1. SAP Support Costs Am I Paying too Much?

2. Agenda  Company Background  SAP System Details & Support Model  Base Line Cost Assessment  Evaluate the Options  Redesigned Support Model  Service / Cost Comparisons  Performance Metrics  Other Tips

3. Company Background  Joint Venture Company  Primary Business: Oil Refining  1200 Employees + A Variable Number Contractors  236,000 barrels per day  Revenues = $1.0 billion (approximate)  Converted to SAP in 1999

4. SAP System Details  Release 4.6C IS-Oil  Operating System: IBM AIX (4.3.3)  Database: Oracle (8.1.7)  Hardware: IBM RS/6000  Number of Servers = 12  Production Data Base = 89 Gigabytes  Total Storage = 0.6 Terabytes

5. SAP System Details (cont.)  Modules: FI, CO, AM, MM, PM, PS, SD, HR  1 company code  3 Core Modifications  1670 Custom Programs (< 100 used)  28 Interfaces  800 Licensed Users  Peak Concurrent Users = 120

6. Support Model -History  1998 -Implementation Team Transition -Hardware / Software Acquisition -Outsourcing Agreement (BPM)  1999 - 2001 -Implementation Steering Team (Business) -Minimal In-house IS support staff -Application Support = 12.5 FTE’s (outsourced)

7. Support Model –History (cont.)  2002 -Upgrade from 3.1H to 4.6C -Application Support = 10 FTE’s (outsourced) -Some Production Support Transitioned to In- house Upgrade Team  2003 “Transition Year” -Business Process Leads -In-house Support Team -New Outsourcing Agreement

8. Baseline Support Costs

9. Observations  Application Costs Not Adjusted for Current SAP Market Conditions  Technical Landscape Outdated; High Maintenance Effort  Minimal Knowledge Transfer Occurring  Few Process Improvement Initiatives  SAP Strategy Not Well Defined  Metrics tracked were of minimal value

10. Baseline Support Costs Observations (cont.)  Support work processes not well defined  Users interacting directly with 3 rd tier support staff

11. Evaluate the Options  Attempt to Re-negotiate with Current Outsourcing Vendor  Initiate “Request For Proposals” Process  Redefine In-house Staffing – How Big?  Move to a “Fully Hosted Solution”  Change Management – Gauge what the Business Will Accept?

12. Redesigned Support Model  Attempt to Re-negotiate with Current Outsourcing Vendor  Initiate “Request For Proposals” Process  Redefine In-house Staffing – How Big?  Move to a “Fully Hosted Solution”  Change Management – Gauge what the Business Will Accept?

13. Redesigned Support Model End Users Information Systems Dept. Process Owners & Process Leads SAP Team 3 rd Party Outsourcer(s) Operations SAP Support Level Service Level Agreement Low High TechnicalFunctional Maintenance Agreement Power Users Service Level Agreement(s)

14. Service / Cost Comparison  AIX/Oracle or Win2000/SQL?  Fixed Price For Base Maintenance and Support “All Inclusive”  Enhancements on a Time & Material Basis  Quality of Service Expected to Improve  In-house Staff Focused on Improving ROI and Alignment With Business Initiatives  42% Reduction in Annual Support Cost

15. Baseline Support Costs

16. Performance Metrics Bug Fixes DescriptionMetricResolution Time Critical100%Within 24 hours (clock time) High97%Within 2 business days Medium90%Within 5 business days Low90%Within 7 business days

17. Performance Metrics (cont.) Availability Production = 99.25 % Non-Production = 97% Response Time (User Dialog) 95.0% within 1 Second 97.5% within 2 Seconds Critical Business Transactions Set User Expectations Work toward continuous improvements

18. Tips  Evaluate operating system options (AIX vs Win2000)  Be selective on 3 rd Party Software  Assess impact of custom development  Define “Steady State” services and RFP for lowest cost  Shop for best resource(s) to do enhancement work and apply project management principles  Lowest cost per hour does not always translate into lowest total cost

19. Tips (cont.)  In-house staff are best positioned to drive process improvement efforts but may need a jump start from an outside consultant  Establish Cost Indicators in order to evaluate efficiencies (i.e. Cost Per Concurrent User)  Select an outsourcing vendor who has a good relationship with SAP  Conduct operations and efficiency audits  Frequently assess business needs

20. Thank you for attending! Please remember to complete and return your evaluation form following this session. Session Code: 2811