Omnicell is an 800-person company that makes automated solutions for medication and supply management. They run ERP 6.0 with most of the ECC components, including financials, human resources, and supply chain management.

When Sue Pranes joined the Omnicell team as Senior Director of Information Technology in 2007, the IT team had a formidable task in front of them. Their previous ERP system was over-customized and out of step with user needs. Omnicell needed a new ERP platform – one that would help them to build on their competitive strengths rather than tying them to an inflexible back end. Omnicell chose SAP ERP 6.0 and here’s what happened.

Q: How did Omnicell end up on ERP 6.0?

A: I’ve been with Omnicell about three years – right before we started our ERP 6.0 project under the leadership of CIO Jorge Taborga. When it came time to upgrade our JD Edwards system, we decided to look at other options like Oracle and SAP. One of the driving factors that led us to SAP had to do with revenue recognition. We fall under certain VSOE (Vendor-Specific Objective Evidence) guidelines. SAP could address our compliance needs through configuration – the other ERP products we looked at were not as robust.

Q: Smaller companies don’t necessarily mean shorter projects.

A: That’s true. Even though we’re a small company, our processes are similar to that of a big company when you take into account our business model. We not only do purchases, we do lease deals and other processes you would not expect in a company of 800 people. Originally we wanted a six month ERP project, but because of the complexities in the process, we made it a year long project. We implemented everything on the ECC 6 side, from order management all the way through revenue recognition. We now have 200 active SAP users across finance, manufacturing, operations, and human resources.

Q: Tell me about a key feature you installed.

A: One of the more unique areas in SAP we worked hard to implement was variant configuration (VC). Most of our products are totally configurable. Prior to our SAP installation, we could only “build to picture.” Once we got onto SAP, manufacturing actually had an accurate and complete part list for each configurable product. Then we added an external configuration tool to SAP. The sales force uses a graphical configurator to essentially build the product in front of the customer and give them a visual representation of exactly what the final product will look like. That image then translates down to the variant configuration rules that drive our pricing, our costs, and our manufacturing.

Q: Why is Variant Configuration Important to Omnicell?

A: Our business model is built around customer intimacy. We truly partner with hospitals or other companies and align ourselves with what they are trying to do. On the systems side, that attitude carries over to the variable configuration – they can’t get that kind of personalized configuration from other vendors.

Q: What did it take to provide this level of customization?

A: We knew that by involving customers early in the process, we’d save everyone time and money. But it wasn’t an easy thing to adapt to. Before we installed SAP’s Available to Promise (ATP) capabilities, we were kind of flying blind. We would do everything humanly possible to get the product to the customer, but we didn’t have total visibility. Now we have an ERP system that tells us exactly what is possible – or isn’t – based on our inventory, commitments from our vendors, and other variables. That’s an adjustment, but there is a payoff – using SAP VC, we achieved an initial 99% order configuration accuracy.

Q: A lot of your key IT functions were outsourced during the install – how did you manage that?

A: It’s important to have a good relationship with the outsourcers’ management team. In our case, the Fujitsu America management team is local to us. I do have a coordinator from their side that is on site full time. It’s key for the internal team to have a relationship with the offshore team. To foster that, we brought the members of the offshore team here for a couple months, so that when they went back offshore, our users had a relationship with them – they weren’t just an anonymous person on the other end of the phone.

Q: When you have the offshore team on site, how do you break the ice?

A: Throughout the ERP 6.0 project, we had a weekly lunch. When the offshore team was on site, we’d pull them into those lunches. Getting everyone outside the office is especially fun. We’re trying to have a bowling event so teams can interact outside the office too. Especially if they’re coming from offshore, we’re showing them parts of our culture, so it’s a little different when we take them to miniature golf or to Dave and Buster’s.

Nothing like Dave and Buster’s to get an offshore team comfortable.

Actually, I haven’t been able to talk them into going to Dave and Buster’s yet (laughs). Hopefully soon.

Q: How did you get your users on board with the ERP 6.0 install?

A: Before we started the project, we already had our users excited about the change. They knew about the pain points with what they had implemented before. On the older system, they had customized it to an extent where they couldn’t even support the upgrade of the system. As a result, they didn’t do all the patches or the other things you would normally do. Relying on a CRM system dating back to 2000 and an ERP system dating back to 2002 limited our users’ options.

Q: You took the involvement of business users further than most.

A: Yes we did – that’s probably why we had so much buy in from the various business units. We involved them completely in the ERP selection; we let them see all the demos; we even provided the vendors with some of our data, so that instead of seeing protypical bicycle company, our business users could see how the system would operate with our own product information. We also involved them in the selection of the implementation partner.

Q: Now that you’re live, how do you keep the lines of business happy?

A: This year, we implemented an IT governance board. The board’s job is to look at all the IT related projects across the company and drive the overall alignment. To do that, we’ve come up with a scorecard for each project. Now we can rank the different projects across the organization.

Q: How do you rank the projects? Is it according to ROI?

A: For our major ERP projects, we didn’t really focus solely on ROI – it was just something that we needed to do. But we are trying to measure some of the smaller projects, whether it’s labor savings or soft costs. That’s why our scorecard has different categories, so we can look at all the elements. One big factor is how the project fits into our strategic direction – that’s key to deciding which projects get funded or not.

Q: What types of projects get funded?

A: If it’s a regulatory requirement, you have to do it. Aside from those “no brainers,” we have seven key initiatives we map our projects into. Basically it’s a point system. We rate the cost, the impact, the risk, the project duration, and give the project an overall score. Then we put it into overall rankings with all the other projects. We have about 70 different potential projects right now, and they’re all ranked according to these seven criteria. What we wanted to avoid was “the person who yells the loudest gets their project done.” Through quantitative analysis, we avoid the perception that we only do projects for certain departments.  So far, it’s been very successful.

Q: What’s next for Omnicell based on your rankings?

A: We just did a proof of concept model to use SAP’s Business Warehouse with SharePoint 2010. The feedback on that from our business users has been very, very positive. One of their biggest frustrations is that they have to pull reporting data from SAP, from Siebel and from spreadsheets and compile it as best they can. Once we complete this SharePoint/BW installation, it will all be delivered to them as they need it. Our salespeople are on Duet, and that also integrates into SharePoint 2010, so when we are done, we will have a whole new collaborative environment where our newer technologies are integrated.

Q: That should keep you busy – any summer vacation plans?

A: Actually, I’m leaving for Mexico shortly!  New Zealand and Australia have their America’s Cup boats down in Cabo. You can get trained on an activity and race the other team. No offense to Orlando, but that should be a good time.

Have you managed an ERP 6.0 project? Have any go live tips of your own to share with our readers?