Airgas Makes $100 Million Annually from SAP
By Sam Sliman, President, Optimal Solutions Integration

 

It should go without saying that SAP customers – both public and private – derive serious financial benefits from implementing SAP.  Otherwise, why would 92,000 organizations bother?  Still, doubters persist, and I believe they persist because concrete data on the tangible financial benefits derived from implementing SAP are rarely publicized.  In a highly competitive world where operational secrets are held close to the vest, SAP customers are reluctant to quantify the benefits for the world to see.

 

Enter Airgas – and their stunningly direct press release that quantifies the "incremental annualized operating income” benefit related to their SAP implementation as being on the order of $75 million to $125 million.  The operative words here being “incremental” and “annualized”.  That’s right – they will make another $100 million on average, each year, indefinitely, because they implemented SAP.  Total cost = $105 million, or a tad more than a one-year payback.  Any questions?

 

Ask any CEO or CFO of a major corporation how many opportunities they have to spend a dollar and make that dollar back, in profit, within one year – and to continue making that incremental dollar annually for the foreseeable future.  Once they stop laughing, I’m sure they will tell you that these opportunities are extremely rare – in any economic environment.

 

While there are many useful tools, metrics and methodologies for measuring the performance of enterprise technology, it is not always easy or even possible to put a definitive dollar amount against this value, which makes Airgas’ recent disclosure all the more valuable to current and prospective SAP customers.

 

Read Airgas press release: Airgas Provides Update on Value of Highly-Customized SAP Implementation

 

Thanks to Airgas’ 300 internal subject-matter experts plus a full-time project team of 120 external consultants and Airgas executives and the pressure cooker of a takeover bid, SAP customers stand reassured that the monetary payoff from SAP is very real and can be quite substantial.

 

Here’s the skinny on Airgas’ SAP payoff:

 

Airgas, a large distributor of industrial, metal and specialty gasses with 2009 revenue of $3.9 billion, began implementing SAP in 2005 to consolidate its hard-goods business line. After realizing significant returns from initial portions of the project, the company decided to extend the scope of its SAP implementation, which is now scheduled for completion by 2012 and will cost approximately $105 million. Airgas’ $100 million profit boost, categorized by the company as "incremental annualized operating income upon full implementation" breaks out as follows:

These numbers are concrete and credible.  For our part, Optimal has worked with some 600 SAP customers over the past 15+ years in the SAP implementation business.  We have literally seen tens of billions of dollars invested.  And while every implementation has its unique challenges, cost and payback profile, never once has a customer questioned – was it worth it?  And now, thanks to Airgas, we understand why.