The company sap


The new millennium focuses on proven methods and lessons learned from dealing with projects in diverse industries and settings. It brings new technology opportunities to the industrial environment. Projects like implementing SAP should address issues of organization, process, and technology, and explore how modern technology tools such as the internet and world wide web can support effective project management and project success.


The company SAP was founded in Waldorf, Germany, in 1972 by five ex-IBM engineers. SAP stands for System, Anwendungen, Produkte in der Datenverarbeitung (Systems, Applications, Products in Data Processing). Headquartered in Waldorf, Germany, SAP employs 29,000 people in more than 50 countries. The original founders have been so successful in growing SAP into a global player such that SAP AG is now the third-largest independent software supplier in the world, with over 19,300 customers, 10 million users and 60,100 installations, including more than half of the world's top 500 companies. SAP had revenues of 7.4 billion and net income of 509 million in the year 2002 [SAP Annual Report 2002] . What made this company so successful? The first big scale product SAP launched in 1979 was SAP R/2. Running on mainframe computers, R/2 was the first integrated, enterprise wide packaged software and it was an immediate success in Germany. 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 another success for SAP, especially in the North American region into which SAP had expanded in 1988. The growth 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. These solutions are tailored to meet the specific requirements of 23 different industry categories, from aerospace and defense to utilities, giving SAP a competitive advantage that no other company can match. SAP R/3 is delivered to a customer with selected standard processes turned on, and 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. Functionality included ranges from financial accounting (e.g. general ledger, accounts receivable, accounts payable etc) and controlling (e.g. cost centers, profitability analysis etc) to sales and distribution, production planning and manufacturing, procurement and inventory management, and human resources. The start of the internet age at the end of the 90's was a big challenge for the big players of the enterprise software industry. While trying to grow at a high speed, the companies, SAP included, were racing not to miss the internet train. Businesses had to be internet-enabled, e-business quickly became the buzzword of the decade, and the software companies introduced new concepts, new products. Today, SAP offers solutions that improve virtually every aspect of business, government, and education. For example, mySAP Business Suite allows employees, customers, and business partners to work together from anywhere, at any time. SAP's customer relationship management, supply chain management, and product life-cycle management solutions help streamline critical business processes. Leading-edge technologies in such areas as technology platforms, enterprise portals, and mobility provide customers with the tools they need to work more efficiently and profitably. [SAP Annual Report 2002]

Future Requirements and New Products

Customers are increasingly looking for solutions that not only support their critical business processes and minimize risks but also deliver fast ROI and lead to a lasting reduction in IT total cost of ownership. SAP's focus has been on solutions designed for specific processes - predefined combinations of applications, services, and content for resolving urgent business problems. Trends always change according to new requirements so that software developers and companies have to work on products continuously in order to meet these requirements. What is the progress with SAP technologies? What are the new requirements and the expectations of the business in the new millennium?

  • The new business environment
  • SAP'S product strategy for next millennium
  • Sap's Business strategy: Assuring customer success
  • A Family of empowered end users

Nowadays, trends are going that products should support multi currencies also for the legal framework of monetary union. Product should have euro and integrated solution. Otherwise, it can have a less of market share because of lack of euro-compliant.

Other application areas are related to new business environments.

  1. Link the extended supply chain with the financial value line.
  2. Integrate back office and front office.
  3. Manage the extended enterprise-Real time.
SAP R/3 System

SAP R/3 pursues a flexible and modular structure of individual components. In previous page you have reviewed the general module groups such financials. If we would like to see them altogether in terms of sub modules, these individual components are as follows:

Basic System:
  • Basic components (BC)
  • Advanced business application programming (ABAP4)
Accounting System
  • Financial accounting (FI)
  • Controlling (CO)
  • Asset Management (AM)
Production and logistics
  • Sales and Distribution (SD)
  • Materials Management (MM)
  • Production Planning (PP)
  • Quality Management (QM)
  • Plant Management (PM)
  • Project System (PS)
  • Human Resources (HR)
  • Workflow (WF)
  • Industry Solutions (IS)
Similarities in All R/3 Methodologies

All methodologies for implementing SAP software have a few common elements. First and most important, they are all structured. They consist of phases, which are broken down into tasks, further broken down into activities and finally into work steps. Almost all methodologies have four phases that can generally be thought of as follows, although with different names:

  1. Initiate: This phase includes planning and costing the effort, determining the internal staff and outside help necessary, defining the scope of the implementation, and doing the initial business case justification for the undertaking.
  2. Think: This is the phase in which the current or "as-is" state of both systems and processes is analyzed and what is wanted from the "to-be" state determined.
  3. Work: In this phase, the R/3 program is actually configured to the specifics of a company's business, then tested and deployed.
  4. Watch: The watch phase entails measuring the results achieved against the expectations, and supporting , maintaining, and upgrading the system as necessary.

Accelerated SAP (ASAP) is SAP's current standard implementation methodology. It contains a roadmap, a step-by step guide that incorporates experience from many years of implementing SAP. Quality checks are incorporated at end of each phase to ensure quality of deliverables and monitor critical success factors.

Another important aspect of an SAP implementation is the implementation strategy the business decides to pursue. A strategy defining the functional scope and regional coverage of the implementation is chosen by analyzing the cost, resource requirements, risks and expected returns of the implementation. At a high level, we can define three implementation strategies: Step-by-step functional implementation, Big Bang, and site rollout. Each one has its pros and cons, and selecting a strategy requires an in depth analysis of the above mentioned criteria. The strategy should also define the business' approach and preference for technical development, i.e. adding customized code to core SAP, in form of user exits, custom transactions, and modifications. The quite opposite implementation strategy of using SAP as delivered is often referred to as "Vanilla SAP". This is a big challenge for the business to adapt the processes to the software, but results generally in minimum cost and risk for the implementation, and minimum maintenance after go-live.

Let us compare the three major implementation strategies, by its advantages and disadvantages.

Step-by-step implementation

A step-by-step implementation is characterized by the implementation of the software in small steps, and generally concentrates on the implementation of a few related modules at one time. Before adopting this approach, an overall concept must be established for all relevant business processes in order to avoid conflicts and constraints in subsequent implementations. For example, due to the complexity of its financial legacy system over several regions, a company might choose to implement certain logistics modules first (e.g. Materials Management, Sales and Distribution, Logistics Execution) and build interfaces between R/3 and the legacy systems.

  • The complexity for coordinating, controlling, and organizing the project and resources is reduced
  • A minimal amount of human resource is required for the project team and user community
  • The quality of the projects improves because the project members increase their knowledge and skills
  • A team of internal consultants can be established over time, reducing the cost of the project
  • There is a smoother changeover throughout the company: people have time to adapt to changes
  • Costs are spread over a longer period of time
  • Modest organizational changes can be considered during the implementation
  • There is a longer project throughput time
  • Interfaces must be developed to maintain existing systems
  • Integration advantages of the project can only be used step by step
  • Customizing may not be optimally set because integrating components have not yet been implemented
  • Return on investment is generally delayed
Big Bang implementation

A big bang deployment of R/3 replaces all or most critical existing systems in a single operation with the new software. Fastest by definition, the big bang had emerged as the most cost-effective and also th e riskiest solution. A majority of the SAP community would vote against simultaneous launch of all R/3 modules in conjunction with a new IT infrastructure. This approach is preferred by companies with a straightforward organizational structure or with too many systems to replace where the cost of developing interfaces would be too high.

  • Few or even no interfaces between legacy systems and the new application are needed because all modules go live at the same time
  • There is a short throughput time
  • The project members' motivation is high
  • It is highly efficient, because redundant customizing is avoided
  • There is optimal integration of all components under consideration of the integrated business processes
  • The implementation is complex due to the increased need for coordination and integration
  • It is resource intensive over a short period of time
  • All employees are subject to higher stress levels at the same time
  • A high degree of consulting support is required
  • Organizational changes must be limited in order to overcome resistance to change among employees

Roll-out refers to region or business specific extensions of an implementation after a model is created at one site or business unit, which is then used to implement to the other sites or business units. For example, a company operati ng in USA and Europe might choose to create a model for most of its functionality in USA and with a subsequent phase implement the tested approach in Europe. Similarly, a company operating multiple business units might choose to start the implementation with the one of the business units and leverage its experience. The roll-out approach can be combined with the other implementation strategies above limiting or enlarging its functional scope.

  • There is valuable experience gained by project members
  • Expertise is available for a fast implementation
  • Costs are kept low because only limited resources are needed
  • Standard business processes can be achieved by using a model implementation and leveraging the same design
  • Customization must also consider company standards for subsequent implementations
  • Site-specific requirements can be overlooked
  • Which implementation strategy to select will be affected by the time and resource (people and money) constraints. The size and scope of the effort will also affect the decision of which implementation strategy to take. Finally, there are a number of major events that may have an impact on the selection of the proper strategy. Among these are the following:

  • Mergers and divestitures
  • New legal requirements such as the recent Euro migration
  • Increasing software failures in the current system
  • A current re-engineering effort within the company
  • Austerity and cost cutting programs within the company

Overlaying these issues that affect the decision are another set of issues that affect the implementation, whichever implementation strategy is selected. To some degree, these issues will steer the selection toward one approach over another, but they will have an impact no matter which implementation strategy is selected.

Among them are the following:
  • Geography: Is the company domestic, regional, or global, and should the implementation be domestic only, regional or country-by-country?
  • Customer needs: Are certain customers, or certain sets of customers, demanding information and information transfer that your current systems are not capable of performing?
  • User needs: Which user in your company is driving the decision to obtain, install, and deploy R/3? Is it the financial community, or the IT community? IS it the sale and marketing community who are reflecting customer needs?
  • Time and urgency: If your current software systems are experiencing increased and increasingly costly failures, you need to get R/3 up and running somewhat quickly. The year 2000 problem challenged many companies at the end of 1999 to expedite their implementation in order to avoid to upgrade any legacy systems that might not have supported year 2000.
  • Legacy system impact: Different implementation strategy options have a different impact on the current system. A limited rollout for a division will probably mean that the legacy systems used by other divisions will not be decommissioned and that maintenance costs will be ongoing.
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