Reference no: EM133540746

Case: Versum Materials is an electronic materials company supplying premier specialty gases and products to the semiconductor industry's chip manufacturing process. It merged with Merck in late 2019, is headquartered in Billerica, Massachusetts, and operates a network of offices, manufacturing sites, and research and development (R&D) centers in Asia, Europe, and North America. In October 2016, Versum was divested from its parent company, Air Products, and transitioned from a $10 billion industrial gas and chemical company that predominantly sold large volumes of inexpensive products, such as cylinders of pure oxygen, nitrogen, hydrogen, and helium, to an independent $1 billion company selling highly regulated gases and chemicals for semiconductor manufacturing. 

After separating from Air Products, Versum continued to rely on its former parent company's information systems under a transition service agreement (TSA). This was only an interim solution, however, since Versum really needed its own IT infrastructure and enterprise system to support its new business model and plans for growth. The company was given a very ambitious deadline of 18-24 months to get off the TSA and have its own systems in place. 

When determining what ERP system to put in place, Versum Materials had a few options. The first was to copy Air Products' existing 20+-year-old SAP ERP system. The second was to bring the same customizations and functionality to a new SAP ERP system, and the third was to start completely from scratch with all-new servers, software, and processes. Versum selected the third option because that option provided an opportunity to wipe the slate clean and implement processes that worked for its specific business. 

The legacy ERP system had been heavily customized with various upgrades over the years, and most of those customizations were for the parent company's industrial gas division, which had very different information requirements than the new Versum. Versum Materials management didn't want to continue using that system when it was not really suited for the business. 

To find the new replacement system, Versum Materials looked at different ERP providers and products. Management ultimately elected to stick with SAP software because it had all the capabilities to satisfy the industry's legal and regulatory requirements and because it appeared to be the quickest and easiest to implement in a short timeframe.

 

If Versum had tried to put in a totally new, non-SAP ERP system, employees and IT staff would have had to learn an entirely new, unfamiliar system, which could not be easily accomplished in short order. The training and the issues with people's understanding and knowledge of a new software package would have dramatically impacted the business. 

Versum Materials instead decided to make SAP S/4HANA the foundation of its new system. S/4HANA is an integrated ERP system that runs on SAP's in-memory database, SAP HANA (see Chapter 6). Instead of running the new SAP ERP system in a data center of its own, Versum Materials opted to implement the system in a private cloud, with a hosting provider that would manage the cloud SAP S/4HANA platform running in its own physical data center. This saved the company from making a large up-front capital investment in the new system and the responsibility for managing the system. 

Versum implemented its SAP S/4HANA system by taking advantage of SAP and industry best practices embedded in the software and creating consistent processes across its business units. The typical SAP implementation is rolled out in phases, often country by country, for global enterprises. Companies with global supply chains where materials or products are manufactured or shipped from one country to another must convert their supply chain data from the old system to the new system quickly and cleanly to keep products flowing. Versum Materials has a global supply chain spanning more than 10 countries, so a phased rollout would have required putting temporary interfaces in place to feed data from the previous system to the new system to enable the new system to go live country by country. Versum's transition services agreement (TSA) did not allow enough time for that option, so the new ERP system had to go live everywhere all at once. 

A "big bang" system rollout was also advantageous because it forced Versum to keep the system simple, thus having fewer problems to address. Dragging the program out and rolling out Taiwan one month and Korea the next, for example, would have taken much longer and been much more complicated, notes Sally Giamalis, SAP Program Director of Versum Materials. Versum had anticipated that the new system would initially have problems taking orders, creating purchase orders, or shipping products to customers. However, by working with Accenture consultants, Versum found that the implementation went smoothly and with minimal disruption to its business. 

When Versum went live with SAP S/4HANA, it also rolled out other SAP solutions, including modules for SAP Business Warehouse optimized for SAP HANA, SAP Business Planning and Consolidation, SAP Global Trade Services, the SAP Advanced Planning and Optimization component of SAP Supply Chain Management, SAP Solution Manager, SAP Process Integration, SAP Data Services, and SAP governance, risk, and compliance (GRC), as well as some non-SAP applications. The entire implementation took just 15 months. During the course of implementing the new system, Versum did, however, run up against some challenges, especially with converting the data from the old system. For example, Versum had to go through three cycles of data cleansing to obtain sufficiently accurate invoicing, address, and contact information. In addition, the data structure in the old SAP ERP system was not the same as that for the new SAP S/4HANA system, which had a new hierarchical Business Partner structure. In the old SAP ERP system, the Customer structure (ship to, bill to, contact, and vendor) consisted of many different data objects. In the new SAP S/4HAHA structure, all those different data objects are part of a new object called Business Partner. In the old structure, a customer and the vendor could be the same thing even though they were two different entities. In the new structure, if the company sells to a customer but also buys from that customer, that customer has a single Business Partner record. 

The new SAP S/4HANA system makes it easier for Versum to optimize operations, manage costs, and take advantage of real-time analytics. The company now has a solid foundation for operating as a standalone company providing specialty materials. 

Questions:

Based on your knowledge of Antoher Organization that has embarked on a digital transformation effort:

1. What were some of the issues that were faced by that organization?

2. What technologies were implemented?

3. How did these technologies resolve the issues?

4. Were they successful? What remains to be done?