Automation of business processes is a necessary and probably the surest way to improve the efficiency of a company. In the market of corporate automated systems, SAP system is called the standard of quality. Maxim Matyash, Director of SAP Ukraine, told Leadership Journey how intelligent software systems from SAP increase the value of a business.
Leadership Journey (LJ): Today the term “smart enterprise” is more and more popular in the business environment, which is perceived as a symbol of the company’s innovativeness. How high is the demand for the digital transformation of business?
Maxim Matyash (M.M.): To illustrate, I will give a simple example. In the past times, to find a road, we simply asked other people to show it. Then there were maps, which for a long time were used as the main means of navigation, and then GPS navigators entered our life.
Initially, these devices could only display the positioning on the territory, and now they are able to lay the optimal route taking into account various factors (traffic jams, road repairs, road accidents). In quite a short time, and navigation will no longer be a human concern: the unmanned vehicle will deliver to the desired point without our involvement.
This simple analogy illustrates well the development path of corporate systems. We are moving from the processes performed by man manually at the enterprise — including accounting and operational accounting, to the systems controlled by artificial intelligence.
LJ: How has the automation of enterprise management systems evolved?
M.M.: It all started with the account books, where each operation was recorded on paper. Then came the era of automation: computers appeared, and a transaction system was created to record all operations. Then came the digital systems. Some operations or data are no longer manually input but are automatically filled in – for example, from MES or SCADA system. However, all three stages have a key rule; a human has always made the decision.
Automation served only as an assistant, providing information for choosing the optimal scenario. Complicated calculations were automated, but people still processed the results. Now we are standing on the threshold of the revolution when a machine will be making the decision for a human. And this is the most important step towards an automated enterprise.
LJ: What is Intelligent Enterprise in the understanding of SAP? What solutions do you propose under this concept? What tasks are they designed to solve?
M.M.: For SAP company, the creation of intelligent systems that make it possible to abandon routine operations is one of the main directions of development. We always look to the future. For us, the stage of simple automation of processes has already been passed. SAP itself needed a new concept for its internal transformation. That is why we first tested the new ERP generation on ourselves. Now we are looking further – in the direction of “smart” or “intellectual enterprise”.
It is this concept that formed the basis of the digital transformation that we are now offering to our customers.
The change in ERP is dictated by the demand of enterprises that are aware of the need to transform internal processes. Users have a qualitatively new experience in communicating with information systems that contrast with classic corporate management systems. In private life, we play, communicate, buy, watch, and in every process, we encounter information systems. They are intuitively clear and easy to use, fast and do not require complex configuration or implementation. We are anticipating the same from corporate systems. In addition to innovation in customer experience, business processes and business models, technologies came to be added to the corporate landscape, and in particular to ERP. Gradually, a new generation of ERP system was born: a new interface, new technologies, new scenarios and the opportunity to experiment were added to our basic ERP system, SAP S / 4HANA.
LJ: How would you describe a perfect digital enterprise management system?
M.M.: Such a system includes two components. The first is the transactional system, which is the foundation of the business. Stability is its main feature. The changes introduced should not violate the continuity of the company’s main processes: personnel management, financial management, procurement, and logistics processes, etc. In these areas, the experiments are painful, which makes a frequent introduction of innovations impossible.
Of course, the issue of introducing new technologies into the basic business processes come to the forefront. This implies a constant change in systems and may adversely affect the stability of the company. To expand the basic processes in SAP, a new concept was developed – a system of innovations. It includes the most actual and progressive technologies: Experience Management, Customer and Employee Experience, Big Data, Machine Learning, IoT, Blockchain.
In particular, one of the most important areas for development, which determines nowadays business success, is managing the experience and emotions of customers and employees.
Operational data (O-Data), such as costs, revenues, and sales, which are collected in ERP, CRM, HR-systems, show what happens in the business. But the data of experience (X-Data) are very important, which allows you to understand the feelings and emotions of the people involved, as well as the causes of what is happening. There comes a time of emotional artificial intelligence.
SAP Experience Management solutions combine X-Data and O-Data. By collecting experience data at every significant point of contact, you can now analyze and understand where there are gaps in experience, and further determine what needs to be done with this in order to improve the quality of customer service, staff, products, and brands.
Now, an approach that combines a transactional system and a system of innovations allows for the implementation of various scenarios that were previously unavailable in the corporate business applications. These are, for example, personal client offers (in terms of Experience Management and Customer Experience), pattern and voice recognition, autonomous robots (Machine Learning), and the collection and analysis of sensor information (IoT).
LJ: What is the effect of the synergy of these two approaches?
M.M.: Stability of skeletal business processes, flexibility, and dynamism in interaction with markets, customers and employees.
The integration allows the use of small parts (services) of the innovation system in the transaction system and vice versa. For example, when there is a task to switch to predictive maintenance, first in the system of innovations, the condition of the equipment is analyzed, and in the transactional system, repair orders are analyzed.
And if it is necessary to forecast sales taking into account external information (market trends, exchange rates), then it is most convenient to do this in the innovation system and then transfer the data to the transaction system. At the same time, external data analysis is carried out using a special algorithm based on machine learning technologies.
In this case, it is very important to effectively use the advantages of On-Premise and Cloud technologies. The hybrid approach leverages the strengths of each model: a stable core deployed within the company, and an innovative platform in the cloud for conducting experiments, using Open Source technologies and for dramatically reducing the time to develop new solutions. The physical processes occurring in the company are also important, which are usually completely independent of the ERP class systems. The fullness of the warehouse, the condition of the production, the location of the transport that delivers the finished products – the usual ERP-system learns these data post factum, after input of the relevant information.
LJ: What kind of intelligent management system is a “smart enterprise” according to SAP?
M.M.: This is a world consisting of machines, equipment, and sensors, connected to a digital core, in our case — to the SAP S / 4HANA system, and providing real-time transmission of information to the transaction system and receiving feedback from it.
What do we put into this concept? Smart Enterprise is an integrated set of applications covering the most important business functions: customer interaction, manufacturing, and supply chain, digital core, people (company employees) involvement, and cost management.
In addition, the unified SAP HANA data management platform and the SAP Cloud Platform development environment, deep data integration is provided across the entire solution package.
And finally, the complex incorporates intelligent technologies that are part of SAP Leonardo, such as machine learning and advanced analytics, IoT, Blockchain.
In the concept of “smart enterprise”, ERP is no longer just an accounting transaction system. Information from the sensors goes directly to the S / 4HANA system, allowing you to perform the necessary transactions in real-time. Machine learning algorithms are being implemented in all areas of a company. About 80% of all transactions in the system should be automated using artificial intelligence. Although this figure is a relative indicator, it gives a binding to tangible and measurable criteria.
LJ: To what extent do Ukrainian companies need a digital transformation of business now?
M.M.: Any company in its quest for success needs digital transformation. Today, digital transformation is a necessary condition for maintaining competitiveness and a tool that opens up new development prospects for businesses. At the same time, you need to understand that at least a minimal automation of business processes is necessary for a digital transformation of a company. Without this, digital data processing is simply impossible. You can create a digital “smart enterprise” only if this process is launched by company management and involves employees at all levels.
LJ: Who in the company should be the driver of such transformations? Is there a dedicated role for innovation in business?
M.M.: The creation of a “smart enterprise” begins with the understanding that in digital transformation, not technology, but the business strategy and rethinking of business opportunities offered by modern technologies play the major role. This is a central idea.
Digital transformation requires businesses to update their strategic thinking in the first place. This is done precisely by updating the IT infrastructure of the enterprise and modern IT tools to manage internal and external processes in an enterprise, including interaction at all levels of communication — with suppliers, customers, and staff. This idea is manifested in the changing role of technology leadership in business. In the traditional sense, the role of a Chief Information Officer, or CIO, is to use technology to optimize processes, reduce risks, and improve management of an existing business.
And the new position of Chief Digital Officer (CDO) is more strategic, it focuses on using technology to rethink and update the core business.
LJ: Are there any companies in Ukraine that can already be classified as “intellectual enterprises”?
M.M.: In Ukraine, many companies have embarked on this path, and not only industrial giants. We are talking about enterprises for which digital transformation is the basis of a business development strategy for the next 5–10 years. Some of our clients are actively investing in business development, by introducing new IT technologies, but more needs to be done so that Ukrainian companies could be rightfully called Intelligent Enterprise.
To illustrate, I would mention the example of the Metinvest Group, which has transferred all SAP systems of its enterprises to a cloud platform, thereby becoming the first Ukrainian user of the SAP HANA Enterprise Cloud (SAP HEC). This project was recognized as the largest in terms of volume in Central and Eastern Europe: 138 systems and more than 18,000 users operate in the cloud. Moreover, Metinvest allocated the IT function to a separate company, Metinvest Digital, which plays the role of the Competence Center for the implementation and deployment of innovative projects, such as personnel management (SAP Success Factors), collaboration with suppliers (SAP Ariba), mobile management equipment maintenance teams (SAP MRS), etc.
Pharmaceutical company “Darnitsa” is introducing a unified electronic document management system to form a registration dossier for medicines and control quality management processes.
“Farmak” has implemented a cloud solution for personnel management, by automating the processes of setting goals and evaluating their implementation, assessing competencies, developing individual development plans and managing personnel reserve. As a result, it was possible for the employees to have a clear picture of how the fulfillment of their goals affects the results of the entire company.
The list of Ukrainian enterprises with a focus on digital transformation is constantly updated.
LJ: Cloud services have already entered our lives as a technological opportunity designed to speed up and simplify many processes. Nevertheless, many entrepreneurs and companies do not use cloud storage for fear of information leakage. Are such fears justified when using SAP products?
M.M.: The most reliable way to protect data is to hide it where no one can find it. Alas, there is no such place. That is why data security moves from the “where” category to the “how” category: the decisive parameter is not the place of storage, but the conditions and measures ensuring the safety of information. Unlike a company’s own IT infrastructure, a cloud often is a better controlled and secure environment. Only a few companies can afford the large-scale investments needed to develop and maintain their own information security systems, while for cloud service providers, security is a priority item of expenditure that determines the relevance of their services. Competition is another important point. To stay afloat in market conditions, our company and SAP partners constantly offer customers new opportunities and solutions, unlike corporate IT departments that lack time and resources.
LJ: What prospects do you see on the Ukrainian market, what changes do you expect?
M.M.: There are strategic areas where digital transformation is an urgent task, not so much for a single company, as for an entire industry, or even the national level. Take, for example, the energy market, which is currently undergoing major changes. The new European model of the energy market will begin to work in the near future. This transition entails significant changes: the number of market players will increase, their role will change, and competition will increase. This will affect not only individual companies but also end-users of electricity. To quickly adapt to the new energy reality, Ukrainian companies need to use proven technologies and solutions to achieve their goals in the new market structure.
LJ: What transformation opportunities are appearing in the public sector of the Ukrainian economy?
M.M.: Given the European vector of development of our country, the state sector should not ignore several areas. Firstly, this is the creation of a centralized automated system for the provision of administrative services to citizens (Citizen Services System) for the Ministry of Economic Development and Trade of Ukraine. Secondly, the introduction of an automated system of the centralized state budget of Ukraine and the financial management system in the Ministry of Finance of Ukraine. Thirdly, the introduction of a unified centralized system for managing personnel, finance, procurement and other business processes of all state institutions. These systems can be hosted on G-Cloud (state cloud). Fourth, the creation of an analytical repository and Fraud Management System (fraud counteraction and management) for the State Fiscal and State Customs Services. And this list is far from being complete.
LJ: What can we expect because of the large-scale digital transformation of Ukrainian companies?
M.M.: I am sure that in the near future, digital transformation will become for Ukrainian companies, not just a fashionable term and global trend, but an understandable and indispensable process that will ultimately speed up the inflow of investments into the Ukrainian economy and help domestic companies successfully to compete in the world market.