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SAP, the company, was founded in Germany in 1972 by five ex-IBM
engineers. There are rumours around the SAP offices that in
fact some ex ICI brain boxes originally developed the SAP R2
databases as part of an internal project, on leaving the company,
they bought the rights, and the story started from there! You heard
it here first!!
In case you don't know already, SAP stands for Systeme,
Andwendungen, Produkte in der Datenverarbeitung which – translated
to Systems, Applications, Products in Data Processing. Being
incorporated in Germany, the full name of the parent company is SAP
AG. It is located in Walldorf, Germany which is close to the
beautiful town of Heidelberg. SAP has subsidiaries in over 50
countries around the world from the US to Venezuela. SAP America
(with responsibility for North America, South America and
Australia!) is located just outside Philadelphia, PA.
The original five founders have been so successful that they have
multiplied many times over such that SAP AG is now the third largest
software maker in the world, with over 17,500 customers (including
more than half of the world’s 500 top companies). SAP employs over
27,000 people worldwide today, and had revenues of $7.34 billion and
Net Income of $581 million in FY01. SAP is listed in Germany (where
it is one of the 30 stocks which make up the DAX) and on the NYSE
(ticker: SAP).
There are now 44,500 installations of SAP, in 120 countries, with
more then 10 million users!
So what made this company so successful? Back in 1979 SAP released
SAP R/2 (which runs on mainframes) into the German market. SAP R/2
was the first integrated, enterprise wide package and was an
immediate success. For years SAP stayed within the German borders
until it had penetrated practically every large German company.
Looking for more growth, SAP expanded into the remainder of Europe
during the 80’s. Towards the end of the 80’s, client-server
architecture became popular and SAP responded with the release of
SAP R/3 (in 1992). This turned out to be a killer app for SAP,
especially in the North American region into which SAP expanded in
1988.
The success of SAP R/3 in North America has been nothing short of
stunning. Within a 5 year period, the North American market went
from virtually zero to 44% of total SAP worldwide sales. SAP America
alone employs more than 3,000 people and has added the names of many
of the Fortune 500 to it’s customer list (8 of the top 10
semiconductor companies, 7 of the top 10 pharmaceutical companies
etc). SAP today is available in 46 country-specific versions,
incorporating 28 languages including Kanji and other double-byte
character languages. SAP also comes in 21 industry-specific
versions.
SAP R/3 is delivered to a customer with selected standard process
turned on, and many many other optional processes and features
turned off. At the heart of SAP R/3 are about 10,000 tables which
control the way the processes are executed. Configuration is the
process of adjusting the settings of these tables to get SAP to run
the way you want it to. Think of a radio with 10,000 dials to tune
and you’ll get the picture. Functionality included is truly
enterprise wide including: Financial Accounting (e.g. general
ledger, accounts receivable etc), Management Accounting (e.g. cost
centers, profitability analysis etc), Sales, Distribution,
Manufacturing, Production Planning, Purchasing, Human Resources,
Payroll etc etc etc. For a full description of the modules included
in SAP, see the related articles. All of these modules are tightly
integrated which – as you will find out – is a huge blessing … but
brings with it special challenges.
SAP are maintaining and increasing their dominance over their
competitors through a combination of
- embracing the internet with mySAP.com (a confusing name we
believe) to head off i2 etc
- extending their solutions with CRM to head off Siebel
- adding functionality to their industry solutions
Who is it made for? Why might I need it?
We have all heard about the large (and very large) companies who
have implemented (or are still busy implementing) SAP R/3. But SAP
is gaining acceptance by smaller companies too.
There are many reasons a company selects and implements SAP – some
are good and some are bad. The good ones include replacing an
out-dated and inefficient IT Architecture (including the CIO’s
nemesis … the burning platform), enabling business process change,
and to gain competitive advantage. The bad ones are too numerous to
go into here but would include the “why are we the only
semiconductor company without SAP” question. More on the good
reasons follows:
1. Replacing an out-dated and inefficient IT Architecture: In the
beginning, computer systems were developed by individual departments
to satisfy the requirements of that particular department. When
someone finally realized that benefits could be had by linking these
systems together, interface heaven was born. There are some
companies today with literally thousands of interfaces, each of
which needs to be maintained (assuming of course that there is
someone around who understands how they work!). Sweeping them away
and replacing them with an integrated system such as SAP can save
much money in support. Of course, if you have a burning platform as
well the question becomes even easier.
2. Enabling business process change – From the start, SAP was built
on a foundation of process best practices. Although it sounds
absurd, it is probably easier (and less expensive) to change your
companies processes to adapt to SAP than the other way around. Many
companies have reported good success from combining a SAP
implementation with a BPR project.
3. Competitive advantage – The CFO types around have heard this old
saying from the CIO types for many years now. The question still has
to be asked … can you gain competitive advantage from implementing
SAP? The answer, of course, depends on the company. It seems to us,
however, that:
• being able to accurately provide delivery promise dates for
manufactured products (and meet them) doesn’t hurt … and
• being able to consolidate purchase decisions from around the globe
and use that leverage when negotiating with vendors has gotta help …
and
• being able to place kiosks in stores where individual customers
can enter their product specifications and then feed this data
directly into it’s production planning process is pretty neat
• etc etc
How much does it cost? What will it take to implement it? Wow!
There is a defining moment in the journey of all companies on the
road to SAP nirvana. This moment comes just after the company has
concluded that it want’s SAP, it needs SAP, it’s gotta have SAP …
then comes the question ‘so what does it take to implement it’?
Before being accused of being too negative, let me remind you that
at the heart of every good business decision lies a cost benefit
analysis. If this cannot be complete with a positive outcome, the
initiative (whatever it is) should probably not be launched. Same
goes for a SAP implementation.
Implementing SAP is expensive. No doubt about it. But the potential
rewards can dwarf the costs (and have for many existing customers
already). One customer reportedly made enough savings on the
procurement of a single raw material to pay for the entire
enterprise-wide SAP implementation! Of course these are hard to
substantiate, but visit SAP’s website and take a look at the
customer testimonials.
SAP sells it’s R/3 product on a ‘price per user basis’. The actual
price is negotiated between SAP and the customer and therefore
depends on numerous factors which include number of users and
modules (and other factors which are present in any negotiation).
You should check with SAP, but for a ballpark planning number you
could do worse than starting with $4000 per user. There is also an
annual support cost of about 10% which includes periodic upgrades.
Again, check with SAP.
Then there is the implementation cost. Yowser. It is about now that
you need to get the business case out again and remind yourself why
you need to do this. The major drivers of the total implementation
cost are the Timeframe, Resource Requirements and Hardware.
Timeframe – The absolute quickest implementation we have ever heard
of is 45 days … but this was for a tiny company with very few users
and no changes to the delivered SAP processes. At the other end of
the scale you get the multi-nationals who are implementing SAP over
5 to 10 years. These are not necessarily failures … many of them are
planned as successive global deployments (which seem to roll around
the globe forever). Of course the really expensive ones are those we
don’t hear about! For the most part, you should be able to get your
(single instance) project completed in a 9 to 18 month period.
People – The smallest of SAP implementations can get done on a
part-time basis without outside help. The largest swallow up
hundreds of people (sometimes over a thousand) and include whole
armies of consultants. This adds up fast. Again, get that business
case out. The types of people you will need run the range from heavy
duty techies to project managers.
Hardware – The smallest of SAP implementations probably use only
three instances (boxes) … one for the production system, one for
test, and one for development. The largest implementations have well
over 100 instances, especially if they involve multiple parallel
projects (otherwise known as a program).
Adding all this up, your SAP project can run anywhere from $400,000
to hundreds of millions of $’s. As you can see, SAP can be all
things to all companies … so it’s best to talk to them (or your
consulting firm) about your specific requirements.
Is there any help out there? What should I do next? Help From SAP AG
There is a ton of help available out there – depending on your
companies budget and culture – to help you along your journey
beginning with your strategy and ending up when you reach that
hallowed (and sometimes distant) ground of post-implementation. This
article concentrates on the help available from SAP AG. Article 5
discusses other sources of help.
SAP AG employs around 22,000 people. Although they re-organize as
often as most other companies, you can think of them as being
organized into the following four areas: Pre-Sales, Consulting,
Training and Developers.
• Pre-Sales. These are people with heavy-duty functional knowledge
of one or more SAP modules and one or more industries. They give
really excellent system demonstrations on particular areas of the
system which – while thick with pre-sales features – are an
extremely valuable source of information about SAP. I’m sure they
have many other responsibilities as well, but if you can, get a demo
from them. For an even more useful demo, ask if you can provide them
with business process scenarios that are pertinent to your business
or industry prior to the demo.
• Consulting. While also knowledgeable in SAP (of course), these are
mostly consulting types like those that can be found in the major
consulting firms. Often a team will consist of consultants from SAP
and a partner consulting firm and you will not know the difference.
Expect them to have business process and/or industry knowledge in
addition to detailed SAP knowledge. They are not readily available
to non-customers as they are usually assigned to one or more
customers. A good list of consulting partners is available in the
links section of this website.
• Training. In 1999 SAP opened up their training programs to
non-customers and non-partners. This opens up a whole world of
top-rate training programs at SAP’s facilities around the globe.
These can be expensive, however, and up to three weeks are usually
required to gain a sufficiently deep understanding of a particular
module or subject. If you have lots of time and money, you could
register for one of SAP’s ‘academies’ which are five-week crash
courses (emphasis on crash … as in burn) in one of the following
areas: FI/CO, MM/SD, and HR/ABAP. These end with an examination and
‘certification’ in your chosen area. More information on SAP
training courses can be found on SAP’s website.
• Developers. These heavy-duty techies are off limits to
non-customers. Customers can sometimes get a message to them via the
OSS system – which is an automated trouble ticket type system. If
you ever actually see one, or have one on the phone, ask all the
questions you can think of, as you may never have the chance again!
Is there any help out there? What should I do next? Help From Other
Sources
Here we will cover the help that is available from other sources,
including: Consulting Companies, SAPPHIRE and other SAP Events, ASUG,
and this website.
1. Consulting Companies
One of SAP’s key strategies has been to develop partnerships with
the Consulting Companies. This has contributed enormously to the
widespread adoption of SAP due to the fact that there are literally
thousands of consultants (SAP estimate 55,000) ready to help with
all aspects of your SAP implementation … from strategy to
completion. There are two types of consulting partners:
1. Global consulting partners (13 of these at last count) are the
largest of the consulting firms who are able to provide global
assistance to global companies, and
2. National consulting partners who are accredited by country
Your need of a consulting partner depends on your project scope and
complexity, your project budget, company culture, and prior SAP
implementation experience in your company. Suffice to say that
without heavy prior SAP experience in your company, all but the
simplest SAP implementations would benefit from the involvement of
experienced individuals who have done it before. Rates depend on
your negotiations with the consulting company, of course, but you
could do worse than use an estimate of $200 per person per hour.
Consulting styles differ from firm to firm, so make sure your
company culture is compatible with the typical approach of your
chosen consulting partner. In addition, spend some time on their
websites to get an idea of their approach, experience and
capabilities.
2. SAPPHIRE and other SAP events
SAPPHIRE is the name given to SAP’s annual user conference. Multiple
SAPPHIRE’s can be found around the globe each year, and are usually
sold out in advance. North American SAPPHIRE’s are typically held in
hot cities (off season) and attract upwards of 14,000 prospects,
customers and partners. Read up on SAPPHIRE’99 here. SAPPHIRE is a
great place to go explore, but is quite expensive at around $2,200
for three days (food, lodging, travel etc is at your own expense).
Even so, it is well worth the time and expense.
Note: SAP holds other events throughout the year (TechEd, for
example, is aimed at the more technical users) see their website for
additional details.
3. ASUG (America’s SAP User Group)
As the name suggests, ASUG is a forum for users of SAP. Non-users
(prospects and consultants) and not usually found lurking here. ASUG
actually comprises of multiple sub-ASUG’s – each focusing on a
particular area of SAP, for example there is an ASUG for High Tech
companies, and an ASUG for companies using ALE etc. Leadership of
these sub-ASUG’s (for lack of a better description) usually rotates
between members of the user community. ASUG provides opportunities
for networking, learning and influencing SAP (for example joining
forces with other users to convince SAP to include a particular
modification in their standard software). In addition to meetings
within the sub-ASUG’s, there is an annual conference (which
attracted nearly 6,000 users and vendors in 1999). More details on
ASUG can be found at www.asug.com