In a classic tale of vendor lock-in, Northern Gas Networks (NGN) has invested so heavily in SAP that it make little sense to purchasing heads to do anything other than sign off on a new £6m software license.
NGN, a private sector company that is regulated under public procurement, has just awarded SAP a contract worth £5,985,385.60 over five years. (We'd love to have been in the room when they were fighting over the last 60p.)
The company delivers gas to 2.7 million homes and businesses in the North East, Northern Cumbria and much of Yorkshire through a vast network of underground pipes. It has total revenue of £409m and assets worth £2.1bn.
NGN pretty much had to go with SAP once more. The tender notice says: "Without this renewal, NGN will lose access to key critical business applications like SuccessFactors… The optimal approach is to continue using SAP products, as the alternative would be a re-implementation of new technology, infrastructure and middleware, plus integration with our back end ERP... the development of these apps, along with the integration into ERP has taken over 2 years."
It's perhaps understandable NGN wants to stick rather than twist as it has "invested heavily in SAP Hana and licences to optimise its ability to capture regulatory and non-regulatory data via on-premise/cloud software and applications".
Furthermore, NGN "intend[s] to extend the agreement with SAP and expand the scope of their SAP licensing model" to meet strategic objectives.
But despite this expansion in SAP licence spending, the gas network believes it can save money overall. Efficiencies through SAP include "information reporting and processing" that it said "are now dramatically quicker. For example, payroll has reduced from six hours to five minutes, and outstanding escape reports can be accessed in real-time, whereas previously, it would take eight hours," according to NGN's 2021-2026 Business Plan [PDF] published earlier this year.
Meanwhile, standardised, simplified processes across the business have removed manual processing of information, NGN added.
NGN's Business Plan also states IT operating costs have fallen from a high of £12.2m to £6.6m, a reduction of 45 per cent. Overall, it expects IT and telecoms spend to fall from an average of £8.6m over the last six years to £7.2 million in 2021/22.
NGN's software investments include Ariba, Concur, SuccessFactors, and Analytics Cloud from SAP but it also runs also OpenText content management and Microsoft Office 365 applications. Its SCADA control systems run on AWS' public cloud.
The gas infrastructure company now plans to use its SAP S4/HANA platform for more access to real-time data, artificial intelligence, automation, Internet of Things and predictive analytics, according to its five-year plan. NGN began migrating from ECC 6.0 to SAP S4/HANA in 2017 and has been running SAP since 2005.
Our only consolation maybe that Sod's Law of megaprojects will eventually kick in and what can go wrong will go wrong. Watch this space. ®