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TESTIMONY OF
STEVE PECK
PRESIDENT
SAP PUBLIC SERVICES, INC.

BEFORE THE
HOUSE ARMED SERVICES COMMITTEE
SUBCOMMITTEE ON TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES
UNITED STATES HOUSE OF REPRESENTATIVES

REGARDING DOD BUSINESS TRANSFORMATION EFFORTS

 March 31, 2004  

Chairman Saxton, Ranking Member Meehan and Members of the Subcommittee, I am Steve Peck, President of SAP Public Services, Inc.  I appreciate the opportunity to appear before you today to share SAP's perspective on the Department of Defense's Business Transformation Efforts.

Who we are:

For the last 32 years, SAP's mission has been and continues to be: To create software that helps organizations become more efficient and better able to achieve their objectives and serve their customers.  Our hard work and focus has made SAP the third largest software company in the world and the worldwide market leader in business application software.

We employ nearly 30,000 people in 50 countries with about 5,000 people in the United States.

Tens of thousands of organizations worldwide use our software to manage their enterprise and minimize their cost of operation.

We are an active partner with the U.S. government, which uses SAP software to enhance business operations in a number of federal agencies including the Departments of Defense (Army, Navy, DLA), Homeland Security, Treasury, Interior, Energy, NASA, and GSA.

We are a strong believer in the future of the American economy and will continue to invest heavily in our U.S. operations. In fact the majority of future corporate investments will be in the United States where we continue to create jobs.

We develop open standards software to make it possible to manage the broad diversity of technologies and systems found in the market place. Our technology facilitates the integration and alignment of people, information, and business processes across organizations and technology boundaries easily integrating information and applications from virtually any source. We believe these capabilities are important because they are consistent with DoD's Net-Centric Operations and the Global Information Grid strategies. We provide a scalable, reliable, and proven infrastructure that allows open integration with all major standards.

Comprehensive, Scalable, and Secure Solutions

Our products and experience, combined with the expertise and reach from our partners, three of whom are seated beside me today, provides clients with the most comprehensive family of business solutions. We combine best-of-class functionality, complete integration, industry-specific capabilities, scalability, and easy collaboration.  Our product suite spans financials and human capital management, logistics, supplier and customer relationship management, and supply chain and product life-cycle management. We also provide decision support and analysis capabilities via business intelligence products for strategic enterprise management including balanced scorecards.

Defense & Security

In addition to core product offerings, we have also created specific solutions for Defense and Security to address the entire range of resource management and control needs across the various defense forces, security, and non-governmental organizations.  These products enable planning, building, and supporting an operating force throughout the spectrum of operations.  They enable improved management of the organization, personnel, material, and financial resources.

Our Experience and Focus

We have gained a wealth of experience in helping organizations modernize and transform to fit their strategic goals. We work with our clients and business partners to understand the drivers for change and how success can be achieved in the fastest way possible.   We currently operate and have been successful in 23 different industries. In the Aerospace and Defense industry 23 of the top 25 corporations use our software.

For instance, about four years ago Raytheon implemented our software as the overall common system to provide a single operating picture to their leaders and "one face" to the customer. This was important because the company has grown to over $10 billion through organic and acquisition & merger strategies that brought together people and systems from different organizations. By using our products, Raytheon can now access information from throughout their global operations and network of over 93,000 employees.

The Bureau of Customs and Border Protection at the Department of Homeland Security decreased the time required to reconcile their monthly rent bill from GSA from 8 days to 10 minutes. They have completed the first two phases of their SAP implementation and have realized significant efficiencies in their day-to-day operations.  Managers now query the system directly to answer their questions instead of relying on support staff to gather data.  The new paperless environment allows users to create requisitions electronically, giving procurement specialists more time to focus on their core responsibilities.  System administrators now maintain one system to do the work that formerly required six systems.

At NASA, SAP software is now used to meet core financial accounting requirements.  NASA is able to achieve three important functions:

•      On-line real time integration of US Government Standard General Ledger (USSGL) accounting as prescribed in Treasury's Financial Manual (TFM) for all financial transactions for the Agency at the document line item level of detail.

•      On-line real time integration of the procurement business process for complex long-term contracts that are incrementally funded from multiple appropriations with the Office of Management and Budget's (OMB) requirements for budget execution across fiscal years.

•      Integration through periodic allocations of the Federal Accounting Standards Advisory Board's (FASAB) full cost accounting requirements for all indirect costs of the Agency with  NASA's current budget formulation structure which does not explicitly budget all indirect costs.

The Defense Logistics Agency's Business Systems Modernization (BSM) project is modernizing financial management, order fulfillment, supply and demand planning, material management, and procurement. As part of this effort DLA reengineered its business practices adopting the commercial best practices embedded in SAP software.  This comprehensive integrated system is in use today for thousands of items of supply at all three Inventory Control Points and is on track to manage more than 4 Million items when fielding is completed.  Business processes have been improved, organizations reshaped, and the workforce re-tooled.  BSM is supporting the DLA mission today which includes operations in Afghanistan and Iraq.

The U.S. Army is using our software to build their new Global Combat Support System; as the backbone for provisioning and depot maintenance; to assemble and distribute mobile Army Surgical Hospitals and for business management in the Armaments Research Development and Engineering Center at Picatinny Arsenal, NJ.  The Army is creating an integrated logistics enterprise and continuing to get value from our solutions to enable control, visibility and sharing of technical information from factory to foxhole. We support the Army's efforts to create a logistics common operating picture (LCOP) to give joint commanders the ability to make decisions based upon real-time logistics information.

The U.S. Navy uses our software to operate and manage acquisition programs; to integrate maintenance and supply operations of aviation and ship maintenance; to provide visibility of resources across activities and optimize supply chain management; and to validate compliance with the CFO Act.  This has resulted in reductions in legacy IT and data base systems while improving data quality and adding timeliness benefits.  All independent pilot projects are being combined into a single ERP system for the Navy to standardize Navy business processes for acquisition, financial, logistics and maintenance operations. Integration of these systems is expected to improve accountability within the Navy and provide near real time information for decision making to all levels of management.

We take great pride in the fact that all of our federal customers have either succeeded or are on the road to success in their SAP implementations.  Most have taken advantage of the best practices inherent in the software, and have been able to replace significant numbers of legacy applications with our integrated application software.

Our view of challenges and opportunities:

The rapid change and innovation in technology presents some unique challenges and opportunities on how to best apply technology to support the core missions of the Defense Department.

The general trend has been to consolidate IT infrastructures, thin out server landscapes and save on resources by reducing complexity and costs. Most businesses are looking to invest more in innovation and less on maintenance of IT.  From our viewpoint the crucial issue for most large organizations is mastering complexity while ensuring integration.

In the past, laws and regulations have often required government to purchase products and services in a very specific way with detailed guidance on what is needed and how a specific solution must operate. This approach was indeed important in the past because it helped companies better understand the government needs and be able to effectively deliver on the specified requirements of any given agency or department.

Because of the investments technology companies have made and the broader adoption of technology in the private and public sectors, government now has a unique opportunity to put this innovation to work in ways that allow for faster acquisition and implementation cycles. It is now possible for government to purchase technology solutions with the end goal as the primary objective. This approach allows for the lessons learned throughout the private and public sectors to be quickly applied to achieve the desired end state. We believe this approach will lead to shorter acquisition cycles and faster results.

We also strongly recommend developing acquisition approaches and processes that are focused on what must be done, and allowing organizations to bring forward the proposed approach on how to achieve the goals. We believe this approach provides a framework for best capitalizing on the decades of best practices that have been embedded in the design of COTS products like SAP and will allow capturing the value of the investments made to create those practices.

Our experience has allowed us to bring forward insights and solutions that result in increased efficiency and effectiveness for our customers.  For certain, we understand that the end goal here is to help protect and defend our country by making sure the Department of Defense has the tools to function efficiently and to make sure our warfighters have what they need and are fully supported.

Finally, I would like to stress that SAP is fully committed to helping DoD and federal agencies achieve their clean audit opinion and business efficiency goals.  We hope that our testimony has been helpful to you, Mr. Chairman, Ranking Member and Members of the Subcommittee.

We look forward to continuing to serve as a positive and trusted advisor.

Thank you very much for the opportunity to provide these remarks.

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