Alan Wong, Global IT Director for Pulse Electronics, an electronics manufacturer based in San Diego, California, with offices across North America, Asia, and Europe, divides his IT budget into three tiers – business operations, business growth, and innovation. Like most manufacturers, the turbulence of 2020 has impacted budgets and planning for the organization that designs and manufactures a wide range of components used in products like electric vehicles, phones, industrial networks and medical equipment. As a result of the pandemic, 78% of surveyed manufacturers expect a financial impact and over half expect an impact on operations.
When budgets start to tighten, innovation is often the first thing on the chopping board. This can be problematic, as funding innovation is key to establishing differentiation and growing market share. In a survey of global industrial manufacturing CIOs, 71% report prioritizing the increased use of artificial intelligence and other digital innovations during the pandemic. However, many manufacturing CIOs are struggling to find budget for innovation while facing uncertainty.
Wong was also looking to implement business intelligence (BI) and AI technologies to strengthen the cognitive and intelligence capabilities of Pulse Electronics’ SAP system. The implementation would enable predictive analytics to derive sales insights to drive business objectives in an increasingly competitive market. Making room for this project would mean finding ways to fund it without sacrificing mission-critical business operations. “It became evident that to sufficiently fund our innovation initiatives, including adding business intelligence capabilities, we needed to take a completely different approach and immediately release some funding from one of our budget tiers,” said Wong.
His budget strategy relied heavily on eliminating low-return expenditures like operational costs and application support. In looking at the tiers of his budget, business operations stood out. Within that tier, he identified SAP software charges, upgrade costs, and add-on fees as an area of focus. Pulse Electronics uses SAP Business Suite and Business Objects for several critical functions, including finance, operations, supply chain, and warehouse management. Any interruption to SAP operations would mean a major loss of revenue.
To maintain core system stability while integrating BI capabilities, Wong made three critical moves:
- Reduced the biggest line item of spending related to SAP support: Costs related to running SAP software were eating up their operations budget and not delivering a perceived value. Their expensive support contracts didn’t even cover business-critical customizations performed on the application. Supporting the complex system internally wasn’t practical, neither was a complete rip-and-replace with a new application. Independent, third-party support provided an ideal solution allowing them to keep their ERP system, reduce business operations costs, and simplify support.
- Reinvested savings into innovation: Moving from SAP support to an experienced independent, third-party support provider resulted in an instant 50% savings on annual support fees in the business operations budget tier. Those savings allowed Wong to help fund and stand up the business intelligence project when new spending wasn’t in the plan.
- Improved quality of support including customizations: The move to third-party support not only brought cost savings that enabled the BI launch, but it also improved support quality for their SAP platform. Before, they were paying the vendor for support they couldn’t fully utilize because of their customizations. Now support for customizations is included at no extra cost. And when they have questions or issues, Wong reported, “Getting answers is significantly simpler than before.”
Wong’s strategy hinged on independent third-party support. His provider of choice, Rimini Street, stood out with an industry-leading SLA and a dedicated Primary Support Engineer assigned to each account. “As a result of the cost savings that we obtained by partnering with Rimini Street, we can invest in innovations that lead to business growth and at the same time ensure we remain competitive in the industry,” Wong explained. Pulse Electronics’ journey to realizing their goal of implementing business intelligence and AI provides a blueprint for CIOs in manufacturing to find creative ways to help fund what’s next without risking what’s essential right now.