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Essay: Challenges corporations are facing within the Chinese market

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China is no longer an unknown country to the world. On one hand it is developing very fast and offering numerous opportunities; on the other hand does the ever-changing market mainly due to the economic reforms confront corporations with new and complex tasks demanding adaptations at system and data level.
The framework of this thesis is to analyze what types of challenges those corporations are facing within the Chinese market in order to meet existing and future market requirements. In a next step the thesis will focus on SAP’s System Landscape Optimization Services and the SAP Landscape Transformation Management platform (SAP LT) offering insights on all transformation capabilities and how this technology can help the customers to mirror their business requirements to system level. The big transformation project at the Chinese customer Dongfeng Motor Co. Ltd. will illustrate how the SAP Landscape Transformation Software can help customers in realizing the required business changes and apply them to the company’s existing system landscape,.
Dongfeng Motor Co. Ltd. one of the biggest joint venture companies in the Chinese automotive industry is pursuing to realize its growth strategy with the goal of becoming the leading automotive enterprise in the global market. To achieve the first step in creating a streamlined, well-structured and standardized system landscape the corporation approached the System landscape Optimization (SLO) group of experts to master the required company code transfer, a SAP ERP system upgrade and a Unicode conversion. The SAP System Landscape Optimization team accepted this challenging undertaking operating on the basis of the SAP LT platform and successfully went live with an up-to-date system landscape ready to handle more innovation driven projects.
Keywords: Enterprise Resource Planning (ERP), Landscape Transformation (LT), SAP, System Landscape Optimization (SLO)
As a developing country, China’s unparalleled growth is an economic marvel with its transition from agricultural and rural economy to internationally competitive market player. With an annual growth rate of 7.4% on average, the burgeoning Chinese economy is already the largest economy, according to International Monetary Fund (IMF). A comparison of Chinese GDP and purchasing-power with the rest of the world shows that China became the top economy of the whole world in the fourth quarter of 2014.
In the next 5 years, the growth of the Chinese economy will be expected to reach b around 7.5%. After ‘China’s new blueprint for reforms s, (J.M., 2013) in many ways, the market has become more transparent, attracting foreign companies to enter the Chinese market and investing in market research to open businesses in China. From the year of 2006 to 2010, Chinese government issued the 11th Five-year plan. Plus the 12th Five-year plan for the year of 2011 to 2015, promoting the local demand of Chinese customers, reducing the disparities of the social income, controlling the pollution, and other topics. Gradual structural adjustments will support the economic growth, providing a very stable environment to each industry. (Congressional Research Service, 2014)
Effect of population on the growth of economy
China mainland has the largest population compared to all the other countries, with the population of 1.4 billion, which equals 20% of the population in the entire world. More than 90 Chinese cities have a population exceeding 1 million inhabitants. The statistic results show that the population of the capital -Beijing and the financial center of mainland- Shanghai; will be is larger than 20 million by the end of 2012 and already reached 21, 2 Mio for Beijing and 24,2 Mio for Shanghai end of 2013 (www. Wikipedia ‘ Beijing/ Shanghai) Even government driven regulation such as the introduction of the ‘One child policy’ were not able to fully control the ‘baby boom’ in China. (World Population Review, 2014)
The ‘One child policy’ managed to decrease the overall growth rate and helped that the average child rate per woman dropped from 4 to 1. However the decrease of cheap labor has also a negative side effect since the need for low-cost labor in low value-added industries increased. As a result of China??s fading competitive advantage in labor, the country faces a gloomy outlook if the structure of its economy does not transform to a high value-added industry structure. The lack of young people will be detrimental to the Chinese labor market and will have an enormous impact upon the economy as a whole in the future. It goes hand in hand with the rising proportion of retired persons, which will not only greatly impact the labor market and slow down the growth of Chinese economy but will also have an impact on government expenditure for pension funds. Especially in rural areas China families usually have 2 to 4 children and therefore the accurate Chinese population may even be larger. (World Population Review, 2014)
The graphs below show the Chinese population pyramids for both years 2010 and 2050. In the first picture showing the year 2010, the biggest group of people in China range around 20 to 50 years. In the 2nd picture, the situation dramatically changed, which means the number of people between the age of 20 to 50 has decreased and the age group of 60 years and older dramatically increased. Another problem arises the number of young and skillful workers can no longer meet the demands of a growing economy. Take Guangdong province as an example, the shortage of workers is already more than half a million even in 2006. Based on the report of China??s National Bureau of Statistics, the population fit for working was 937,300,300 by the end of January in 2013. This has decreased by more than 3,500,000 than that of January 2012. (Sirkin, 2013) In the southeastern provinces nearly 30% of factories suffer from a shortage of workers, which affects the production.
Figure 1 Chinese Population Pyramids in years of 2010 & 2050
The dramatic changes in the structure of the Chinese population and the booming industry also affect technology., Nowadays technological innovation offers numerous advantages, such as higher profit, higher production, a faster access to information, increasing convenience of communication, simplify and speed up our daily work, and a modern life with a better quality. (Gordon, 2011)
Meanwhile the shortage of population mentioned above can be eased by encouraging the practical higher education focusing on practical working skills, instead of academic theories. Expert knowledge and technological affinity can help close the gap regarding the shortage of high skilled workers.
However this can be changed or solved, as long as China is able to upgrade the Chinese economy model. Currently most of exports still belong to labor-intensive products, e.g. assembly of products, productions of clothes. But the industries are changing and the demand for high-tech manufacturing, e.g. computer chips or software, would balance the situation is rapidly increasing. Among the world??s high-technology manufacturing China has taken 24% in 2012 with a growing R&D speed of 18% per year. (Wertime, 2014)
As we can see from the picture above, the share was only 6.5% in 2000. (Source: HSBC). There are many Chinese high-tech companies, such as Huawei, Tencent, Baidu, Alibaba, Lenovo, CRH, and so on. The high-tech export of China??s comprises computers, vehicle parts, high-tech lamps and optical-surgical equipment, and so on. (Frangos, 2013)
In order to achieve a high value added market the quality level of products ‘Made in China’ needs to improve. This requires that especially, innovation and R&D as well as investing in marketing and services, has to be upgraded to meet international standards. Quality improvement of Chinese brands is a major issue and has to be tackled within the next 10 years. When foreign companies and Chinese companies work with Chinese producers, they tend to blindly reduce the production cost, instead of thinking about the quality of products or the reputation of brands. However when the cost of a certain kind of product is too low, the quality will never be good. High cost leads to high quality, while middle price brings acceptable quality, and lowest cost gives worst quality. This needs Chinese government to issue very strict regulations to improve the situation.
Shifting from assembling imported spare parts of overseas companies to producing Chinese value added brands one of the great challenges China is facing. To achieve this goal, China requires a very strong R&D ability. Being aware of this Chinese government spends an increasing amount of expenditure on R&D in order to catch up with developed countries.
Among the largest Chinese companies, 100 companies are listed in the Fortune Global 500 (published in 07.2014). According to the Fortune 500 List only two Chinese companies were publicly recognized 18 years ago. Today 95 out of 100 companies are located in China mainland. (Fortune Global 500 2014, 2014) Only in Shanghai there are more than 1,000 MNCs (multinational corporations) doing their business.
On the other hand, among the Fortune 500 companies approximately 490 companies are running business in China. Even though China is an attractive market with a stable business environment, offering numerous resources and a huge market, all players have to fight for market share in such a competing environment.
How to stabilize the companies?? economic positions – M& A’s, international joint ventures, restructurings
In order to extend market shares and increase growth in such a competitive environment, companies are seeking various ways of reaching this goal. Therefore M&A scenarios (mergers and acquisitions) or divestments as well as organizational structure changes are becoming more and more common. These business activities require adaptations inside the companies calling for the re-assignment of resources, organizations and system Landscape set-up.
Impact of economic globalization on Chinese companies
The globalization is fostering international business cooperation and free trade. Many countries or regions have established free trade agreements with other countries, such as World Trade Organization, ASEAN-China Free Trade Area and European Union with less barrier of trade. Boundaries of states have been dramatically reduced in the past 20 years. In particular the fast development of transportation and information technologies has tremendously increased this process.
The globalization brings opportunities and challenges at the same time. Globalization allows companies to explore new markets gain access to more buyers, increase profits and win more market share. Suddenly local markets and existing brands have to compete with internationally operating firms. Only maintaining local markets is not profitable for companies to survive nowadays. To expand foreign markets cannot only increase market share and profit, but also can gain an advantage in life cycles of companies??, especially for manufacturing companies. With the globalization they can better manager their products according to needs of different markets??, and also avoid products fading from local markets. Another benefit of selling on an international level is that different nationalities have different product preferences; therefore sometimes products are successful in some local markets and might fail in others. When one product becomes not as popular as before, it can be introduced to another market, since consumers may like due to different cultures and environments. Even the costs of production, raw material, transportation, controlling, marketing and services can be reduced. Meanwhile companies will be able to get professional employee with required knowledge and experience from any country, also maybe with lower costs. When it comes to tax, companies can arrange their business based on the differences between tax rates of countries.
Meanwhile since the global economic enables foreign companies to come to local markets, many competitors have entered. Thus a huge pressure was brought to local markets. Many foreign companies carry more advanced technologies, better products and services. Even though prices of foreign products may be higher than local Chinese companies, still consumers will prefer their products as long as they are affordable.
What the global economy needs & the significance of system related
In order to adapt to today??s competitive business environment, and to meet globalization requirements most companies need change their existing business set up to survive in international markets. Most companies which operate on a local level are forced to apply major changes to the company??s current structure. This fundamental change may necessitate changes in the existing product portfolio affecting, e.g. human resources, raw material and production sites.
Once a corporation wants to move from local to global operations many regulations and international standards need to be met. Legal, tax related and environmental standards need to be introduced on organizational and system level. On system level new calculation methods or International Financial Reporting Standards have to be implemented to enable business operations spanning the globe. Moreover special support centers need to be installed to guarantee full control and the smooth handling of all system related issues e.g. system outage, production failure, material shortages, delivery stops etc. At the same time a huge worldwide distribution network also needs to be settled. (SAP SE TechED, 2011)
The graph below shown outlines the main transformation scenarios relevant to most international cooperation. Data integration, process harmonization, structural reorganization, consolidation and M&A’s will have a serious impact on the overall system set up of companies. The required changes to the existing system landscapes will result in a great demand for transformation software and services.
It simplification and innovation paired with future growth are the main drivers to engage in and realize such large transformation projects including the implementation of new hardware and/or new software.
But at the same time it is essential for companies to mitigate the overall risk of large transformation projects. Different topics need to be looked at – data quality, data consistency, cost control and operations. Above all the total cost of any transformation project will be the first and almost the most important topic to talk about, since no company would be willing to spend too much more money. So every customer will try everything to keep the total cost under control. After years of running a company will have a large amount of data history, which should not be transferred with any mistake or lost partially during a project. After all the aim of a transformation should better the business operation and make it smoother and more efficient.
The Chinese socialist market economy is the second largest economy by nominal size and the world’s largest economy by purchasing power. Within the past years it became the world’s fastest growing major economy with growth rates averaging 10 %. The ever changing market makes it incredibly hard for companies to adapt to the ever-changing conditions of the Chinese business environment. For each business operating in China, many obstacles have to be overcome to adapt to such rapid fluctuations of the market. For companies with large, growing volumes of data, these obstacles pose an even greater challenge.
In order to make sure inputting and outputting Chinese from any script, foreign companies in China need to convert the Unicode. The process to change the language of the system is called ‘convert the Unicode’. (Oracle, 2013) Meanwhile this ‘Convert the Unicode’ task can be very complicated. It needs professional expertise to perform in order to guarantee the data quality. The Unicode can guarantee an efficient text processing in Chinese, and maintain the text data integrity, which can lower the operation cost. (SAP SE, 2006)
Accounting standards
Each country has its own accounting standards, policies and laws to regulate the local market according to its own economy and market. For example, in the USA there is GAAP, in Europe there is IFRS and in China there is China GAAP (also called New PRC GAAP issued in 2006 and over 90% similar with IFRS). Even though the China GAAP is almost the same with IFRS and US GAAP, but there are still some differences. In China multinational companies are running business both inside and outside of China, no matter they are Chinese companies or foreign companies. The accounting standard in every country has to be obeyed at the system level.
This may involve formats of forms or reports, names of items, the way to generate every item on balance sheets, and so on. It differs from country to country. To implement all of these will require a large number of professional experts, the latest technology and proven expertise.
If accounting standards are not fully fulfilled, the company will face a punishment from the local government, and it will be a huge loss. (Oracle, 2013)
International trade is happening every second everywhere. Together there comes a common need which is to exchange different currencies in order to purchase or sell goods. Manufactures, financial institutions, and other companies have a large demand of converting currencies in the enterprise systems so that they can better manage business to reduce the tax and the total cost. As a result converting must be realized in all aspects of ERP systems at the same time without any mistake or risk, since even a little mistake can cause the data inaccurate.
However companies usually do not have this expertise to get the conversion done with a minimum downtime and zero risk. Meanwhile the business cannot be interrupted during the project.
Buy, sell, M&A, restructure
To proceed a restructuration, such as purchasing, selling or M&A in business activities, IT plays an essential role in this in order to adapt the system landscapes. To rearrange the business structure of an enterprise, company codes, plants, accounting and sales data have to be redefined or rearranged in the systems. At the IT system level, transformation needs to be performed.
Or else there will be a conflict in the system, which will drag down the efficiency of the operation of business and increase the total cost of the company. In some worse case this malfunction may cause a failure to the business operation of the company. The success depends on whether a company is able to fulfill the necessary business needs and realize the transformation or integration fast and accurately.
First implementation of ERP system
SAP entered into China in 1990s, for many enterprises in China, especially local Chinese companies or SMEs, it might be the first time for them to implement an SAP ERP system. This means the data before using ERP system is still in the form of Excel sheets, which create a big trouble of collecting, storing, maintaining and aligning with the new data of ERP system. However the old data must be kept accurate, even though sometimes it may not be always 100% right. On the other hand the wrong data may affect other existing data history. (Hartung Consult, 2014)
Meanwhile the Chinese business structure which is rooted in Chinese culture is different from the western one, the same as other Asian countries. However the major ERP brands including SAP ERP were developed in western countries, with the western logic, business processes and culture. This problem may cause trouble in the first implementation of the ERP system, since without the support of the top management there is no way that the ERP system could be successfully implemented for the customer side.
Statutory requirements
Not only differences of accounting standards have to be reflected in the system, other legal requirements and local standards also need to be paid attention on.
A large number of Chinese business practices differ dramatically from international ones especially in the processes of international trades, e.g. problems of getting VAT back from tax authorities and goods in bonded warehouses. (Hartung Consult, 2014)
Nowadays Chinese government is trying to release more policies to open the market and create an environment which is more transparent for companies. New changes and adjustments will come after all of the changes and reform in China.
Unstable IT departments
Internal IT departments for most of companies are not so stable, and as a result this may time to time break the knowledge and experience connecting generations of employees. For example, 6 years after an ERP system was implemented, the customer approaches SAP for a landscape transformation, but at that time those people who set up the process in the very beginning have already quitted the company and started to work in other companies. Plus the relevant document files are not well created even in the very beginning due to the reason that sometimes systems were installed by third parties. Third parties do not file documents as carefully as SAP professional teams. New employees in the company basically have no knowledge of how business processes were arranged in the very beginning. Thus it will cause more trouble to transformation projects and delay projects.
Although this happens also in other countries, it is more common in China. Because compared to competitors of SAP SLO in China, the SLO team??s services cost much more. So many companies prefer to invite third parties to perform transformation projects instead of SAP SLO team. However those third party companies are not as professional or standard as the SAP SLO team, even though their prices are much lower. When there is a need for those companies to rearrange their ERP systems or some transformation project, they will need a long time to find the necessary files.
1.3 How do Chinese companies cope with changing market requirements and align their system landscapes
Unlike Western countries China is experiencing a dramatic and unpredictable transformation in the way of becoming globalized, which will ask for the support from the implementation of IT technology and software, and also lead to a great demand of applications of enterprise resource systems and landscape transformation.
With the growth of the global economy and enterprises business is becoming increasingly complex and constantly changing. To keep up with these ever-changing business requirements businesses need to invest in IT to cope with the rising complexity. Therefore standardization and simplification of processes and structures have to apply. In order to increase scalability, Technological innovation needs to be introduced.
With the sheer size and growth rate of the ever-changing Chinese market, the challenges of mergers & acquisitions, joint ventures and divestments are commonplace. To fully meet these business challenges customers often need to find the right, appropriate solution to tackle the required changes on system-level. The process of business transformation is not only challenging but can also determine the outcome of the synergies and decide the failure or success of the integration process. The question arises: how can companies in the Chinese market adapt and overcome these challenges within an ever changing market while increasing growth and scalability, also with minimum total cost of ownership (TCO) and higher level of uptime.
Adapting to the IT landscape is inherent to businesses as processes like SAP Enterprise Resource Planning (ERP) among other IT infrastructures have the capacity to shape and influence global strategies of Chinese corporations. The key to turn these challenges into opportunities is the SAP SLO group and the SLO technology. With the proven professional expertise and the latest transformation technology, the customer??s system can be adapted and aligned with a minimum downtime and total cost without any technical or financial risk. All of the business requirements are able to be fulfilled.
Due to the large demand in China, the Chinese market is very attractive to IT companies, such as SAP, Oracle, Sage Group, Infor, Microsoft, and so on. On one hand comparing to EMEA and MEE markets, Chinese market is not as profitable as them yet, it is catching up at a very high speed. On the other hand earlier in China applications of enterprise resource systems were not so common as EMEA or MEE markets, nowadays many companies have already set up enterprise resource systems, and other companies are on their way to plan or purchase. At the same time this will also cause an increasing need of system landscape transformation solutions.
In this area SAP’s System Landscape Optimization (SLO) is working with various Chinese companies to help in the transformation process. In this thesis I would like to highlight solutions that SAP SLO provides to companies to help adapt to the business environment. Meanwhile to check out whether China is a potential market and how valuable it is for SAP is also a goal of the thesis. Moreover in order to meet enterprises’ specific needs and gain more market share what strategies can SLO make? In this thesis I will also have the opportunity to showcase an example of one of the largest automotive producers in the world which was able to reduce the IT overhead and also consolidate their IT system with a greater degree of standardization; in turn reducing its IT TCO and downtime.
Founded in 1972 by only five former IBM employees, now SAP has already developed into the largest giant in the field of enterprise system solutions of the whole world, and the 3rd biggest software manufacturer. In 2014 SAP AG transitioned to SAP SE (Societas Europaea, SE), which means it is a European multinational software enterprise. In 188 countries, SAP SE provides software and solutions for more than 260 thousand customers, of which most are SMEs. Every year according to the global standard ‘ IFRS, it has a revenue around 17 billion US dollars. (SAP at a glance, 2014)
As an enterprise system provider, SAP SE is always leading the market with the help of 14 development centers all around the world, especially in the areas of applications, analytics and mobility solutions. To help customers run their business simple is the top priority of SAP.
The picture below offers a 360?? overview on all of the products offered by SAP SE. ( http://go.sap.com/solution.html )
SAP Services and Support
The picture below shows the structure of SAP Services and Support. Among services of Data & Technology Services, the System Landscape Optimization Services will be introduced in this thesis in detail. The SAP Services and Support are an efficient support to SAP products and enterprises. A full range of support services from the basic level to strategic movements are offered by SAP.
The support & maintenance offerings available at SAP include SAP MaxAttention, SAP ActiveEmbedded, SAP Enterprise Support, SAP Standard Support, Solution Manager and SAP Customer Connection Program. (SAP SE, 2014)
SAP SE entered the Chinese market in the early 1990s. However since 2008 not only SAP, but also other international IT giants, such as IBM and Oracle, started to concentrate on China and set China as the biggest major target.
SAP has been vigorously expanding its market share in the Chinese market since 2008. Many large Chinese companies have already become customers of SAP??s, such as Lenovo ””, Zhejiang Electric Power Corporation””’-””””, Handan Iron and Steel Group ”””, Huawei ””, and so on. During the last three quarters of 2012 the number of SMEs users doubled, even though the costs of labor are climbing and customers’ requirements are changing constantly. (Channel, 2013) Meanwhile nearly 80% of SAP??s customers are SMEs.
SMES focus on business transformation
According to the research ‘ development of SME & IT held by SAP SE and Oxford Economics, which included 2100 SMEs in 21 countries, In front of challenges most of Chinese SMEs will take the business transformation as the key strategy. Compared with SMEs in other countries, Chinese SMEs tend to explore new markets actively, and implement technology to accelerate innovation, reduce costs and improve efficiency. (Channel, 2013)
– Concentrate on business transformation: 79% of the companies which have been interviewed are processing or planning for major business transformations. And 47% of them consider the transformation as the key to exploit new markets.
– SMEs are preparing for ‘Going out’: Although 13% of companies have no income from foreign markets, but in the coming three years this percentage will decrease to 2%. 21% to 40% of the income of 44% of companies comes from foreign markets, which increased for 83%. This speed is more than twice as much as the average global level, which is only 36%. (Channel, 2013)
The core business for SAP to develop SMEs business is the partnership. Till now SAP has become an important strategic partner of more than 200 SMEs. These companies integrate their equipment and applications into SAP software and use new SAP technology, e.g., the Cloud Computing. In March, 2013 the first ‘SAP Partner Innovation Center’ was founded in China, which shows the determination of SAP’s to the Chinese SMEs market. SAP China Lab provides the technology of application software to this center, and integrates the global technical support to help partners with researches of projects. This can perfect the whole line from contracting, innovation to introducing products to markets.
At the same time, until last year SAP has already signed contracts with 15 distributors. As the platform of SMEs, SAP has hold SAP Forums in more than 12 cities in China, with topics such as Mobile, Big Data, E-commerce in the future and Cloud, and so on. Many SMEs in China have attended these forums. (Channel, 2013)
2.2 SAP Enterprise Resource Planning
Enterprise Resource Planning system or ERP system for short is an enterprise wide information system to master and integrate all of the resources, processes and data of companies, in order to achieve the goal of reducing total cost, increasing the efficiency and enhancing the management.
Figure 9 Sample SAP ERP interface
The picture above is the interface of SAP ERP, which is very simple to use, and user-friendly. ERP systems are also able to master reporting tasks in many fields, such as financial reporting and accounting reporting, and so on. With the help of this function, there is no need for every company to spend many hours on generating reports manually with Excel sheets any more. Moreover the data access is more direct and the data itself is more transparent and real time, which can support managers to make decisions comprehensively based on all of the resources available in the whole company.
For various companies SAP ERP has different solutions:
As shown in the picture below, for different sizes of companies, SAP ERP has specific solutions for each company accordingly.
SAP Business One ‘ SAP Business One is designed specifically for start-up companies, which aim to set up their end-to-end business professionally and efficiently in order to gain more opportunities and profits. When the accounting system of a company is over loaded, and the company needs a professional and multifunctional software platform for the operation, SAP Business One can be a good choice for companies of every industry. When it comes to the price, this is an entry-level ERP of SAP’s ERP system, so SAP Business One is an affordable and sufficient product for start-up companies. (SAP SE, 2014)
SAP Business ByDesign ‘ SAP Business ByDesign fits for companies in the industries like technology companies, automotive companies, manufacturing companies and so on, which are experiencing a very high growth. These customers are usually small or middle size companies, and want to better control their IT system and data volume. This group of customers has a need to upgrade the business process, from the one with complicated manual works and spreadsheets to an integrated system functioning automatically. (SAP SE, 2014)
SAP Business All-In-One ‘ For companies of middle size and growing very fast, SAP Business All-In-One enables companies to manage outgrown current point solutions and legacy systems. It can be applied for companies in every industry. Meanwhile it has got deepest industry-specific functionality. (SAP SE, 2014)
Based on company code the information of one client can be divided according to different controlling areas. Organizational units exit in companies, such as customer service, production, and so on, which contain levels of positions. Among sales organization, there can be many cities or even countries. When it comes to the production, one company may have plants and storage locations a number of locations. Including sometimes large amount of Master Data in clients ‘systems, it is extremely complicated to be handled.
2.3 System Landscape Transformation & Optimization
Numerous external influences and also internal causes can lead to the result of regular and constant transformation needs for all of the companies. To realize a more clear, effective, and low-cost operating environment, it is becoming increasingly challenging for enterprises nowadays. Companies must be able to adjust themselves and adapt to the new structure of their system landscapes as fast as possible. (Marc O. Sch??fer, 2012)
This situation becomes more complex when companies try to merge or acquire another company where the IT system, ERP process and the business landscape is completely different from their own. The process of harmonization and scalability is a challenging IT transformation project which often runs over budget or suffers from changes in the project scope and most importantly the delay in the implementation of the project.
The System Landscape Optimization department of SAP provides necessary technology, professional and effective transformation solutions and services to companies to tackle the challenges.
2.3.1 SAP Landscape Transformation (SAP LT)
A large number of enterprises have been using various system landscapes which may include various SAP systems or software of SAP Business Suite, e.g., SAP ERP, SAP Customer Relationship Management (CRM), and software for SAP Supplier Relationship Management (SAP SRM), as well as SAP Business Intelligence (BI) and industry solutions. (Marc O. Sch??fer, 2012) Eventually complicated problems will arise, such as:
– Different types of system landscapes of SAP and other brands
– The released editions of systems and software do not match or corporate with each other.
– The businesses processes may not be working as a whole, due to structures do not belong to the same one. (Marc O. Sch??fer, 2012)
– The master data will be heavily affected, and it may become redundant
In order to fulfill expectations and demand of ever-changing markets, SAP System Landscape Optimization team provides SAP LT software to support companies to successfully manage the challenges and be competitive. As an IT business process management solution provider with greater focus on delivering reliable and accurate data solutions, SAP SLO is able to take on the challenge of the business transformation. The professional solutions and system expertise that SAP SLO offers include services like aligning the organizational structure and reducing IT organizational overhead. Both of these have been proved extremely effective and efficient and are emerging as preferred solutions by many Chinese companies.
The SAP Landscape Transformation (SAP LT) software helps companies to solve the following cases:
– Master projects of M&A and sell / divest at the system level.
– Help realize projects of reorganizations.
– To smooth business processes for customers, and make sure it is the most efficient and simplified.
– Via system consolidation and data centralization, minimize the TCO.
– Unify and coordinate the whole master data, transaction data and document flow. (Marc O. Sch??fer, 2012)
2.3.2 SAP Landscape Transformation solutions
Figure 10 Functionality in SAP Landscape Transformation Release 2.0
(SAP Landscape Transformation, 2014)
The SAP Landscape Transformation solutions can be divided into several categories: Leverage sell, buy, and restructure; unify and transform data; Consolidate and reduce IT costs. The following is the brief introduction of some common solutions provided by the SAP System Landscape Optimization group based on the SAP Landscape Transformation technology.
Buy, sell, and restructure
– Company Code Carve-out:
The moment one company take one part or parts of its company codes into another independent company, this mother-company needs to divide the relevant company code from the mother company according to laws.
Figure 11 Company Code Carve-out
– Company Code Merge:
Especially when a M&A business activity happens, the two original separate systems and
– Plant-merge service / Plant-reallocation service:
Due to restructuring purposes companies tend to merge plants or divide plants in the system in order to better control and operate their business.
– SAP SLO can implement different transformation services at the same time according to the requirements of customers.
Harmonize & Unify data
Business activities of one company, large amount of data and operations of different departments will cause inconsistent problems to this company. This is the reason why a clear and streamlined business process is so necessary for a company. SAP SLO team is able to align all of the data of finance, controlling, logistics and operations.
Convert currencies: for a huge multinational company, it needs to align all the assets in different currencies. SAP SLO converts currencies of the master data and the system without any technical risk.
Align Financial and Controlling Data
(SLO, 2014)
Multinational companies have business in different countries, and then they have to face various tax laws and regulations, such as GAAP and IFRS. Meanwhile the accounting and financial records are required to be transparent. These regulations have to be applied in all of the systems and processes of this company in each country. SLO group supports customers align and unify data based on SAP technology.
Optimizing Logistics and Operations (SLO, 2014)
The efficiency and speed is the key to achieve among all of the competitors for every company. So to streamline and optimize the business operation and data will be necessary to meet this goal. Take the product hierarchy as an example; SAP SLO can assist customers to better redesign an efficient product hierarchy, which can fully use materials, information, data and other resources.
Convert Currencies in System Landscape (SLO, 2014)
A multinational company which owns branches in different countries leads requires the conversion of currencies into the currency primarily used by the company. SLO offers the services to convert currencies in every part of the ERP system, for various business purposes. Not just to be easy to manage the assets of the company, but also applicable for the local government and auditing organizations to apply auditing or supervising in order to enhance the transparency of the company and meet the local regulations. Meanwhile the maker of foreign currency is always changing, so to localize the currencies is a way to avoid unnecessary market risks of the company. At the same time SLO can also introduce, change or delete parallel local currencies. (SLO, 2014)
Consolidate and Unify the Landscape
To set up a unified central system can reduce the TCO and redundant data for the customer. For example, the service of process-data migration can help customers transfer data from one system to another, or to a system or software which is a newer edition. (SLO, 2014)
2.3.3 SAP Landscape Transformation Technology
SAP Landscape Transformation, or SAP LT is SAP software, which requires a license purchased directly from SAP and can be downloaded from SAP websites. SAP LT is very standardized software with a flexible SAP LT solutions portfolio. Sometimes according to the requests from the customer side, different solutions can be combined with each other in order to realize various types of projects. Details of SAP LT will be introduced in this thesis.
2.3.4 SAP Solution Manager
SAP Solution Manager is an efficient platform on which project phases, such as implementation, tests, operation, improvement and implementation can be easily operated with a minimum cost and zero risk. With the help of SAP Solution Manager, many kinds of projects can be implemented, e.g. upgrading systems, company code changes due to M&A or restructure, and so on. (Marc O. Sch??fer, 2012)
SAP LT is one part of SAP Solution Manager. Not only SAP products, many tools from partner companies have been integrated into SAP Solution Manager to bring convenience to customers. With a very friendly interface, SAP Solution Manager can be operated and monitored efficiently just with the central management dashboard. (Marc O. Sch??fer, 2012)
Figure 13 Sample Process Tree
(Bohland, 2014)
Process tree ‘ The picture above is the process tree of the SAP landscape transformation software. All of steps of the whole migration can be performed within the process tree of SAP landscape transformation software. The process tree brings conveniences to projects that it includes the whole structure. The users have no need to go through difference software tools to call required basis and generic functions. (Bohland, 2014)
If the users want to set new objects or change the existing ones, they can either just apply it in the process tree or apply some special transactions.
2.4 System Landscape Optimization Market in China
SLO is still fresh to Chinese market
On one hand the SAP System Landscape Optimization group entered into Chinese market in 2010 five years ago. As a very young SAP service, SLO is still not well known by Chinese companies till now. Before 2010 no one in China even knew the brand ‘ System Landscape Optimization.
On the other hand nowadays a project costs large amount of money and there is also a huge risk for the customer side. Companies think twice and compare different companies before making any decision. Moreover the prices of the SAP SLO group’s services are much more expensive than other small companies which can implement the same transformation, even though third party companies are using a different approach, and they are actually not as professional as SAP SLO. Plus third parties companies do not preserve the history data. But customers do not know any of these. Thus Chinese customers still do not have enough confidence or knowledge regarding the SLO technology and services.
In China, the number of SLO customers is not very big, and there are not so many large enterprises which are customers. Meanwhile projects already performed in Chinese markets may not have very complicated business process environments as some large enterprises’, because customers are not large enterprises. Therefore there is a need for SAP to market the SAP LT technology and services in China with very good Chinese customer reference cases, such as success stories. This is very essential to attract new customers.
Culture differences
Language: One of the most important steps of one project is for SAP SLO to fully understand what the customer??s requirements really are. However in real cases this is still not as smooth as imagine, especially when this project is in China and consultants are from Germany or other non-Chinese speaking countries. When the conversation begins, Chinese, English, German, or other multi languages may be involved. Occasionally problems cannot be well explained and may cause problems in following phases of the project. Then the SLO team has to again talk to the customer side to figure out the requirements of the customer’s. This may cause a delay of several months to a project, which may make the total cost exceed the budget.
Connections in China: Foreign people may not understand how connections (Guan Xi) work in the beginning. In business activities people tend to spend more time on building very good business partner relationships or even friendships with customers through many kinds of social activities. Although it seems not reasonable for foreigners in the beginning, it can make a project running very smoothly without unnecessary troubles. This can also help with the cooperation between customers and SAP SLO before, during and even after projects.
Very professional Chinese project managers and consultants are needed
To solve the communication gaps, very professional Chinese project managers and consultants are highly needed. Since they are familiar with both the language and the culture, they are able to figure out customers?? needs immediately and arrange team members in a proper way.
Moreover it is essential to get fully technical and documents support from SAP internally. For the reason that many new problems may not be within the plan, and time is very tight on the customer??s side, support from SAP side is necessary for consultants and even for experts.
Requirements out of contracts
It is not rare that some customers may have some other requirements out of contracts in Chinese market. SLO professional expertise is highly needed to maintain the ERP systems and other SAP products. However if one does not have a clear division of responsibilities, it might cause extra risk to SAP. For example, in Chinese market many customers of SLO projects prefer the SLO team to conduct testing, but it should be customers?? responsibilities. For the reason that customers know better about their own business processes, and what is the necessary parts to test. The projects are realized by SAP, but if tests are done by SAP, the result might be affected in certain extent. Because the SLO team would test things realized by them, and they do not know which process is more important to customers.
3 Case study: Dongfeng Motor Co. Ltd. – System Upgrade and Company Code Transfer via System Landscape Optimization by SAP
As the largest single-country market, China is the largest automobile market of the whole world. There is no doubt that in the coming years China will remain the first one according the statistical results shown in the picture following, and in the near future car sales in China will contribute more than 33% to the global vehicle market. (McKinsey & Company, 2012)
Dongfeng Motor Co. Ltd., as the biggest joint venture automotive company of Chinese market contracted with SAP SLO team in 2013 for the project of ‘System Upgrade and Company Code Transfer’. (Accenture, 2013)
Figure 14 Greater China Light Vehicle Sales Development (2005-2020; Millions of Units)
(Accenture, 2013)
3.1 Dongfeng Motor Co. Ltd.
Located in Wuhan (Hubei province, China), Dongfeng Motor Co.Ltd. or Dongfeng Motor (DFL) is the biggest joint venture company in the industry of automotive in the whole Chinese market. As a strategic cooperation between Dongfeng Motor Corporation and Nissan group, Dongfeng Motor was founded in 2003 with 57, 000 employees and registered capital value of RMB 17 billion. Each of the parent companies holds 50% of the equity of DFL. DFL covers a large product arrange from passenger vehicles, light commercial vehicles, parts & components to automotive equipment. In China, such a market full of competitions, DFL is able to become a strategic partner of a large number of foreign auto companies, e.g. Citro??n, Honda, Kia, Nissan, Peugeot, and Renault. (Dongfeng Motor Co. Ltd., 2012)
To enhance the R&D abilities, DFL pay the most attention on R&D, which can ensure DFL a sustainable development and a growing market share. In 2013 DFL restructured and aligned their business, so that DFL can run with a more efficient, direct and short management framework. The reputation of its products and services is the most valuable for DFL, for the reason that they want DFL to be a ‘highly trusted’ brand in Chinese and also the international markets. DFL is always dedicated to building itself into an innovative, green, and responsible automotive giant that can develop sustainably. (Dongfeng Motor Co. Ltd., 2012)
The ultimate goal of DFL is to become the leader of both of the Chinese automobile industry and the international market. In order to achieve this goal DFL is always working on strengthening its brand image, joint ventures and international cooperation. As an important market strategy, DFL contracted the Volvo Group for a joint venture business activity. This commercial vehicle business includes Passenger vehicle and commercial vehicle. It will strengthen its competitive advantages through the continuous improvement of products and service quality and the increase of market share while satisfying the customers’ demand.
3.2 Project objectives of the project
To realize this joint venture strategy is not that simple, but involves complex procedures, especially for the SAP system and data base of DFL. DFL is the biggest joint venture car manufacturer in China, which brings huge amount of data along with the operation. DFL was using SAP system R/3 4.7 for a very long time range, and as a result the data volume of DFL has reached 12TB by the beginning of 2013. This large amount of data running in the old system will definitely cause a high total cost to DFL. However the SAP ERP R/3 4.7 system will not be supported and maintained by SAP after March 2013.
Now in order to divide the whole structure in to Passenger Vehicle (PV) and Commercial Vehicle (CV) two parts, DFL has to split the whole system of DFL into two separate systems. At the same time a system upgrade was also scheduled for DFL, which will upgrade the DFL ERP system from 4.7 to the ECC 6.0 system to make sure their business will be ran efficiently.
After splitting the system, the data of PV and the data of CV should be intact in each system. This means their company code needed to be transferred into new systems. Meanwhile a Unicode conversion was also required for DFL, because of the language.
3.3 Dongfeng Motor engaged the SAP SLO team
This project means a lot for Dongfeng Motor, and it will become a milestone for Dongfeng Motor in the future, since whether the joint venture business activity can succeed depends on this project. This ERP system running by DFL is SAP system, furthermore most of the business operations are running in SAP applications. Meanwhile the master data DFL is confidential and so important that there should not be any mistake, and no history data should be missing during this project. However a huge amount of the DFL’s history data has been generated after so many years’ running.
After successfully implementing a large number of projects, SAP System landscape optimization group has the proven expertise and the latest technologies to realize the landscape transformation. The solution and service of SLO can master all of the tasks of DFL at the same time without any risk based on SAP LT software and technology. Meanwhile the project can be achieved during only one downtime, while other transformation providers need several downtimes to finish it, which will definitely influence the customer’s business. Furthermore with the NZDT technology of SAP SLO, the downtime is able to be reduced to the minimum level by the SLO group to insure the business continuity.
Therefore SAP System Landscape Optimization group was engaged by Dongfeng Motor to help DFL realize this project.
3.4 Preparation of the SAP Landscape Transformation Software
3.4.1 Installation and Basic Configuration
As the necessary and basic platform of SAP Landscape Transformation, the SAP Solution Manager system must be installed before the SAP Landscape Transformation. Then the SAP Solution Manager system functioned as a control system, which can handle the transformation project. When the SAP Solution Manager system was ready, the SLO team installed the SAP Landscape Transformation software into the control system. (SAP SE, 2013)
The next step was to download add-ons of SAP Landscape Transformation from http://service.sap.com/swdc to have the work center of SAP LT. Here the add-ons include DMIS 2011 and SHC_CONT 2011.
3.4.2 SAP LT Work Center
The first picture below illustrates how the SAP LT Work Center looks like. When you are in this work center you will be able to access to all of the suitable SAP Landscape Transformation functionalities structured by typical transformation requirements. For the entire LT project team, they can access to project roadmaps providing the guidance. Meanwhile project templates include all selected transformation solutions for business experts. (SAP Landscape Transformation, 2013)
Figure 15 Sample SAP LT Work Center
3.4.3 SAP LT Systems
From the picture below we are able to know how different systems and functions are integrated and connected in the SAP Solution Manager. In the SAP LT Work Center, the Project-Roadmaps and Execution Plan can be accessed. Then from the execution plan, you can open the systems of the analysis, the test, and the production. (SAP Landscape Transformation, 2013)
The SAP Solution Manager system functions as a control system here, on which the SAP LT work center runs.
Figure 16 Project Execution and Integration with SAP Solution Manager
(SAP Landscape Transformation, 2013)
Then it comes to the execution system. The execution is a copy of the customer??s production system. Usually there are usually two execution systems, and the other one is just the production system itself. The SAP LT work center is connected with both of them.
The analysis systems also correspond to the target system to perform the data analysis. It might be a copy of the target system in some cases.
The test system should be a complete copy of the production system, including the same dataset, customizing, and the hardware configuration and so on. Except for the target project, no other project or anything should be performed in this test system. Test cycles will be performed in the test system for at least once or more according to the specific situations. Sometimes there might be more rounds of tests if necessary. (SAP SE, 2012)
3.5 Transformation Processes
3.5.1 Analysis and planning
As the beginning of this project, the SAP Landscape Transformation standard analyses have been run from SAP Solution Manager Software by the SLO team. These analyses are functioning inside the software. The analyses results illustrated the users with important insights. For example:
– The whole picture of the target system landscapes
– What were the features and structures of the database in detail
– Enabled users or customers to have a better guess how much time, costs and other resources could be needed in the beginning of projects
– Figured out the basic settings of the original systems
– Checked out whether there is any missing or duplicate data (Marc O. Sch??fer, 2012). The SLO team was able to delete duplicate data from the systems in order to make systems run better and save space of systems
Based on the standard tool analysis, the data structure, business processes, other applications developed by customers have been checked. The business processes are essential for DFL. After having the knowledge of how the whole business processes were set up in the system of Dongfeng Motor, the team were able to implement the project without any destruction to the processes. The SLO team needed to know what kind of and how many application developed by DFL to make sure they would work well with new systems after the project, and if they would not then they would be necessary to be adjusted.
In the analyzing phase, the contact person and responsibilities for each aspect was defined, e.g. the contact persons for technology to support technical problems; the contact person for communication who can coordinated when there was a communication gap between the customer and the SLO team; the contact person who would make decisions when the project was out of scope.
This step is a preparation for the coming processes, and it can control the total risk and costs of the projects. Then with the results of the analysis phase, the next step ‘ scoping can start.
3.5.2 Scoping
Based on the results of the analysis, the SLO team has got the information of the original system, including what kind of objects are inside the source system which Dongfeng Motor was using. Then our team communicated with Dongfeng Motor and find out which objects among the results list should be within the range of the scope; what selection criteria and delimitation should be used later on; what kind of restructuring need the customer had in order to set the exact direction and plan for the whole project.
From May to September 2013, after analyzing and scoping the SLO team managed to finish defining the roadmap for this transformation. The roadmap contained a framework for the whole implementation of SAP applications and solutions, such as, proven business procedures and processes, which covered all of the activities, needed though the lifecycle of the project management and business process management. On the other hand, the roadmap also included setting up the system landscape, and installing and configuring the software. (Marc O. Sch??fer, 2012)
Figure 17 Time line of the project
In this phase the know-how phase has clearly made the time line of the project. The duration of each plan was planned exactly.
3.5.3 Implementation of the Transformation
Before this step, there are certain requisites had to be fulfilled. System ‘ The control system must be based on basis release 7.0 or higher. Meanwhile the central system has to be the same one, instead of having another separate one. The SAP Solution Manager has to be installed. And the sender and receiver system should be 6.20 or higher edition.
In all of the systems there are several applications needed to be installed. They include DMIS 2011, SP05, Initial QMS transport and further transports and SAP Notes. Technical settings ‘ In all of the systems the following settings should be done before the transformation. They comprise RFC destinations, users with respective authorizations and development authorization. (Bohland, 2014)
The picture above shows the main structure and figures of the whole project.
Firstly, with the SAP Landscape Transformation software the SAP team installed 2 empty SAP ERP system shells (Sandboxes) for both of the target systems – Passenger vehicle (PV) and Commercial vehicle (CV). After this when the PV and CV systems were ready for the transformation, the SLO team performed the system upgrade, from SAP ERP 4.7 to SAP ERP ECC 6.0 EHP 6.0 version system. Meanwhile the SAP team performed the Unicode conversion in order to make sure the language is working well in the system.
Secondly, the SLO created an activity list covering all of the steps how DFL IT department would execute later on step by step in detail. For the reason that the data of DFL might be confidential, it was inconvenient for DFL to show the data. Thus in the end the persons who would execute are always the IT department of the customer side. So this time the activity list was created for DFL by the SAP team.
This activity list included how the history data would be simultaneously transferred into both of the target system after being adjusted from the source system of Dongfeng Motor??s. The history data comprises basically four parts. They are shown in the picture below. The whole company code of Dongfeng Motor??s includes: Finance (FI), Costs (CO), Materials (MM), Sales (SD), Production (PP), Investments (IM), Projects (PS), and Warranty (WTY). After being adjusted and minimized, the data volume has dropped from 12 TB totally to 6.5 TB for the PV system, and 2.5 TB for the CV system.
Figure 19 Company Code and History Data structures
The applications developed by the customer side, DFL, have been analyzed and checked in the previous phase. Those applications did not work needed to be adjusted so that after the project every application would be able to function even though the system would be totally changed. The SLO team applied the adjustment accordingly to the applications developed by DFL.
3.5.4 Test cycles
In the beginning, the SAP SLO team set up the test system and performed the system integration test after the implementation phase in the test system from September to November of 2013, and then the user acceptance test has been conducted from November to December 2013, so that the target systems would be perfect to go live.
Figure 20 Sample test cycles
This picture illustrates how the two test cycles were structured for DFL. In each test cycle the SLO team executed the one transformation phase in the test system first. (The only purpose is to check whether the activity list would work well with the data without any mistake. Then the team ran the test to check the result, and fixed the problems came out during the test, and perfected the activity list.
In the data test, there were some Dongfeng Motor employees who input a certain amount of data. Then tests contained two types, one is for the data and the other is for business process. The meaning of tests was to check and analyze these aspects of the test results before the transformation:
– Whether the whole structure of the data is consistent
– Whether the data access in the repository data is functioning well
– Verification of the outcome of the test
Figure 21 Sample Interface of the execution phase of tests
(SAP Landscape Transformation, 2013)
The picture above shows the interface example of the execution phase of tests, which will lead to the test system. There are details of each test cycle, such as test, analyses for tests, analyses and Go Live. Click each of them, more details will show. This is where tests are controlled and monitored.
The following picture is an example of the interface of the test system. The process tree of the test system example includes all of the functions, with different columns comprise state, progress, tasks, execution number, note, and so on. Here you can monitor and control the system. This is an example of the interface of a chart of accounts conversion. Users can click on the scroll bar to check the rest parts.
Figure 22 Sample of the test system
(SAP Landscape Transformation, 2013)
Once the SLO team made sure everything was running well in the test system without any problem, the conversion was able to be made in the production system, so that the production of Dongfeng Motor would not be interrupted by the project. (Bohland, 2014) However if the results was not good enough in this kind of situation, more rounds of tests might be run by the team, until the best result comes out. It is to guarantee the quality of solutions and service for the customer side. In fact the whole implementation phase can also be divided into several small rounds, and in each round there can be a small test, in order to make sure a seamless transformation.
Meanwhile the SLO team also finished the technical documents, which are about the solution provided for Dongfeng Motor. They also generated the materials for the training of the IT department of Dongfeng Motor Co. Ltd.. During the whole delivery of the project knowledge transfer was been achieved eventually. With the little by little guidance, quality insurance and safeguarding Dongfeng Motor IT department became able to take over the project in the end with the knowledge and technological support from the SAP team. The knowledge transfer was able to increase the speed of the project and reduce the total cost for both SAP and Dongfeng Motor.
Figure 23 Knowledge transfer
(Bohland, 2014)
3.5.5 Dress rehearsal
From January 2014 to the beginning of April 2014, the SAP SLO team carried out the dress rehearsal for Dongfeng Motor systems. After the dress rehearsal the would-be downtime was able to be assessed by the SLO team.
3.5.6 Go Live
After the dress rehearsal phase the system was ready to go live, and be delivered to the business operation. In the planned weekend of April 2014, from 24th to 28th, the original system of Dongfeng Motor was shut down and the IT department of DFL implemented the transformation according to the guidance on the activity list accordingly by themselves. The project went live within only one single downtime, with the help of the Near Zero Downtime (NZDT) technology of SAP SLO. After the go live phase the SLO team kept on supporting Dongfeng Motor to make sure the target systems would be working well. This was the post-go-live phase. Right now the project has been successfully realized.
3.5.7 Near Zero Downtime (NZDT)
The downtime of one project can influence the business of the customer side. If it is too long, then the customer??s business will be interrupted, and this will lead to extra costs. So one goal of projects is to control and minimize the final downtime. SAP SLO developed the Near Zero Downtime technology, or NZDT for short is able to effectively minimize the downtime, to basically one weekend.
With this function, the users can monitor all of the maintenance activities through only one window. This is achieved by bundling those activities. This can help implement the project without stopping the core business processes.
3.6 Project challenges
The size of the system of Dongfeng Motor??s was already 12 TB with a huge monthly growth rate of 150 GB when the project just began 2013. The whole data and the system needed to be dealt with the utmost care. All of Dongfeng Motor??s business process was influenced; especially the core business was covered. Meanwhile during the whole project, people were working in three different cities in China, Wuhan, Guangzhou and Shiyan. They needed to cooperate with each other very well, and make sure every action was on time and consistent. Even there was even a very little delay on any side of them; it could cause tremendous influence or even a failure to the project. This situation required a huge amount of concentration, dedication and cooperation. All of the relevant departments and the SLO team together with the supporting SAP staff cooperated perfectly, which was the key leading to the successful go live of the project.
The production and the core business cannot be interrupted because of the project, which is the reason why the downtime of the project must be minimized. Moreover this project contained System Upgrade and Company Code Split two parts, which was not easy to realize within one downtime. With the NZDT technology of SAP SLO??s, the total downtime has been minimized into only one weekend.
During the phase of analyzing, in the system of Dongfeng Motor??s, there were 7000 files which had been developed by them, and some of them had not been maintained properly. This had caused a huge problem to the SLO team. The SLO team utilized the SAP SLO standard analyze tool to proceed the technical analyze to all of the data structures. After discussing with users in various departments of Dongfeng Motor and checking all of the analyze results, the SLO team overcame this obstacle.
3.7 Benefits for Dongfeng Motor Co. Ltd
The successful transformation of the project enables Dongfeng Motor to be able to run business in a very standardized system landscape, which was a big milestone for Dongfeng Motor on their way to a successful multinational corporate.
– Business value: All of the repository data and file flows have been kept safe ad consistent. The business process was transferred by the SLO team to PV and CV two target systems so that DFL would be able to run their business in the new systems. Meanwhile there was only one short downtime making sure the business could run without any interruption.
– Operation: The project was seamless, and brought no impact to the data, system or their business. Only one successful go live achieved the goals of the project.
– Risk: Based on the SAP professional service and software, the technical risk has been reduced to the minimum level. With a small amount of manual process, the tests were finished by the automatic software tool. The team provided the data rollback technique, and made sure the risk could be at a low level. At the same time this has also reduced the total cost of the cutover.
This project also guaranteed the success of the joint venture project between the Volvo group and Dongfeng Motor. In order to realize the joint venture, Dongfeng Motor would not be able to handle the joint venture at the system level without the professional technical supporting from the SAP SLO team. DFL is now one step closer to its target.
4 Conclusion
In this thesis I illustrated the challenges which local and foreign companies are facing or will face in the fast ever-changing Chinese market, especially at the system level. Whether they are able to face these challenges would be the key for them to succeed in Chinese and international markets, in such a time when there is a huge globalization need. Here I mentioned languages, accounting standards, currencies, restructure of companies, fist implementation, statutory requirements, and unstable IT departments, and so on and so forth.
To solve companies’ technical problems, SAP can be a very good partner of companies’ doing business in China. SAP is already working with various Chinese companies to help in the transformation process with professional solutions and proven expertise. Especially the SAP LT technology has been highlighted and the general phases of a transformation. The case gave us a picture of processes of a SLO project based on SAP LT software, and also it is a very good example how the SLO team help companies adapt to the global business environment.
SAP SLO has an increasing number of opportunities in Chinese market and also many challenges for it to concur. The challenges include culture differences, a lack of many professional Chinese project managers and consultants, and how to meet customer’s requirements out of contracts. Communication is very essential, although there are already a large number of Chinese consultants. A good communication can make project more efficient and profitable. SAP SLO team may still have some space to make it even better.
The further task remaining is to figure out how complicated some Chinese customers’ data structure could be, and how to solve this problem efficiently, or else it can delay projects for many months. This problem is serious especially when former employees who set up the whole business process for the system in the very beginning have left the company. This is going to be a tough task, especially for a large company like Dongfeng Motor with such a huge amount of data history. Moreover every company has her own way of setting up the data, even if a very professional SAP technical consultant cannot be sure to cover all of the data set by himself easily in a very short time.
This further task will need more internal information and experience from SLO consultants who have taken part in projects in Chinese market. Meanwhile some of it might be confidential for the customers’ sides or the SLO team, which makes it very challenging to achieve the goal.
5 Delimitation
This thesis is a general study of the situation of SAP SLO market in China mainland and SLO projects phases, and it does not aim to dig into all of the architecture or technologies, such as how to operate any specific data file with the SAP Landscape Transformation Software in details.
Due to the reason that the access to the details of this transformation is very limited, meanwhile the project was finished nearly one year ago, so the relevant consultants are already working on other projects in China or other APJ area. And the relevant materials are very limited, which made the first hand information very difficult to collect for this thesis. And at the same time the author did not involve in this project. Thus the details of the project could not be able to reach the deepest architecture level, but can be used for the management consulting use.
ERP ‘ Enterprise Resource Planning system is an enterprise wide information system
to master and integrate all of the resources, processes and data of companies??
reduce the total cost, increase the efficiency and enhance the management.
NZDT ‘ Developed by SAP SLO, the Near Zero Downtime technology is able to
effectively minimize the downtime of projects.
DFL ‘ Dongfeng Motor Co. Ltd. is the largest joint venture company in the automotive
industry of Chinese market.
SAP LT ‘ SAP Landscape Transformation software masters projects of M&A and sell
/ divest at the system level. Unify and coordinate the whole master data,
the transaction data and document flow.
SLO ‘ System Landscape Optimization group is in Data Management Service
department of SAP SE.
SMEs ‘ SMEs is Small and medium-sized enterprises.
PV ‘ Passenger vehicle
CV ‘ Commercial vehicle
GAAP ‘ GAAP is Generally Accepted Accounting Principles. It is accounting
principles and procedures for companies to obey to finish financial statements.
IFRS ‘ IFRS means International Financial Reporting Standards. It is a commonly and
globally accepted accounting standard across international boundaries.
TCO ‘ Total cost of ownership helps managers have the knowledge of direct and
indirect costs and benefits which are the results of applying of an IT
Company Code ‘ Company Code is the basic unit of the ERP system.
CRM ‘ CRM is Customer Relationship Management is helping companies to
emphasize on customers and its business processes. As a part of the SAP
Business Suite, it covers sales, service, marketing, analytics, and so on. CRM
can help retain best customers and better manage the customer interactions.
BI ‘ Business Intelligence

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