North American Energy Company’s Resistance to Change Limits Cash Management Automation Efforts
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Key Takeaways
⇨ Many organizations are still hesitant to adopt advanced technologies such as generative A.I.
⇨ Companies should leverage full utilization of existing SAP license to drive process efficiency
⇨ Reluctant enterprises should reduce the burden of transformation and change management with SAP Fiori.
As organizations across various industries scramble to adopt advanced technologies such as generative A.I., there remains a faction of organizations navigating the business landscape with traditional methods and processes. While the reasons behind this can vary, common threads often include limited resources, resistance to change, and a preference for manual processes over digital systems. A case in point is a North American energy company, whose Information Systems (IS) Finance Project Lead recently shed light on the challenges they face and their impact on efficient cash management practices.
The energy sector has distinct characteristics that differentiate it from other industries, particularly in terms of requirements and operations. The Finance Project Lead at this energy company said, “Our customers are limited. We have a very small range of people we do business with. Our needs are very industry-focused. For everyday business operations, we create in-house applications.”
This approach means they are using approximately only “35% of SAP’s financial management capabilities,” relying instead on their own tailored solutions. The issue is not a lack of technology, but rather a reluctance or perceived lack of necessity to fully leverage what’s available in SAP ECC 6.0 for Finance Management.
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One reason is the company’s operational structure and resource constraints. The IS department is lean, which means there is no budget allocated for third-party solutions, causing an over-reliance on manual systems. The Finance Project Lead revealed, “A lot of data is maintained on spreadsheets; sometimes printouts are taken. People take signatures and keep them for audit purposes. It’s a very traditional way of maintaining things.”
The company’s decision not to enhance accounts payable, accounts receivable, cash management, and asset management functions in their SAP environment may reflect a broader tendency within the energy industry, where there’s a strong inclination towards maintaining existing practices. In this company, any proposition of change, especially one involving technology, is met with skepticism. This reticence extends to upskilling practices, where the company has struggled to educate internal teams, resulting in a lack of trust in automated processes without manual intervention. The Finance Project Lead lamented, “There are several processes that can be automated and do not require manual intervention. Because of traditional background or legacy work experience, even if you provide automated processes, it’s likely they would still want to go back to manual postings.”
Challenges
While it’s understandable that this energy organization prefers systems and methods that they are accustomed to, there is an unavoidable downside to this approach: inefficiency. This particularly affects their cash management practices, a process that could greatly benefit from SAP system’s full capabilities. Instead, they rely on manual operations for tasks such as forecasting cash balances and analyzing spreadsheets.
Manually handling these operations not only increases the chance of human error but also limits their ability to make strategic decisions. “The traditional method of being focused on spreadsheets for analyzing or forecasting cash balances is very manually done. It could be very well done in SAP,” noted the Finance Project Lead.
The roadblocks to optimizing their operations are clear: resistance to change, reliance on manual processes, and resource constraints. The company’s keen awareness of their challenges is the first step towards addressing them. They recognize the need for modernizing their cash management modules and functions and understand that doing so could bring greater efficiency to their operations. As this energy company is in the early stages of evaluating the move to SAP S/4HANA Finance, cash management is among the core processes they will likely modernize. Given the current culture, change management will provide a tremendous challenge for this North American energy company during the transition.
Another consideration is to implement SAP Fiori while on SAP ECC 6.0. This approach would allow each department within finance to modernize incrementally, prior to an SAP S/4HANA Finance migration. Anurag Barua, Digital Transformation Leader at SAP, expands on this approach, “It is a smart approach. Given the intuitiveness and intelligence of SAP Fiori, an early exposure to it will considerably lighten the burden of change management and will lead to a speedier and more widespread adoption of S/4HANA and help realize the ability to combine S/4HANA finance process efficiencies with the user productivity enabled by SAP Fiori.”
While the energy sector’s needs might be unique, it can still benefit from enterprise transformation. After all, SAP ERP is not a one-size-fits-all solution, but a flexible tool designed to cater to a wide range of business needs. The energy company’s reluctance to fully utilize SAP’s features might stem from a misconception that it is more suited for a manufacturing setting. However, they overlook the potential benefits and enhancements that the tool could bring to their operations.
The journey towards finance transformation and effective cash management doesn’t have to be a seismic shift. Rather, it can start small, targeting areas that will generate the most significant benefits with the least disruption. For this energy company, the Project Lead identified capital assets as one such area. They noted, “A lot could be there in SAP, which would help [capital assets], but since we use our inbuilt solutions for assets, I think that could be a big area as well.”
Embracing digital technology is not about replacing traditional methods but enhancing them to drive efficiency and strategic decision-making. If companies like this North American energy company can overcome the initial resistance and embrace the tools at their disposal, they can unlock untapped potential within their financial management operations. The energy sector, much like any other industry, can benefit greatly from the features SAP and similar systems offer. The key lies in taking the first steps, however small, towards the future. The journey of a thousand miles, after all, begins with a single step.
What does this mean for SAPinsiders?
Fully utilize current capabilities that you have paid for to drive greater operational efficiencies. Energy companies need to move beyond the misconception that SAP is more suitable for industries like manufacturing. They should consider the full potential of the SAP system and the efficiency gains it can bring to their operations, such as improved forecasting, cash balances, and more effective management of capital assets.
Overcome resistance to change to enable automation strategies. Energy companies need to address the inherent resistance to change within the organization. This can be achieved by creating a change management plan that educates employees about the benefits of the new systems and processes, and gradually transitions them from manual to automated operations.
Consider the long-term ROI of adopting digital solutions. The energy sector is resource intensive, often causing internal teams to operate under budget constraints, which limit their ability to invest in third-party solutions. However, they should consider the long-term cost efficiencies that SAP and other digital solutions from SAP partners can bring to the table. These include Solution Extensions, which may offset the initial investment over time. It might be worth allocating budget for digital transformation initiatives to ensure they have the necessary tools to operate efficiently and stay competitive in the marketplace.
Drive greater user engagement and adoption of SAP ERP with SAP Fiori. A comprehensive strategy, focused on areas yielding significant benefits with minimal disruption, can help energy companies streamline their finance processes over time. With SAP Fiori, organizations can empower their teams to work more efficiently, while mitigating the risks of a seismic shift in operations.