What is Integrated Project Estimating and Pricing?
When customers and prospects request bids and proposals from companies running SAP, these requests for proposals can range from a list of relatively standard parts and services to a very large proposal requiring the bidder to create a project-plan with resources like people, material, tools, travel and other direct costs, scheduled over years to decades to cover the various phases of the proposed project. Larger proposals or cost estimates which require a project to schedule, manage, cost, and price each resource over time require an integrated solution for project-based pricing and estimating or “iPE” for short.
What is Twenty5’s iPE solution, in summary?
In a nutshell - Twenty5’s iPE solution is a project-based cost estimating and pricing add-on to SAP built using SAP Cloud Platform (SCP) & SAP HANA. iPE combines the rich cost history from SAP ERP with the speed and power of SAP’s HANA DB to provide a responsive, intuitive, web-based user experience for proposal teams and cost estimators to quickly build complex proposals. These proposals typically range from millions to billions of $ in value, are put together by global teams working in many countries and currencies, and are based on projects covering ten of thousands of cost estimates spanning years of program delivery, for clients such as the US Govt. who require detailed “basis of estimates”, or a detailed accounting for each estimated cost and price.
Who are the executives that benefit the most from this solution?
The typical business sponsor for a Pricing and Estimating capability would be someone like:
VP of Project Cost Control/Mgmt
VP of Business Development
VP of Pricing & Estimating
Other important influencers for a solution like this would be the CFO, COO, VP Engineering, and VP Manufacturing, because cost estimators from both engineering and manufacturing are normally involved in large proposal responses.
While IT is not necessarily the target audience there are a lot of benefits for the solution from an IT perspective as well, including facilitating SAP HANA as a database, combining support and infrastructure with the client's existing SAP basis resources, and a simple, scalable, enterprise-grade architecture.
What pain points does the solution address?
Twenty5’s iPE solution addresses the end-to-end process for building, costing and pricing of a project-based proposal. Without iPE, responding to a large proposal involves lots of spreadsheets and emails going back and forth around global teams, under tight timelines, with a heavy reliance on tribal knowledge or “I remember Sidney did a similar project to this four years ago on the New York bid”. Instead, iPE relies on a central, global cost model in HANA, with inputs from subject matter experts managed by workflow, to allow SAP A&D companies to:
Bid with confidence
Streamline and simplify the proposal business process
Drive best practices, re-use and limit bias
Force issues to the surface early in the bid response process
Understand uncertainty, manage risks and keep track of confidence
Avoid reliance on lots of different databases, extracts or spreadsheets
Achieve DFARS compliance (Section 252.215-7002 Cost Estimating System Requirements and 10 U.S. Code § 2306a - Cost or pricing data: truth in negotiations (TINA)
Does Twenty5’s solution work for both government and commercial bids?
Yes, absolutely. iPE was co-innovated with a customer which is split 50% commercial and 50% defense. It is important because there are fundamental differences between the two segments - with government bids requiring more strict controls as well as capturing of details (BOEs) behind each cost estimate to explain and justify how the costs were calculated (e.g. latest purchase order, closest quantity, etc.), whereas commercial bids typically require more flexibility and less strict controls, such as the ability to change rates more freely, etc.
Is iPE from Twenty5 U.S. DoD DFARS compliant?
While DCAA/DCMA does NOT certify specific software applications, but rather the implementation of software tools and their usage. Twenty5’s solution meets all the key DFARS Section 252.215-7002 Cost Estimating System Requirements and 10 U.S. Code § 2306a - Cost or pricing data: truth in negotiations (TINA) as follows:
Their workflow provides clear accountability for preparation, review and approval of each estimate, with adequate controls in place for management review and compliance verification as part of the configurable proposal response plan
The source and estimating methods used for each cost estimate - such as which historical purchase order was used as the basis for a material cost estimate - are automatically tracked within the system. Manual adjustments to estimates are tracked with comments and change histories
Estimating, costing and pricing techniques are built into how the application is configured and are consequently more consistent as compared to a manual or Excel-based approach
Historical experience, whether in the form of historical purchase orders or vendor contracts, production order actual confirmations or hours booked to similar project tasks or WBS elements in the past, are strongly leveraged by the tool during cost estimating
Duplicate costs, omissions, errors and costs which need to be changed due to new requirements or events (such as for example a new vendor quotation was received) can be marked and resolved in a timely manner with full audit trail, review and approval
Updates to cost estimates can be tracked and relevant persons notified for review, approval and incorporation through the use of workflow and proposal version management
Independent assessments including risk assessments, comparables, top down vs. bottom-up and sanity-checks can be carried out on the cost estimates at any time
Proposals are generally compliant with solicitations through the use of requirements tracking and managing requirements vs. WBS or organizational break-downs
Twenty5’s application is by definition integrated with a customer’s existing management information systems including and especially SAP ERP
Which industries does iPE address?
While Twenty5’s solution was originally conceived for A&D companies, it also addresses the vast majority of requirements for any project-based proposal costing and pricing such as HighTech, Engineering & Construction, Industrial Machinery & Equipment, and Professional Services. And because iPE is built as an open platform, any smaller gaps can typically be addressed during an implementation project.
How does iPE address globalization requirements?
Twenty5’s solution is built from the ground up for handling global requirements.
Proposals can be built with your entire global organization contributing to each bid. Each organization can maintain its inputs using local resources, rates, costing sheets, and currencies. As the inputs are being rolled up into an overall bid, currencies and calendars are converted automatically.
iPE from Twenty5 supports multi-currency in a sophisticated manner where every proposal can be viewed in the customer’s currency, primary company currency, and/or source currency.
Customer currency is the currency in which the proposal will be sold in
Company currency is the currency in which the company is evaluating the bid in, e.g. a US-based company will probably evaluate all their bids in USD, even though they are selling a program to for example a Canadian customer.
Source currency is the currency in which the cost will be incurred. If the company is using Australian colleagues to build a piece of software, or they are buying some parts from Australia, they will pay them in AUD, even though the project is managed in the US. Retaining the source currency is important as when your customer builds a strategy for currency hedging they must understand cash-flow by each source currency.
iPE manages exchange rate conversions between all these currencies, including integration to SAP’s exchange rates, freezing of rates and handling hedging and currency fluctuation buffers.
Currently, iPE is only available in English but the platform is enabled for easy translation, so Twenty5 will perform the translation as part of the implementation for any non-English speaking customers.
Does the solution have a trial or evaluation option?
Twenty5 is able to support a 6-week “Pricing & Estimating Capability Assessment with an iPE prototype” for a fixed fee of $15k, which includes:
Maturity assessment questionnaires
Data quality assessment
Review of the client current tools & technology
End state architecture design
Data load templates and uploading your company's sanitized SAP data for prototyping
Prototype configuration (workflows, user roles, reports, etc.) to match the client's main requirements
This prototype can be deployed and integrated with your SAP ERP system for a small additional cost (if you have a licensed SAP HANA DB platform available).
Demos and introductory education are free of charge.
What does a typical implementation look like?
A typical implementation would last about 4-9 months and would address all the main pillars of people, processes, systems, and data.
PEOPLE - Change Management & Training - ensuring alignment is in place between major stakeholders and ensuring sufficient Executive alignment and buy-in, Training for super users and end-users, Process documentation, and Communication.
PROCESS - Establish Best Practices - find agreement within the organization how to best estimate certain costs, knowing that PMO’s will be responsible for program delivery against the estimated cost targets. As this solution is capable of estimating in lots of different ways, it is important to clearly document these processes and policies.
SYSTEMS & TECHNOLOGY - deployment of Twenty5’s iPE solution either in the cloud or on-premise, on the customer’s main SAP HANA database or as a sidecar HANA database. Configuration of the various options within the tool including “plugging in” custom APIs to read cost and price data from external non-SAP sources such as legacy procurement systems.
DATA - Technical Integration - though Twenty5 has standard interfaces established with SAP for the ~25 data objects shared with SAP ERP, there will always be some variations as well as non-SAP systems that feed data. Master data such as customers, suppliers, materials, and resources/resource groups should also be synchronized with the appropriate SAP or non-SAP source system. Customers can choose to convert historical proposals or not into the new system. While master data is always synchronized or converted, transaction data such as historical proposals are often left in their various legacy systems for referential purposes, thus simplifying data migration efforts.
In the case of a very large organization with a multi-stage roll-out, the 4-9 months refers to the time to the first go-live.
Does iPE require S/4HANA?
Twenty5’s solution works with any of SAP S/4HANA, SAP Suite on HANA, and SAP ECC. The only technology requirement is that iPE requires that the data which is used for cost estimating purposes (such as a view of purchase and production order history) is stored on a SAP HANA database for performance reasons. This can be achieved with a HANA sidecar or BI instance running on HANA if the customer is running ECC, similar to how BW on HANA can be used with ECC.
Does iPE require configuration changes to the underlying ERP?
A big benefit here is that Twenty5’s solution does NOT require configuration changes to the customer’s underlying SAP ERP system. It is a true add-on and is designed to work with the customer’s SAP system however it is configured.
One reason that Twenty5’s iPE solution is a true add-on is that their integrations with ERP are mainly for the purpose of reading data such as rates, BOM’s, materials, customers, purchase orders, routings, production orders, etc. The number of processes that update data in SAP ERP, such as the creation of a program estimating planned project cost baseline in SAP, are few and can be customized as needed based on each customer’s ERP configuration.
Can iPE be extended if there are customer unique estimating requirements?
Twenty5’s solution is called a platform, as it is anticipated that every large customer will have unique estimating sources and strategies.
First of all, the iPE platform comes with a rich set of configuration options, similar to how SAP is designed. So by just adjusting those configuration settings the software will start behaving differently based on each customer’s requirements.
Secondly, the system is built with external API definitions, so that bigger customers can have their own unique estimating sources and strategies “plugged in”. A common scenario for this would be that only a subset of the purchase order history is captured in the SAP ERP system. Furthermore, the open architecture allows partners to extend the solution by building add-ons to address specific estimating use cases.
Can the solution only be deployed in the cloud?
iPE from Twenty5 can be run as a cloud solution or deployed as an on-premise web solution. Regardless, the software runs in any modern browser, but the main difference is the delivery of the code. Twenty5 supports both models.
The solution can also be deployed in a secure cloud, hosted by secure cloud providers such as AWS GovCloud or SAP NS2
How is iPE licensed and how much does it cost?
Twenty5 normally sells iPE on a subscription basis, with clients paying SAP for the underlying SAP SCP & HANA technology, paying Twenty5 for the iPE application, and then paying a third-party integrator for implementation services. Twenty5 sells iPE on an annual subscription basis with the price depending on the size of the company or company segment using iPE.
How does Twenty5 support iPE?
Twenty5’s support is split into product support which is included in the subscription and implementation support which is provided on top normally by a third-party integrator.
Twenty5 provides standard support for level 2-3 response, with SLA response-time agreements per each customer’s internal IT helpdesk policies. Product support including code fix and test, upgrades, and enhancements are included in Twenty5’s subscription or maintenance costs. Support tickets are not currently routed via OSS, rather each customer should provide Twenty5’s developers with remote access to their existing IT helpdesk ticket system.
Twenty5 has a single code-base and will design customer-requested enhancements as product-based enhancements, making such enhancements available to all clients at the same time. While cloud-based users of iPE will immediately benefit from such enhancements, on-premise clients of iPE can decide when to upgrade their applications to the latest version.
In terms of services, Twenty5 is primarily a software company and is proactively working with other system integrators such as PWC, Delaware, SAP consulting, and Accenture to do the bulk of the implementation work. Twenty5 will perform or lead pilot/lighthouse implementations such as new industries or use-cases, and will provide a quality assurance service during implementations led by other system integrators, to ensure the successful delivery of the project.