wanted to discuss at the table was the selection of a good SAP systems integrator. He had served as CIO of couple of midsize companies for 10 years prior to joining the current company. Like any corporate executive, he wanted to pick a systems integrator that was a "safe bet" and not take any major risks. He said, "Deepak, I think we should go through the selection process as you say and my preference is to pick a big 4 SAP implementation partner rather than any other company." I was not surprised at all by his remarks since he did not have much exposure to SAP transformation projects in the past. My feedback to him ended up being a two hour discussion which I will summarize below. But at the end, he said "Now I am convinced that we need to evaluate all QUALIFIED and established SAP systems integrators that a track record and delivery history with the packages we are planning to implement. If it happens to be a big 4 company like IBM, Deloitte, Accenture or Cap Gemini I will be happy but I rather have a best qualified SAP implementation partner in my industry than just the one with a big 4 tag."
So how do we begin with the systems integrator selection process for your business transformation initiative in SAP. First we will discuss "who" we invite to bid for the project followed by "what" we look for evaluating each of these vendors and finally we will discuss "how" we should select the preferred systems integrator.

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Invitation to SAP Systems Integrators to bid for your SAP implementation

So do we invite all big 4 consulting companies or all other major SAP implementation partners? The answer is NO. While evaluating the SAP packages to implement on your project, you must have worked with SAP to gather a list of customers that have successfully implemented SAP modules similar to the ones your company is planning to use. SAP inc (SAP America, SAP AG or your local SAP branch) must have assigned an account executive or client partner to work with your corporate executives through the entire sales cycle and also during implementation. Ask the AE or client partner to provide list of SAP implementation partners and few of their customers where they have implemented SAP solutions similar to yours. Make a few calls to these customers to validate that the implementation partner has successfully delivered your industry specific SAP system. This will help you shortlist a finite list of SAP systems integrators. For very large and complex global implementations, some companies choose to pick two or more system integrators with each one assigned a distinct part of your implementation. I would not suggest inviting more than four SAP implementation partners to bid for the project because the entire process will get unmanageable, time consuming, confusing and political. We also engage as Project Advisors acting as independent third party SAP experts working closely with SAP account executives and C-level executives through the systems integrator selection process and further on. If your project has an independent advisor, then this individual should work with SAP AE and client partner to review, and analyze the qualified SAP implementation partners that are best for your project. A presentation should be made to the CEO, CFO, CIO and other steering committee members on how the potential vendors were evaluated with recommendation list of vendors that should be chosen to bid for the project. Now you have a list of qualified SAP implementation partners. Before you formally invite the bids, your business needs to define business case, high level business requirements that covers all key business processes and systems integration needs. These high level requirements should be sent together along with RFP for systems integrators to review and respond with a proposal. You should also define whether the project will be implemented on time & materials basis or on a fixed fee engagement. What should the RFP or bid invitation document contain? Request for Proposal (RFP) should be as clear as possible to include your business transformation project scope, project constraints and expectations from the potential systems integrators. Some of the aspects to include in RFP are: Business case Scope of project (supplemented with high level requirements) Engagement model (fixed fee Vs time & materials) Project milestones and go-live date Expectations from project delivery executive, partners, solution architects and team leads (qualifications, experience and exclusions)

Review bids and proposals from each competing vendor

Each vendor (aka systems integrator) will typically prepare an executive proposal "RFP" document which will include the following: Overview of vendor credibility and track record Response to high level requirements and questionnaire Approach and methodology to transform your business to SAP Profiles of delivery executives, key SAP solution architects and SI team leads that will potentially be part of project if awarded contract Implementation methodology (custom, ASAP, Ascendant, EVD, ADM, etc) Project execution model (100% onsite or hybrid onsite with offshore component) Prior to this step your corporate CEO and CIO should meet and appoint project executive leadership which will be executive panel members that will collectively score each of the vendor and recommend a preferred vendor to the steering committee. Executive panels typically on some of my prior engagements include CIO, executive sponsor, business lead (Business/operations VP or Director), technology lead (IT VP or Director), project advisor (such as myself) and optionally the CFO. Each vendor should be invited onsite with its leadership executives to spend a day or two. The agenda should include executive presentation of proposal, follow-up sessions and Q&A sessions with executive panel.

Scoring the proposals and vendors

Every now and then you see the large implementation partners (systems integrators) come in with fancy presentation to impress the corporate C-level executives telling how big they are, share list of fortune companies that are their customers and decades of consulting experience some of their partners and executives possess. To me all this does not matter at all. If I were the CIO or CEO of a company, I would want a systems integrator that has implemented a SAP solution similar to our need and have successfully delivered the projects within budget and stipulated time. I would also want to see some of the key team members (like SAP solution architects, delivery lead and senior SAP team leads) that will be part of the project so that I gain confidence in the knowledge and experience of the team. These are some of the aspects you will see in this section when we discuss how to score the vendors. We will share some of the key criteria we use to score the systems integrators for an SAP implementation. We have 65 proprietary attributes that we use for system integrator scoring and evaluation that we use along with project specific custom attributes on the project we oversee most of which will not be discussed here.

Key systems integrator scoring and evaluation criteria

Here Specific SAP Packages refer to expertise with all SAP modules, industry solutions and tools that will be implemented on your project. Each of the evaluation factors discussed below carry a unique weightage that is set for each project working with our internal methodology and customer executive leadership. Attributes below that are identified as "C" is critical vendor evaluation criteria and each vendor must have a satisfactory score to be considered for the project. Those attributes flagged as "A" are important aspects and if these can be successfully evaluated could give a vendor added advantage over the others. All others discussed here important vendor evaluation criteria and should only be considered if the vendor has attained satisfactory score in all critical "C" criteria.

Industry Expertise with specific SAP packages [C]

Systems integrators should have expertise implementing almost all of the SAP modules and industry solution you are planning to use. For each of the SAP modules or IS, I would look for expertise with at least 5 projects for older SAP solutions (such as FI-CO, SD, MM, HR.etc) and expertise on at least 3 projects implementing newer SAP modules or industry solutions (such as IS-Retail, TRM - Tax & Revenue Management, Public Sector solutions, etc). The SAP modules that are critical to the project are weighted higher than the others. One other aspect I usually for is integrating related external applications that are common within a specific industry.

Experience & Skills of key SAP solution architects [C]

The most important role on any SAP project is played by the solution architects from the systems integrator that have in-depth knowledge and experience about the SAP modules being implemented. Below par solution architects and senior SAP consultants would mean inadequate expertise about standard SAP functionality hence resulting in poor blueprint and fit gap analysis. Lack of standard SAP knowledge may lead to higher RICEF objects as some functionality that is part of SAP or if there is a workaround may still show in RICEFW list as enhancement. It is very important that your project QA advisor interview all solution architects and senior SAP functional resources. Without this it is practically impossible to have a high quality SAP implementation. I usually give the experience and skill of solution architects a relatively higher weightage than the others.

Customer reference check (implemented specific packages or similar) [A]

It would be good to know the quality of footprints each of these vendors have left at their prior implementations within your specific industry. I strongly suggest that you do not call the reference customer that is provided by the customer as there is a possibility that feedback may be manipulated or the vendor only providing a reference where they did exceptionally well. Get a list of 4-5 customers from each vendor. Then select two or three from this list to start with performance verification. During each reference check ensure that you are talking to either a Chief Information Officer, executive sponsor or business operations executive who had directly overseen the SAP implementation. Do not pressurize the customer to provide any information that is confidential or they may be reluctant to share. Check for the following:

  • Delivery of the project and how it compared to the original budget and schedule?
  • Quality of resources on the project (especially delivery executive and solution architects)
  • Check if there were excessive change requests that were not directly related to scope or priority change
  • Risks and issues customers faced on the project. Systems integrator ability to address these issues.
  • Things that customer would do different if they were to implement the project again
  • Effectiveness of SI to work with SAP America or SAP AG to quickly resolve open items related to the SAP standard delivered functionality or related questions.

Outsourcing: Offshore technical skills and team capabilities for design and build phase

For more than a decade, outsourcing especially of design and technical development in SAP has become a common trend on almost all SAP implementations. I also see this as the best way to optimize the project budget as you get 5-8 offshore SAP skilled resources for the same price if you would spend on one onsite SAP consultant. Some US public sector SAP implementation are an exception to outsourcing for many right reasons as these are government organisations and they cannot just outsource their internal operations, intellectual data for confidentiality and privacy concerns.
Check the proposal and verify with each vendor on skills and experience on some of the key SAP resources. Ratio of onsite to offshore resources in each functional and technical work stream in SAP needs to be checked. Assess sample weekly progress reports and visibility to the output produced provided by the offshore leadership. Last but not least, determine the average rate per hour for these resources which will also allow you to negotiate with other vendors.

Cost of overall implementation up to go-live[C]

The most important and "deal make or break" factor is the overall implementation cost that is presented by each vendor in their proposal. Be assured that you will need to work with each vendor very closely with multiple follow-up cycles to end up with a well baked cost with break downs for each phase and individual component. Before you can compare the project costs from each vendor, ensure you have project costing for each project phase that include business team (SAP functional resources + SI business analysts), application team (SAP technical, legacy/external systems skilled SI tech resources), systems team (SAP BASIS, security, network admin and hardware maintenance), organizational change management team, training and PMO. The costs should also include hardware although at the end you may be working with one number to represent hardware costs across all vendors. If you have custom development in SAP, then ensure that each vendor cost include this in their proposals because some vendors may assume that custom development may be done by SAP and as such the costs may seem lower due to this excluded component.

Project implementation and delivery approach

It is very important for your executive panel to understand how your business will be transformed into SAP. Have each of the vendors deliver a detailed presentation on their implementation methodology and how exactly they are planning to deliver your specific project. Make sure this is not a standard off the shelf presentation but more customized session that takes into account your business uniqueness, organizational and project constraints. I would also look for PMO dashboards and sample reports to be shared in these sessions.

Understanding of high level scope and requirements

Early on as mentioned above, your executive panel sent out the RFP (Request for Proposal) with a list of high level requirements. Typically each vendor evaluate these high level requirements and come up with a analysis and high level approach on how each of these business requirements could be addressed within SAP during the blueprint phase. A formal demonstration of how these requirements fit in and around the standard delivered SAP solution should be done by the key SAP skilled senior resources or solution architects. Each systems integrator should clearly demonstrate their ability to understand the client business requirements and also share best practices in realizing these requirements in SAP based on their experience with prior customer implementations. I always expect each SI to come up with 2-3 sessions in which they give a walk thru of their demo SAP environment where they show some of the key features that can be utilized to meet the business needs.

Production support and maintenance capabilities

Every SAP projects upon go-live needs a very robust center of excellence that will support and maintain your production systems. Some companies decide to build their own in-house center of excellence and other chooses to continue a new production support contract with the systems integrator that implemented their SAP system. Rarely customers switch to a new SI to run and maintain their systems with the cost savings being the primary factor, Evaluating production support and maintenance capability of an SI should only be considered at this stage if your company plans to rely entirely on the systems integrator to support and maintain your production system. Check for the processes and tools each of the vendors use for handling production issues. Review a typical team composition that supports SAP and service level agreements (SLA) to resolve open tickets, An important aspect I look for is the process of transitioning the SAP system from active project implementation team over to the production support team. However I suggest no production support commitments should be made now and all these decisions should wait till early or middle of realization phase.

Vendor industry reputation and stability

SAP implementations take between 1-4 years from project planning to go-live depending on the size and number of phases of the project. As such any company implementing SAP should choose a SAP systems integrator that has a good reputation in the industry with excellent SAP systems delivery track. I suggest that you also verify that each of these vendors are financially sound and also stable as an organization to ensure that these factors will not impact your project over the projected duration. Most big 4 consulting companies should be OK but some "mid-size" and boutique consulting firms may be a thorough scrutiny.

Vendor project leadership expertise with SAP incl. project management and delivery

Large systems integrators often come with their senior executives who are excellent at selling with power sales pitch. Some even come with multiple partners and executives with each of these individuals mapped to each member of the executive panel with primary task of "satisfying" the decision makes. I personally do not pay any attention and politely try to ignore all these gimmicks. However, I like to meet with the actual delivery lead (AKA delivery partner) and the project manager (AKA PMO Lead) that will be part of the project if the vendor is awarded the same. Evaluate the delivery leads expertise in implementing; leading and delivering specific SAP solutions at prior customers. There are quite a few factors I look for to evaluate the delivery lead and project manager which will not be discussed here. But the main point here is to thoroughly evaluate credentials and experience of these two individuals.

Shortlisting the final two vendors

Next step in the process is for the members on customer executive panel to complete evaluation and scorecards for each of the vendors. This can be time consuming and you should leverage the expertise and guidance from a third party project advisor if you need assistance in understanding each of the evaluation criteria and related scoring. Once the scorecards are complete, the executive panel should meet and share the scores to determine the average scores in each of the categories. This should be a collaborative exercise and weightage could be re-adjusted if all team members agree that certain attributes should be given higher significance than the others. During this process the executive panel will conclude that 2-3 of these vendors are qualified and suitable to be the systems integrator for your project. Now you can begin with the negotiation cycles with these shortlisted vendors. I strongly recommend that you shortlist the vendors to 2 or maximum 3, otherwise the negotiation and finalization process will be confusing, political and ineffective.

Negotiations with the shortlisted finalists

In the past I have been on a few instances where executive panel (or decision makers) had a clear favorite amongst the competing systems integrators. But, I have wisely suggested that executive leadership shortlist minimum of two vendors as it will give you the negotiating powers. Each of these shortlisted vendors will compete against each other to give you the best possible price for your entire SAP implementation. This is a must-have approach that should be adopted by every customer planning to implement SAP. While comparing bid and negotiating make sure that you are comparing "apples to apples" across the vendor bids. If your company began on the route of project being "time and materials" based engagement then it is time now to ask the vendors for cost implications if your leadership would decide to change the project to be a "fixed fee" engagement. If scope of the project is clearly defined, then I highly recommend that you consider your project to be executed on a "fixed fee" basis phase by phase. Do not commit yourself contractually to a vendor for the entire lifecycle of the project. Negotiations should be done assuming that Statement of Work (SOWs) will be executed for each phase of the project prior to its commencement.

Recommendation of preferred systems integrator to the steering committee and finalization

Executive panel should put together a formal presentation that include vendor evaluation process, results and recommendations. Scorecard summary for each vendor and key scores should be shared with the project steering committee. Finally the executive panel should explain on how and why they selected a specific vendor to be the systems integrator of choice. Steering committee may recommend up some follow-up activities that may need additional clarifications with the vendors. Otherwise, it is likely that your company will proceed with the executive panel recommended vendor as the system integrator for the project. This is when your organization can work with your SI to draft SOW for project planning phase.

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