Transfield Services made a huge bet on its Project Quantum global SAP rollout. Freya Purnell found out how going standard has the organisation on a strong footing for the future.
Transfield Services is an ASX-listed operations, maintenance, and construction services business, operating globally in the resources, energy, industrial, infrastructure, property, and defence sectors. The company employs 19,000 people across 18 industries in 10 countries, including Australia, New Zealand, the US, Canada, Chile, the Phillipines, Nauru and Brunei.
Background
In 2011, Transfield Services embarked on a major transformation program with SAP at its core. The company had first implemented SAP about a decade ago, but the technology was ageing. Transfield Services also had grown quickly, both organically and through acquisition, and had not fully integrated its technology platform in line with this growth.
According to Transfield Services CIO Stephen Phillips, this resulted in poor information flows impacting decision-making.
“At the end of the day, decision-making at all levels of the organisation ultimately drives business performance. So we wanted to make the information flows more predictable, more reliable, and quicker, so Quantum was really starting that journey and putting in place that foundation.”
Aside from the technology issues, however, there were more critical business drivers at play.
Transfield Services’ business performance had been under pressure for a number of years – in part due to an industry-wide shift from cost-based reimbursable models to fixed price commercial arrangements, which transferred the risk to Transfield Services. This has required a paradigm shift for the company.
“The business was very hard-wired and successful in the reimbursable model. But it took some time for us to adjust to the implications of using different commercial models,” says Phillips.
Transfield Services also had become very siloed, and with increased margin pressure came the need to leverage resources more effectively.
“Essentially it was a cost and revenue exercise – getting our cost structures right in the model that we’re operating, and the revenue side was about making sure we’re not leaking revenue and profit by not being able to adjust to the commercial models that we’re working with,” Phillips says.
The SAP footprint
Project Quantum has involved the implementation of a broad portfolio of SAP solutions – including all of ECC 6.0 (except Production); CRM for lead to contract, service management and Customer Interaction Centre; a hybrid HR/payroll system using SuccessFactors for performance, compensation and learning management, and payroll and the core people data module in ECC.
Transfield Services has also implemented the BusinessObjects suite, including Business Warehouse and Budget Planning and Consolidation, and has been an early adopter of many of the newer technologies from SAP – including SAP Work Manager by Syclo to help the company manage its distributed workforce, Fiori and the full SAP Mobility Platform.
Ivan de Oliva, general manager, architecture, analytics and innovation, Transfield Services, says they have also implemented ‘hidden’ technologies like SAP Application Interface Framework, which has been very important for Transfield Services’ relationship with its customers.
“We connect to our clients and we have a very broad service and client base. One of the value-adds is that we actually connect to them tightly including from a technology perspective. That Interface Framework makes it easy to quickly create a specific connection to share people or work order data,” de Oliva says.
Transfield Services intentionally purchased a broad licence portfolio so it could adopt whatever SAP technologies the business needed.
“It wasn’t a big risk to take because of how complex the business is. But in deploying, we haven’t had to worry about the platform – it has high functional headroom so the business can grow into it,” de Oliva says.
One of the keys to the project’s success, and hopefully the platform’s longevity, has been discipline around deploying standard SAP.
“For the breadth and size of what we’re doing, how little customisation there has been is remarkable, and that’s been learning some very hard lessons from the past, which a lot of organisations have gone through,” Phillips says.
By adopting so many of SAP’s solutions, Transfield Services can take advantage of the end-to-end integration it promises – and can wash its hands of any data flow issues, referring them back to SAP.
“I don’t have to have a whole lot of people working on that, and in fact, I’ve already seen quite a significant reduction in the number of people we’ve got ‘just turning the wheel’, that you have where you have fragmented platforms or best of breed approaches,” Phillips says, adding that with a broad foundational platform now in place, Transfield Services will benefit from SAP’s development of the roadmap for each individual component over time.
The integration piece is in fact so valuable to Transfield Services that it made the decision to move away from Salesforce in favour of SAP CRM.
“That’s not because we think Salesforce isn’t a good product – quite the contrary; but we value the integration aspect of CRM and SAP more than we valued the standalone functionality of Salesforce,” Phillips says.
Being early adopters of some of the newer technologies also brought some obstacles, and separating the marketing hype from reality – and being prepared to live with the results – has been crucial.
“With SuccessFactors, the hybrid story is ‘just buy it and it will all connect’. We actually spent more than six months just getting it to connect [to ECC] properly, so you’re managing the user expectations. But we did that knowingly – if you bought SuccessFactors today, SAP’s integration is much tighter,” de Oliva says.
With SAP making acquisitions every quarter, Transfield Services aims to leverage these as soon as possible, but it does carry some risk.
“The real challenge is whether SAP can maintain that value-add of integration while they are buying these best of breed apps and pulling them into their system,” de Oliva says.
Partnerships
For the implementation, Transfield Services decided to work with tier two partners in specialist areas, including ROC consulting on the payroll component, and ASG and Wipro in other areas. SAP was utilised for subject matter expertise and the Max Attention service for quality assurance. As the project moves into the run phase, Transfield Services has outsourced many of its IT activities, including infrastructure and application support (including legacy applications), to Wipro, which is offshoring to India.
Going global
The project had added complexity in that it was a global roll-out to Transfield Services’ various operations and geographies.
Going global in this way was motivated by cost reductions, as well as the ability to yield more benefits by deploying a single backbone across the organisation. Gaining control and predictability by working from a common system was another factor.
Having considered issues such as flexibility, particularly with the customer interface, performance, the impact of change across multiple geographies, and the needs of different industries, Transfield Services ultimately decided on a single global instance.
“Our principle with the customer interface has been that we should be able to standardise within, and then where necessary at the interface with the client do changes there, because many times the data isn’t different, it’s just how they want it,” says Phillips.
“From an industry perspective, we sit across a range of industries from oil and gas, through to providing support for fire engines in the defence force, through to social housing, through to operating ferries. There are a couple of areas that we probably won’t fully integrate, but the bulk of our organisation will be on this platform by the end of next financial year.”
Transfield Services chose to begin the rollout in the Americas in 2011. This business had never run on an ERP system before, and as a smaller operation, enabled the Quantum team to begin with a more limited deployment and benefit from some key lessons along the way.
Among these were the importance of data stewardship, particularly for an organisation without this discipline previously, as well as the role of business process and standardisation.
“In the Americas, the first implementation of the technology rolled out ahead of the business processes being changed. Ideally you want the business processes slightly leading or in alignment with the technology. However, I’d rather have the technology first as an agitator for change than nothing at all,” says Phillips.
“This focus on business process and standardisation has been very challenging for an organisation whose DNA in the past has been, ‘I go out and do whatever I want to do’.”
Following the Americas implementation, Transfield Services then moved onto the Australian geography, rolling the platform across the corporate business, resources and energy business, and part of the infrastructure business. Still to be implemented over the coming year is the rest of the Australian infrastructure and services business, and then the New Zealand infrastructure and services business, which, like the Americas, have had limited use of ERP previously.
Being standardised on a global scale also makes further deployments “infinitely easier”, de Oliva says, as the company found with its recent move into Papua New Guinea.
“New Guinea isn’t an easy country, but the deployment wasn’t hard at all. Even though SAP don’t even have a localised version, the system is so standardised that we were able to just adjust the template, and we knew exactly what to do. We didn’t even have to get additional consulting.”
Simplifying payroll
With a very large, diverse workforce with complex contractual arrangements, Transfield Services’ payroll operations were anything but simple.
With more than 250 enterprise bargaining agreements (EBAs) in place, standardising and automating seems like it should be the impossible dream – but that’s precisely what the company did.
“We took every single EBA and went through the hard churn of working out how to set up the rules so that the administrator only needs to key in the start time, finish time and location, and the system would evaluate the pay,” de Oliva says.
Importantly, a Time Evaluation solution for both payroll and billing saw payroll, costing and billing integrated, with master data set up to drive all three aspects from the payroll data.
“When we set up an EBA, we also set up costing and billing information, so that when someone fills out their timesheet, it drives those systems as well,” he says.
This aspect of the project has been critically important to stopping profit leakage – where employees are paid but the client isn’t billed accordingly.
With a tight integration now in place, from a business process perspective, it also has involved gathering all the information about the 250 EBAs in place – previously held in the heads and filing cabinets of payroll staff – and codifying it through the system.
Though this was a difficult process, the benefits will be far-reaching, according to Phillips.
“That puts us in a situation to over time, be able to take cost out, and be much clearer about our practices and whether they are absolutely aligned with the agreements we’ve struck with clients,” he says.
In addition, it will allow Transfield Services to gain visibility of various conditions in its EBAs and simplify these, as well as have the option to outsource certain functions.
“Where you’ve got many old platforms, some of which were completely self-developed, there is less opportunity for [outsourcing to] other providers. What we are doing here gives us much more flexibility on how we want to do that – whether we want to do them internally, or externally, onshore or offshore,” Phillips says.
Business benefits
Among the benefits Transfield Services expects Quantum to yield are a reduction in cost, and an increase in “stickiness” of revenue and clients.
“The more we can do data exchange with clients and the more we can show the value of the information we bring to them, the more that helps us both in terms of providing solutions to those clients, and putting us in a better position when it comes to competitive advantage,” Phillips says.
The implementation shows clients that the organisation has the capability to roll out key technologies such as field mobility with agility, and will also provide a much greater understanding of the organisation’s productivity as the data history grows.
“This will help both from a revenue perspective in terms of being able to show value to clients as we move through the lifecycle of their contract, as well as focus on what we can do better as an organisation,” Phillips says.
“And to be honest, we were sitting with very ageing technology, that didn’t allow us to make use of the new technologies coming into play. If you can’t do that over time, eventually you will go out of business, because others will come in.”
With the Quantum program costing more than $51 million in 2013 alone, and a further $10 million expected for the 2014 financial year, these imperatives stood the program in good stead, even through a change in leadership and a significant fall in company profiles.
Phillips says while there was enormous pressure to see the investment pay off against this backdrop, this is true of all major transformation programs, and in fact the business’s struggles provided an even stronger case for change.
“Essentially we had no choice. We had not done the necessary investment over time, which was driven partly by poor business performance over a previous period. We had to do this because it is about building the organisation to be more sustainable in the future,” he says.
“There’s been a clear and ongoing commitment to say this needs to work, we’re going to put it in. Yes, there have been plenty of challenges as we’ve rolled it out, but we have to do it and we’ve then got to make sure that we drive the benefits.”
This case study first appeared in Inside SAP Winter 2014.
