Pacific Coast Building Products, a manufacturer, distributer, and installer of commercial and residential building products, implemented an SAP system in 2000 in large part to connect its approximately 100 disparate businesses around the western US and Canada. CIO Mike O’Dell explains the SAP implementation came in on time and under budget thanks to a talented and hard-working IT organization. After the implementation, the company set up its SAP team to function as a shared services organization supporting the various businesses of Pacific Coast, implementing new SAP functionality, and supporting users as needed.

When the recession hit in 2008, however, it was fueled by a housing market crash that basically crippled the building supply industry. Pacific Coast was cutting back wherever it could, and, as CIO, O’Dell was getting a lot of pressure to start cutting IT staff, which he dreaded after spending so much time building such a talented team.

“The question became how we could afford to keep the talent we had in light of the dramatic decline in the building materials market,” O’Dell says.  

At the time, O’Dell was serving as chairman of the ASUG user group and was hearing many SAP users say they were struggling with the costs to implement or maintain their ERP systems in the down market. Their IT organizations were being slashed while their executive teams sought more ROI out of their IT investments, but outsourcing SAP services to consulting firms was too expensive in many cases.

A conversation with a CFO after a speaking engagement led O’Dell to act on an idea he had been mulling over for a while. O’Dell was speaking to a group of CFOs about SAP implementation best practices and one of them raised the issue of cost. “How can a mid-market company continue with its SAP implementation or maintain service levels in the current economy without losing money?” the CFO asked.

 “I told him I agreed that bringing on the right talent to implement and run an SAP ERP system takes investment,” O’Dell says. “And most mid-market companies especially don’t have the resources to build that organization internally or hire a consulting firm at a time when every cost is being watched.”

But what if, O’Dell suggested to the CFO, that company shared the SAP staff and expertise of another company that had already built the right internal team and completed a number of SAP projects? More specifically, a company that had a shared-services-style SAP organization that was adept at moving from one project to another? A company that was looking for a way to keep that team challenged and busy in a down market?

A company like Pacific Coast Building Products.

The Time Is Now

That’s the basis for the concept of cooperative IT. Under this setup, one company shares its expertise — and its investment in staff and training — with another company under a contract. While it’s not a model most companies have been exposed to, at the same time, the recession was causing many companies to look at a lot of things in a new light. When it came to cost control, no idea could be taken off the table without a good look.

The CFO O’Dell was talking to went back to his office, thought about what O’Dell had said, and realized the idea was a win-win. Consulting costs just didn’t fit into his company’s IT budget, and SAP projects were stagnating and reducing the value of the SAP investment. 

“Sure enough, about a month later that CFO called me to explore the idea further,” says O’Dell. Before signing on, however, the client company gave Pacific Coast’s IT team a short list of SAP-related tasks to complete without telling them what their current support partner was planning to bill for those same tasks.

“We completed the tasks easily and it turns out we did them at about 10 percent of the cost that their existing support partner had quoted them,” says Randy Subryan, an enterprise architect at Pacific Coast.

That was all the evidence that the CFO needed. Pacific Coast began working with its new client. The goal at first was support and maintenance — simply keep that company’s SAP system running effectively while reducing the company’s costs. Pacific Coast’s SAP team took over the client’s day-to-day SAP support, monitoring the systems, providing help desk support, and installing Support Packages to keep the applications running smoothly.

“We made some basic performance and cost suggestions, such as avoiding scheduled backups in the middle of the day so the system runs more smoothly,” says O’Dell.

It wasn’t long before the client wanted the Pacific Coast team to implement a new solution into its SAP landscape. O’Dell says that after a close examination, the Pacific Coast team determined that based on the company’s current configuration, new implementations would be fairly complicated and lengthy. “We told them that if it were us, we’d probably just reimplement the existing system using current best practices, adding in the new functionality they wanted,” he says. “We thought that would be much more efficient and cost effective for them. And it was.”

A Different Motivation

That example accurately describes what makes the cooperative IT model a win-win — the motivation of the support staff. These are the same staff members switching between internal Pacific Coast projects and external client projects, with deadlines to meet on all projects. In essence, the external customer projects are approached just as if they were projects for another subsidiary or business unit.

Anton Karnaukhov, director of information systems at Pacific Coast, says the cooperative IT model appeals to clients because when they call their help desk, there’s a common language being spoken. They are speaking to peers who, in many cases, have dealt with the same issues.

“It’s a different mindset than a traditional consulting model because our people are motivated to get all of their projects done as quickly as possible and in the best possible way for the business,” says O’Dell. “We have multiple subsidiaries to support, so we have no incentive to park a consultant at a client to increase the hours.”

Since that initial client, the team from Pacific Coast has taken on several new customers and has created a separate unit called BestXperts that handles the external SAP work. As O’Dell explains, under the cooperative IT model, it’s the same group of employees “basically doing the same thing we would be doing if Pacific Coast had bought more companies. The only difference is we don’t own these companies, so there has to be contracts.”

O’Dell explains the staff members are, for the most part, not people that want to be “parked” at a client site. For example, one of the staffers came to Pacific Coast after a consulting career because he wanted to reduce the amount of travel he was doing and spend more time with his family. “When he heard of the BestXperts model, he expressed some concern that we were going to be sending him back out on the road 75 percent of the time,” says O’Dell. “But that’s not how the BestXperts model works.”

The majority of the work is done remotely and the clients’ physical location is a consideration when accepting work to limit the amount of travel required. The “no parking” rule actually makes the model more efficient because once a task is completed for an external client, the staffer can switch back to an internal project right away. That’s not so easy when a consultant is on site at a client and the client expects the consultant to work on their issues full time.

In the event that a BestXperts client has a request that the team does not have experience with, they do bring in outside consultants, but only those they have personal experience with or who come through a personal recommendation.  

Internal Benefits

The most direct benefit that Pacific Coast has realized from the start of cooperative IT has been IT employee retention. The additional income has taken the heat off the IT team to reduce headcount. As O’Dell explains, IT professionals like to be challenged and relish working with new technologies and on new projects. Working at an internal IT department during a down economy can limit the amount of new projects being launched.

“The average retention for an IT professional is two and a half years,” says O’Dell. Giving IT staffers new work at external clients has reinvigorated many of them, especially those that came from a consulting background. In fact, it has made Pacific Coast a top pick for IT professionals looking for the unique blend of internal and external work.

The external projects have been a chance for the Pacific Coast IT team to improve the depth and breadth of their SAP expertise, working with SAP solutions they may not have come across otherwise. The client-facing work is also a good way for IT staff to brush up on their customer service and softer IT skills.

“We treat all clients equally, but there is a shift in working with an external client as opposed to an internal department,” says Subryan. “We still bounce ideas around with the client to understand their needs like we would an internal client, but we have to do that in a more formal way with external clients. We have to be a bit more sensitive to the internal politics or issues that might be at play in other companies.”  

The additional revenue that has been generated by the cooperative IT model has brought benefits as well. Not only has the IT organization been able to avoid layoffs in a down market, but it has been able to defray some internal IT costs and actually improve its contribution to the bottom line, which has not gone unnoticed by the company’s executive management team.

“Making sure the financials work out is important, but you have to make sure that your people are taken care of first,” says O’Dell. “Because the people that are doing the work have to believe in what you’re doing. There’s got to be something in it for them.”

O’Dell says going forward there are no plans to scale back the BestXperts work when the housing market picks up again and Pacific Coast again increases its IT projects. And, he says, it will work as long as they don’t get greedy.

“The plan is to continue on with this, but to continue on at a walking pace and not a running pace,” he says.