The Total Economic Impact™ Of smartShift For SAP Code Transformation
Cost Savings And Business Benefits Enabled By Automated SAP Code Transformation
A Forrester Total Economic Impact™ Study Commissioned By smartShift, May 2023
With the transition to SAP's S/4HANA product, SAP customers run the risk of incurring high time and labor costs for the various processes that make up a complete transformation. Customers may want to look toward automation, such as that provided by smartShift, that can reduce the costs associated with custom code transformation, dual maintenance, custom code maintenance, and the risk of business interruption.
smartShift offers automated solutions for custom SAP code transformation, dual maintenance, and carve-out and consolidation of SAP systems. smartShift solutions can also be used to run performance remediation on SAP systems, and to run security remediation.
smartShift commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying smartShift for SAP code transformation1. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of smartShift on their organizations.
Return on investment (ROI)
253%
Net present value (NPV)
$12.81M
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four representatives with experience using smartShift for SAP code transformation. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization that is a global organization with 180,000 employees, $86 billion in revenues, and three SAP systems needing to undergo code transformation.
Prior to using smartShift for SAP code transformation, these interviewees noted how their organizations either incurred or expected to incur high costs associated with running manual code transformation for their SAP S/4HANA conversions. Manual processes also introduced unnecessary risk of code errors and security breaches. The interviewees also lacked experience, given such transformations are once-in-a-career events, and looked to smartShift as an expert to guide them.
After the investment in smartShift for SAP code transformation, the interviewees avoided substantial costs that they were incurring during their manual transformation processes, reduced the costs of maintaining, upgrading, and testing custom code, a portion of which was decommissioned, reduced the costs of dual maintenance via automation, and were able to continue critical projects in parallel, which may not have been possible otherwise.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
- Avoided costs of manual code transformation worth nearly $9.3 million. By automating the code transformation process, smartShift helps the composite avoid the high costs associated with manual code transformation. The composite avoids a total of 191,000 labor hours thanks to smartShift’s automation.
- Reduced cost associated with custom code, which shrinks by 40%. smartShift also helps the composite to automatically see what custom code in its SAP systems is no longer required going forward. smartShift identifies that 40% of the composite’s custom code is unused and automatically decommissions it, saving the composite on the associated costs of code maintenance, upgrades, and testing.
- Lowered dual maintenance costs by 20%. smartShift also automates the dual maintenance process, whereby code development is one in the legacy system and manually synchronized to the new system. Thanks to smartShift’s automated dual maintenance, the composite saves 20% of the 36 FTEs it would have needed to run manual dual maintenance.
- Reduced risk of business interruption by 5%. smartShift also helps the composite avoid code freezes and downtime events that often accompany complex SAP conversions. These disruptions run the risk of losing revenue for the period of the freeze or downtime. The composite is able to avoid 5% additional risk of a business interruption with smartShift over manual best practices.
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified in this study include:
- Accelerated time to value of SAP S/4HANA conversion. By reducing the code transformation portion of its SAP S/4HANA transformation, smartShift also enables the composite organization to fully convert to SAP S/4HANA faster than it otherwise would have, realizing the benefits of this conversion, such as faster transaction times and cost reductions, sooner.
- Improved security. By both automatically remediating unsecure code and reducing the human element for code errors, smartShift reduces the risk of security breaches for the composite. Additionally, smartShift eliminates obsolete custom code, which can also create a security risk.
- Increased peace of mind and project predictability. Automation and vastly fewer errors also mean that the composite is able to move forward with its transformation at speed, with peace of mind and a certainty that the project will be completed according to previously set timelines.
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
- smartShift fees. The composite pays fees to smartShift according to the number of solutions it uses, the number and size of systems that need to be transformed, and the length of automated dual maintenance for these systems.
- Time cost of implementation and deployment. To implement and deploy smartShift solutions, the composite leverages four internal employees to collaborate with smartShift over the course of around five weeks.
- Time cost of ongoing management. Additionally, the composite requires a half of one FTE’s time to manage smartShift and the relationship with the company on an ongoing basis.
The representative interviews and financial analysis found that a composite organization experiences benefits of $17.87 million over three years versus costs of $5.07 million, adding up to a net present value (NPV) of $12.81 million and an ROI of 253%
Key Statistics
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Return on investment (ROI)
253%
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Benefits PV
$17.87M
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Net present value (NPV)
$12.81M
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Payback
<6 months
Benefits (Three-Year)
Avoided cost of manual code transformation Reduced cost of unused custom code upgrading, maintenance, and testing Reduced costs of dual maintenance Avoided risk of business interruption
TEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in smartShift for SAP code transformation.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that smartShift for SAP code transformation can have on an organization.
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Due Diligence
Interviewed smartShift stakeholders and Forrester analysts to gather data relative to smartShift for SAP code transformation.
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Interviews
Interviewed four representatives at organizations using smartShift for SAP code transformation to obtain data with respect to costs, benefits, and risks.
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Composite Organization
Designed a composite organization based on characteristics of the interviewees’ organizations.
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Financial Model Framework
Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.
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Case Study
Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.
Disclosures
Readers should be aware of the following:
This study is commissioned by smartShift and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.
Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in smartShift for SAP code transformation
smartShift reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
smartShift provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Nick Mayberry
Drivers leading to the smartShift investment
Interviews
| Organization or Industry | Name and/or Role | Region | Use Cases |
|---|---|---|---|
| BMW Group | SAP manager | Global | SAP S/4HANA transformation, dual maintenance, upgrades, system consolidation, security remediation |
| Jabil | Cynthia Kendall, IT director | Global | SAP S/4HANA transformation, dual maintenance, performance remediation |
| JBS Foods | Colin Cole, IT director | North America | SAP S/4HANA transformation, dual maintenance |
| Procter & Gamble | Bruno Pont, Senior director | Global | SAP S/4HANA transformation, dual maintenance |
Key Challenges
Before smartShift, three of the interviewees’ organizations had already begun their transformation process via manual effort, whether from internal employees or external consultants. The remaining organization engaged with smartShift from the earliest stages of its transformation.
The interviewees noted how their organizations struggled with common challenges, including:
- Expense and length of manual transformation. The core challenges faced by the three organizations that ran manual transformation efforts before engaging with smartShift were the expenses associated with such an effort and the lengthy timeline to completion. Multiple interviewees noted that the transformation might never have happened at all if they had continued with the manual effort, given the expense and timeline.
- Human error and security risk. The interviewees also noted that their manual efforts at transformation led to human error in the code, which then brought further expenses to remediate these code errors. Additionally, human error opened up their SAP systems to unacceptable security risks.
- Lack of internal expertise specifically for SAP S/4HANA conversion. Given that the SAP S/4HANA transformation is a once-in-a-career initiative, some of the interviewees also noted that they lacked internal expertise on how best to manage such a transformation of systems so vital to their operations. Because of this, they sought an industry expert that has worked on multiple transformations in the form of smartShift.
Composite Organization
Based on the interviews, Forrester constructed a TEI framework, a composite company, and an ROI analysis that illustrates the areas financially affected. The composite organization is representative of four interviewees, and it is used to present the aggregate financial analysis in the next section. The composite organization has the following characteristics:
Description of composite. The composite is a large global organization with $86 billion in revenue and 180,000 total employees. It has three SAP systems that need to be transformed: one deployed in 2003, one deployed in 2015, and a third that was acquired via a business combination. Each of these are brownfield conversions from SAP ECC to SAP S/4HANA.
Deployment characteristics. The relevant characteristics of the composite organization’s SAP systems are as follows:
- System 1 is an SAP ECC 6.07 system on a third-party database upgrading to SAP S/4HANA 2021. smartShift analysis shows that System 1 contains 93,000 custom ABAP objects. Originally deployed in 2003, System 1 has undergone numerous upgrades and changes during the past two decades and shows substantial opportunities to optimize, improve, and secure the code base for modern standards beyond basic SAP S/4HANA compatibility.
- System 2 is an SAP ECC 6.08 system on SAP HANA upgrading to SAP S/4HANA 2021. System 2 was originally deployed in 2015. smartShift analysis shows that this system contains 54,000 custom objects. While a newer system, analysis nevertheless reveals significant opportunities for improvement for stability, performance, and security, as well as for removal of obsolete code.
- System 3 is an SAP ECC 6.04 system on a third-party database with 35,000 custom ABAP objects. System 3 was acquired when the composite merged with a regional competitor in EMEA to gain market share and further diversify its business. System 3 will be retired after migrating the business currently managed on the system to System 2 once the initial SAP S/4HANA conversion of System 2 has completed. While many processes will be aligned with those presently configured in System 2, the composite needs to retain several proprietary processes to support unique regional and regulatory requirements, as well as unique capabilities. Custom ABAP code and related data dictionary DDIC for these specialized processes will need to be scoped for carve-out, converted to SAP S/4HANA, and carefully consolidated into System 2 as part of a multiwave transformation after the initial SAP S/4HANA conversion of System 2.
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Avoided cost of manual code transformation | $9,688,909 | $0 | $625,091 | $10,314,000 | $9,277,739 |
| Btr | Reduced cost of unused custom code upgrading, maintenance, and testing | $1,439,046 | $1,439,046 | $1,530,900 | $4,408,992 | $3,647,706 |
| Ctr | Reduced costs of dual maintenance | $331,569 | $711,660 | $315,395 | $1,358,623 | $1,126,535 |
| Dtr | Avoided risk of business interruption | $3,100,962 | $930,288 | $310,096 | $4,341,346 | $3,820,869 |
| Total benefits (risk-adjusted) | $14,560,485 | $3,080,994 | $2,781,482 | $20,422,961 | $17,872,849 | |
Avoided Cost Of Manual Code Transformation
Evidence and data. The core reason each interviewee decided to invest in smartShift was the ability to avoid the high costs associated with manually updating custom code during their transition from SAP ECC to SAP S/4HANA. Not only would using a manual approach require a lengthy timeline to complete, it also would necessitate the use of costly resources that might be better spent on other organizational initiatives.
For example, the SAP manager from BMW Group shared: “Based on our own trusted calculation, smartShift has saved us [tens of thousands of] person-days of manual work with their automated solution. This is a big benefit in and of itself, but we also usually only utilize external resources on these sorts of projects, which come at a higher cost, of course.”
Similarly, Ms. Kendall from Jabil stated: “Our avoided costs were a big deal. We estimated that it would take approximately 10 months of work for three dozen resources to complete the custom code transformation process manually.”
Mr. Cole from JBS Foods noted: “Our original plan was to do all of this manually. If we had continued down that path, it would have taken up to nine months of effort from up to 30 expensive ABAP development resources to transform our custom code.”
Finally, Mr. Pont from Procter & Gamble explained: “smartShift saved us on all manual work associated with our code transformation, among other workstreams.”
Despite the expected timeline length and resource cost with a manual approach, the interviewees shared that using smartShift’s automated approach to custom SAP code transformation substantially reduced timelines and costs.
For example, the SAP manager from BMW Group said, “smartShift completed our full SAP S/4HANA custom code remediation in four weeks, which included 20,000-plus custom objects.” Ms. Kendall from Jabil shared, “With smartShift, we remediated all custom code in five weeks, with 29,000 specific issues fixed in this time.” Mr. Pont from Procter & Gamble said, “smartShift transformed nearly 80,000 custom objects in approximately eight weeks, with guaranteed quality.”
Importantly, multiple interviewees noted that the importance of smartShift’s automated code transformation technology was not just that it led to cost savings. Rather, it had the added benefit of improving project predictability and the certainty of completion by their set deadlines, sometimes set two years in advance. This is covered in more detail in the Unquantified Benefits section below.
Modeling and assumptions. For the composite organization, Forrester models:
- Three SAP systems undergo automated custom code transformation over three years.
- A total of 191,000 person-hours of manual effort are saved with smartShift.
- System 1 would require 61% of these hours, which are saved in Year 1.
- System 2 would require 33% of these hours, which are also saved in Year 1.
- System 3 would require 6% of these hours, which are saved in Year 3.
- The average, blended fully burdened hourly rate for onshore and offshore ABAP development resources is $60.
Risks. The avoided cost of manual code transformation will vary with:
- The number of systems transformed.
- The amount of custom code in each system.
- The average cost of an ABAP development resource.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $9.3 million.
Avoided Cost Of Manual Code Transformation
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| A1 | Person-hours avoided for System 1 | Interviews | 115,758 | 0 | ||
| A2 | Person-hours avoided for System 2 | Interviews | 63,667 | 0 | ||
| A3 | Person-hours avoided for System 3 | Interviews | 0 | 0 | 11,576 | |
| A4 | Average fully burdened hourly rate, ABAP developer | TEI standard | $60 | $60 | $60 | |
| At | Avoided cost of manual code transformation | (A1+A2+A3)*A4 | $10,765,455 | $0 | $694,545 | |
| Risk adjustment | ↓10% | |||||
| Atr | Avoided cost of manual code transformation (risk-adjusted) | $9,688,909 | $0 | $625,091 | ||
| Three-year total: $10,314,000 | Three-year present value: $9,277,739 | |||||
Reduced Cost Of Unused Custom Code Upgrading Maintenance And Testing
Evidence and data. In addition to reducing the time and cost to transform custom SAP ECC code to SAP S/4HANA code, smartShift automatically decommissioned any custom code that was no longer needed. This in turn eliminated the future cost of upgrading, maintaining, and testing this code, reducing overall costs for code maintenance.
For example, the SAP manager from BMW Group said: “smartShift helped us retire 9.5 million lines of custom code that was no longer needed. We [decommissioned] 863,000 custom code issues across 43 landscapes.”
Ms. Kendall from Jabil noted: “smartShift safely decommissioned a full 40% of our custom code, which amounted to 5,300 unused objects. This had a big impact on reducing our TCO since we estimate about $0.25 cost per line to maintain, update, and test this code annually.”
Mr. Cole from JBS Foods shared, “smartShift [decommissioned] 2.7 million lines of unused custom ABAP code, for about 25,000 objects, or about 30% to 50% of all our custom SAP code. This reduces the maintenance we need to do on this unused code. We have had hundreds of developers in the system over the years, and they must figure out this custom code every time there’s a problem or an enhancement. The less of this moving forward, the better.”
Modeling and assumptions. For the composite organization, Forrester models.
- A total of 6,750,000 lines of custom code across three SAP systems.
- Sixty-one percent of custom code is in System 1, 33% in System 2, and 6% in System 3.
- smartShift decommissions all unused custom code, which averages 40% of the total custom code.
- This saves a conservative average of $0.63 on testing, upgrading, and maintenance costs annually per line of code decommissioned.
Risks. The reduced cost associated with decommissioning unused custom code will vary with:
- The number of SAP systems being transformed.
- The total custom code in each system.
- The percentage of custom code that is unused.
- The average cost to test, upgrade, and maintain this code.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $3.6 million.
Reduced Cost Of Unused Custom Code Upgrading, Maintenance, And Testing
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| B1 | Total lines of custom code | Composite | 6,750,000 | 6,750,000 | 6,750,000 | |
| B2 | Percentage of custom code attributable to System 1 | Interviews | 61% | 61% | 61% | |
| B3 | Percentage of custom code attributable to System 2 | Interviews | 33% | 33% | 33% | |
| B4 | Percentage of custom code attributable to System 3 | Interviews | 0% | 0% | 6% | |
| B5 | Percentage of custom code decommissioned | Interviews | 40% | 40% | 40% | |
| B6 | Cost per line of code | Interviews | $0.63 | $0.63 | $0.63 | |
| Bt | Reduced cost of unused custom code upgrading, maintenance, and testing | B1*(B2+B3+B4)*B5+B6 | $1,598,940 | $1,598,940 | $1,701,000 | |
| Risk adjustment | ↓10% | |||||
| Btr | Reduced cost of unused custom code upgrading, maintenance, and testing (risk-adjusted) | $1,439,046 | $1,439,046 | $1,530,900 | ||
| Three-year total: $153,900 | Three-year present value: $150,400 | |||||
Reduced Cost Of Dual Maintenance
Evidence and data. In addition to automating custom code transformation during a conversion to SAP S/4HANA, smartShift also enabled interviewees’ organizations to automate dual maintenance. Dual maintenance is typically done manually, whereby development continues in the legacy system and resources are required to manually sync this to the project system to attain parity before the full transformation is complete. smartShift can automate this process, reducing costs and enabling developers to effectively continue other important work in parallel with the transformation effort.
For example, Ms. Kendall from Jabil shared: “Manual dual maintenance requires resources to both manage and run any updates to our SAP systems on both the legacy and new system. We were handling this via spreadsheets and a solution manager cockpit, but it was all just too much to effectively manage. There were always questions about what gets tested, what (if anything) has been remediated, etc. The smartShift tool took quite a load off of us during this process, reducing our dual maintenance costs by around 20%.”
Mr. Pont from Procter & Gamble added: “With smartShift automating dual maintenance, we no longer have to worry about keeping our systems in sync. We can run projects in parallel without hurting our time to market or the number of projects we do.”
Modeling and assumptions. For the composite organization, Forrester models:
- Thirty-six FTEs are needed to manually run dual maintenance.
- In Year 1, 41% of their time is spent on dual maintenance for System 1.
- In Year 2, 61% of their time is spent on dual maintenance for System 1, and 27% of their time is spent on dual maintenance for System 2.
- In Year 3, 34% of their time is spent on dual maintenance for System 2, and 5% of their time is spent on dual maintenance for System 3.
- Twenty percent of these costs go away, thanks to smartShift.
- The average fully burdened annual rate of these employees is $124,800.
Risks. The reduced cost of dual maintenance will vary with:
- The number of systems needing dual maintenance.
- The size of these systems and number of updates they need.
- The fully burdened annual rate of the resources used for manual dual maintenance.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV of $1.1 million.
Reduced Costs Of Dual Maintenance
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| C1 | Number of FTEs required for dual maintenance | Composite | 36 | 36 | 36 | |
| C2 | Percentage for System 1 | Interviews | 41% | 61% | 0% | |
| C3 | Percentage for System 2 | Interviews | 0% | 27% | 34% | |
| C4 | Percentage for System 3 | Interviews | 0% | 0% | 5% | |
| C5 | Reduction in dual maintenance costs | Interviews | 20% | 20% | 20% | |
| C6 | Average fully burdened annual rate for FTEs performing dual maintenance | A4*2,080 | $124,800 | $124,800 | $124,800 | |
| Ct | Reduced costs of dual maintenance | C1*(C2+C3+C4)*C5*C6 | $368,410 | $790,733 | $350,438 | |
| Risk adjustment | ↓10% | |||||
| Ctr | Reduced costs of dual maintenance (risk-adjusted) | $331,569 | $711,660 | $315,395 | ||
| Three-year total: $3,669,375 | Three-year present value: $3,010,272 | |||||
Avoided Risk Of Business Interruption
Evidence and data. In addition to cost reductions, smartShift’s automations enable organizations to continue operating their businesses as usual, avoiding code freezes and downtime associated with complex SAP transformations.
For example, Mr. Pont from Procter & Gamble said: “Our entire strategy for going with smartShift for our SAP S/4HANA transition was around maintaining zero business risk. We were able to run over 1,000 projects in parallel and do nearly 40,000 transports, keeping everything in sync while still being able to fully operate our SAP systems and, therefore, our business.”
Ms. Kendall from Jabil noted: “We ran a ‘near-zero-downtime’ process, but smartShift certainly helped indirectly with this. We didn’t miss any shipments coming in or going out, we met all the demands of our management, and were able to move everything over within a weekend’s time.”
Modeling and assumptions. For the composite organization, Forrester models:
- Annual revenue of $86 billion.
- A potential business impact of 1 week for System 1, 0.3 weeks for System 2, and 0.1 weeks for System 3.
- A 5% profit margin.
- A 5% reduction in business interruption risk from smartShift when compared to manual best practices alone.
Risks. The avoided risk of business impact will vary with:
- Annual revenues.
- The duration of a potential impact to revenues for each system.
- The profit margin.
- The risk of business interruption using manual processes for each organization.
Results. To account for these risks, Forrester adjusted this benefit downward by 25%, yielding a three-year, risk-adjusted total PV of $3.8 million.
Avoided Risk Of Business Interruption
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| D1 | Annual revenue | Composite | $86,000,000,000 | $86,000,000,000 | $86,000,000,000 | |
| D2 | Potential weeks of business interruption | Interviews | 1.0 | 0.3 | 0.1 | |
| D3 | Weekly revenue | D1/52*D2 | $1,653,846,154 | $496,153,846 | $165,384,615 | |
| D4 | Profit margin | Composite | 5% | 5% | 5% | |
| D5 | Avoided risk of business interruption | Assumption | 5% | 5% | 5% | |
| Dt | Avoided risk of business interruption | D1*D2*D3*D4 | $4,134,615 | $1,240,385 | $413,462 | |
| Risk adjustment | ↓25% | |||||
| Dtr | Avoided risk of business interruption (risk-adjusted) | $3,100,962 | $930,288 | $310,096 | ||
| Three-year total: $4,341,346 | Three-year present value: $3,820,869 | |||||
Unquantified Benefits
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify:
- Accelerated time to value of S/4HANA conversion. Mr. Cole from JBS Foods said: “smartShift reduced the custom code portion of our transformation from between six to nine months down to just eight weeks. Overall, this helped us complete the project a full 50% faster and introduced significant savings.” Ms. Kendall from Jabil expounded, “By getting to S/4HANA sooner, we’ve driven efficiencies across the business, simplifying processes, and reducing costs. We now have transactions and processes coming back in as little as 45 seconds. Table analyses that used to take 9 minutes are now 3 seconds. The list goes on.”
- Value of additional completed IT work. Ms. Kendall from Jabil said: “With smartShift automating code transformation and dual maintenance, my team could focus on strategic things needed to get the project advanced. We could not have stretched the team to do their day job and side projects without dropping the ball somewhere. With no manual work, our developers focused on other strategic priorities that boosted the bottom line.”
- Security. On security, the SAP manager from BMW Group said: “Our SAP landscape has grown over a long period of time, with all kinds of programmers working on the code. The code was anything but risk-free and would be a daunting task to remediate manually. We use smartShift repeatedly to ensure we automatically remediate security issues in our SAP code.”
- Peace of mind and project predictability. Ms. Kendall from Jabil said, “We had very tight cycles we needed to align with, and the speed of automation with smartShift added necessary certainty to completion on our timeline.” Mr. Cole JBS Foods shared: “Manual processes create bad or nonstandard code, which is harder to troubleshoot and creates more problems. If this had happened, we would have experienced days of delay per error, which would be quite common, impacting the overall project timeline.”
- Improved speed of business combinations. The SAP manager from BMW Group said, “From an IT perspective, smartShift has advanced both business consolidations and carve-outs by speeding up SAP system consolidation among the various businesses.”
- Talent satisfaction and retention. Ms. Kendall from Jabil said, “It would have been a hard sell to my team on the project if they would have had to work through all those lines of custom code manually.” Mr. Pont from Procter & Gamble said, “smartShift helped improve our teams’ well-being by removing some stress, removing overtime, and avoiding working weekends.”
- Compliance. Ms. Kendall from Jabil said: “Every line of code touched by smartShift leaves behind a footprint that provides very clear visibility into what was done by the automated tool. This made it easier to get through compliance. We didn’t need to hunt down all sorts of details.”
- smartShift experience and support. The SAP manager from BMW Group said: “In my role, I work with many, many suppliers and consultants. Of these, smartShift definitely has some of the best customer focus.” Mr. Cole from JBS Foods shared: “smartShift was very available. Even when we called them at odd hours, they would pick up and help us.”
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement smartShift for SAP code transformation and later realize additional uses and business opportunities, including:
- Competitive advantage and better decision-making. Mr. Cole from JBS Foods said, “With smartShift getting us to S/4HANA faster than we would otherwise, we’ll be able to get to near-real-time insights from our SAP data much faster, boosting our competitive advantage and business decision-making,”
- Improved innovation. Mr. Pont from Procter & Gamble said: “smartShift helps us innovate. We’re working with them on a number of projects, and they’re not all about conversions, but new capabilities and testing new solutions.”
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Quantified cost data as applied to the composite
Total Costs
| Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|---|
| Etr | Total smartShift fees | $0 | $3,925,750 | $840,000 | $768,000 | $5,533,750 | $4,840,088 |
| Ftr | Time cost of implementation and deployment | $54,912 | $0 | $0 | $0 | $54,912 | $54,912 |
| Gtr | Time cost of ongoing management | $0 | $68,640 | $68,640 | $68,640 | $205,920 | $170,698 |
| Total costs (risk-adjusted) | $54,912 | $3,994,390 | $908,640 | $836,640 | $5,794,582 | $5,065,698 | |
Total smartShift Fees
Evidence and data. smartShift charges separately for its code transformation, automated dual maintenance, and carve-out and consolidation solutions. The price itself is determined by the size of the SAP system undergoing transformation, as measured by the maximum number of objects to be transformed. In the case of dual maintenance, pricing is dependent on the length of dual maintenance as well as the maximum number of objects to be maintained quarterly.
Modeling and assumptions. For the composite organization, Forrester models:
- System 1 requires code transformation for up to 100,000 objects at around $1.5 million and dual maintenance for nine months and up to 7,500 objects quarterly at nearly $1.3 million. These costs are incurred in Year 1.
- System 2 requires code transformation for up to 55,000 objects at around $1 million and dual maintenance for 15 months and up to 4,200 objects quarterly at nearly $1 million. These costs are split between Years 1 and 2.
- System 3 requires code transformation for carve-out and consolidation for up to 10,000 objects in three waves at about $700,000 and dual maintenance for six months and up to 600 objects per quarter at $60,000. These costs are incurred in Year 3.
Risks. Total smartShift fees will vary with:
- The exact smartShift solutions purchased.
- The size and number of SAP systems.
- The length of dual maintenance.
Results. As the composite organization was priced directly with smartShift, there has been no risk adjustment made, yielding a three-year, total PV (discounted at 10%) of $4.8 million.
Total smartShift Fees
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| E1 | System 1 fees | smartShift | $0 | $2,769,750 | $0 | $0 |
| E2 | System 2 fees | smartShift | $0 | $1,156,000 | $840,000 | $0 |
| E3 | System 3 fees | smartShift | $0 | $0 | $0 | $768,000 |
| Et | Total smartShift fees | E1+E2+E3 | $0 | $3,925,750 | $840,000 | $768,000 |
| Risk adjustment | 0% | |||||
| Etr | Total smartShift fees (risk-adjusted) | $0 | $3,925,750 | $840,000 | $768,000 | |
| Three-year total: $5,533,750 | Three-year present value: $4,840,088 | |||||
Time Cost Of Implementation And Deployment
Evidence and data. The interviewees noted incurring relatively minor time costs associated with implementation of smartShift. For example, internal teams needed to work with smartShift code reviews and change control processes.
Modeling and assumptions. For the composite organization, Forrester models:
- Four employees work with smartShift on implementation for about five weeks at a fully burdened hourly rate of $60
Risks. The time cost of implementation and deployment will vary with:
- The scope of work to be done by smartShift.
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV of $55,000.
Time Cost Of Implementation And Deployment
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| F1 | Number of IT professionals needed | Interviews | 4 | |||
| F2 | Hours to implement and deploy | Interviews | 208 | |||
| F3 | Average IT professional fully burdened hourly rate | TEI standard | $60 | |||
| Ft | Time cost of implementation and deployment | F1*F2*F3 | $49,920 | $0 | $0 | $0 |
| Risk adjustment | ↑10% | |||||
| Ftr | Time cost of implementation and deployment (risk-adjusted) | $54,912 | $0 | $0 | $0 | |
| Three-year total: $54,912 | Three-year present value: $54,912 | |||||
Time Cost Of Ongoing Management
Evidence and data. The interviewees also noted incurring low time costs associated with ongoing management of smartShift. They relayed that no FTEs needed to be fully dedicated to this workstream.
Modeling and assumptions. For the composite organization, Forrester models:
- One employee spends 50% of their time managing the solution and relationship with smartShift at a fully burdened annual rate of $124,800.
Risks. The time cost of ongoing management may vary with very large numbers of transformations.
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV of $171,000.
Time Cost Of Ongoing Management
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| G1 | Number of IT professionals | Interviews | 1 | 1 | 1 | |
| G2 | Percentage of time | Interviews | 50% | 50% | 50% | |
| G3 | Average IT professional fully burdened annual rate | F3*2,080 | $124,800 | $124,800 | $124,800 | |
| Gt | Time cost of ongoing management | G1*G2*G3 | $0 | $62,400 | $62,400 | $62,400 |
| Risk adjustment | ↑10% | |||||
| Gtr | Time cost of ongoing management (risk-adjusted) | $0 | $68,640 | $68,640 | $68,640 | |
| Three-year total: $205,920 | Three-year present value: $170,698 | |||||
Consolidated Three-Year Risk-Adjusted Metrics
Cash Flow Chart (Risk-Adjusted)
Total costs Total benefits Cumulative net benefits Initial Year 1 Year 2 Year 3-
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment. Forrester assumes a yearly discount rate of 10% for this analysis.
These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in each Benefit and Cost section.
Cash Flow Analysis (Risk-Adjusted Estimates)
| Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
|---|---|---|---|---|---|---|
| Total costs | ($54,912) | ($3,994,390) | ($908,640) | ($836,640) | ($5,794,582) | ($5,065,698) |
| Total benefits | $0 | $14,560,485 | $3,080,994 | $2,781,482 | $20,422,961 | $17,872,849 |
| Net benefits | ($54,912) | $10,566,095 | $2,172,354 | $1,944,842 | $14,628,379 | $12,807,151 |
| ROI | 253% | |||||
| Payback period (months) | <6 | |||||
Appendix A: Total Economic Impact
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists solution providers in communicating their value proposition to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of business and technology initiatives to both senior management and other key stakeholders.
Total Economic Impact Approach
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Benefits represent the value the solution delivers to the business. The TEI methodology places equal weight on the measure of benefits and costs, allowing for a full examination of the solution’s effect on the entire organization.
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Costs comprise all expenses necessary to deliver the proposed value, or benefits, of the solution. The methodology captures implementation and ongoing costs associated with the solution.
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Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. The ability to capture that benefit has a PV that can be estimated.
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Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur.
Appendix B: ENDNOTES
1 Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
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