WHAT IS SAP? THE BASIC SERIES
What is SAP?
SAP is a global software provider of Enterprise Resource Planning software applications which support business process of all sizes. SAP’s Products focus on Enterprise Resource Planning and the current version is ERP 6.0. While SAP’s products were primarily targets fortune 500 companies and now it is actively targeting small and medium sized enterprises with it’s SAP business one and SAP Business All-in-One.
Following are the different sections which will help you understand what is sap.
- Who are what is SAP?
- Cost of SAP Implementation
- SAP Training
- SAP Corporate Overview
- SAP Modules Overview
Who and / or what is SAP? How popular is it?
History of SAP
SAP the company was founded in Germany in 1972 by five ex-IBM engineers. In case you’re ever asked, SAP stands for Systeme, Andwendungen, Produkte in der Datenverarbeitung which – translated to English – means Systems, Applications,Products in Data Processing. So now you know! 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 Argentina to Venezuela (and pretty much everything in between). SAP America (with responsibility for North America, South America and Australia – go figure!) 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 and growing everyday.
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
What is the cost of SAP? What will it take to implement it?
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? What is SAP doing about it?
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.
Consulting Companies on SAP
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.
SAP TechEd and Other SAP Events
SAP TEchEd is the name given to SAP’s annual user conference. Multiple SAP techEds events can be found around the globe each year, and are usually sold out in advance. North American SAP TEched’s are typically held in hot cities (off season) and attract upwards of 14,000 prospects, customers and partners. Read up on SAPTeched Here. It 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.
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 http://www.asug.com.
SAP AG Corporate Overview (Updated August 2004)
- 3rd – SAP is the 3rd largest software company in the world
- 30,000 – Total number of people employed by SAP
- 5,400 – Number of programmers employed by SAP
- $7.024 billion – FY03 Revenue
- $1.077 million – FY03 Net Income
- 12,000 – Number of companies using SAP
- 79,800 – Number of SAP installations
- 12,000,000 – Number of people using SAP
- 120,000,000 – Total number of people in the 12,000 companies who are using SAP
- 28 – Number of languages supported by SAP
- 46 – Number of country-specific versions of SAP
- 22 – Number of industry-specific versions of SAP
- 1,000 – Number of pre-defined best practices contained in the SAP system
- 10,000 – Number of tables requiring configuration in a full SAP implementation
- 55,000 – Number of SAP experienced consultants worldwide
- 28 – Number of years ago SAP was started
- 5 – Number of people who started SAP
SAP Modules and Solutions Overview
SAP now are moving away from describing their ERP system as a set of modules, and now are using the term ‘solutions’, which is much better. Wondering what would be the ideal SAP Module you need to be in? If you visit SAP’s website (as we urge you to do) you will find that they have structured their Solutions tab as follows:
2. Human Resources
3. Customer Relationship Management
4. Supplier Relationship Management
5. Product Lifecycle Management
6. Supply Chain Management
7. Business Intelligence
If you’re still looking for that list of modules, here they are:
What is SAP FI Financial Accounting – essentially your regulatory ‘books of record’, including
1. General ledger
2. Book close
4. Accounts receivable
5. Accounts payable
7. Special ledgers
What is SAP CO Controlling – basically your internal cost/management accounting, including
1. Cost elements
2. Cost centres
3. Profit centres
4. Internal orders
5. Activity based costing
6. Product costing
What is SAP AM Asset Management – track, value and depreciate your assets, including
What is SAP PS Project Systems – manage your projects, large and small, including
1. Make to order
2. Plant shut downs (as a project)
3. Third party billing (on the back of a project)
HR Human Resources – ah yes, people, including
1. Employment history
4. Career management
5. Succession planning
What is SAP PM Plant Maintenance – maintain your equipment (e.g. a machine, an oil rig, an aircraft etc), including
3. Down time and outages
What is SAP MM Materials Management – underpins the supply chain, including
2. Purchase orders
3. Goods receipts
4. Accounts payable
5. Inventory management
7. Master raw materials, finished goods etc
What is SAP QM Quality Management – improve the quality of your goods, including
What is SAP PP Production Planning – manages your production process, including
1. Capacity planning
2. Master production scheduling
3. Material requirements planning
4. Shop floor
What is SAP SD Sales and Distribution – from order to delivery, including
2. Sales orders
4. Picking (and other warehouse processes)
What is SAP CA Cross Application – these lie on top of the individual modules, and include
1. WF – workflow
2. BW – business information warehouse
3. Office – for email
5. Industry solutions
6. New Dimension products such as CRM, PLM, SRM, APO etc