ROI for SAP ERP 2004 vs. R/3 Enterprise
We're comparing SAP ERP 2004 vs. R/3 Enterprise. We are debating on what to use for a major project that is in the realization phase. There is no prior installation to upgrade. This is a brand new implementation with quite a few interfaces between SAP and non-SAP systems. What are the pros and cons of using one over the other? We are particularly concerned about the fact that there aren't many customers of SAP that are running on ERP 2004 and therefore do not want to be the first few to venture and face issues.

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Admittedly, it is tough to be the first of several customers on a new platform. The risks of this have to be weighed systematically against the rewards. Does the new platform offers business advantages that could not be obtained from R/3? If so, do these business benefits outweigh the potential risks of the newer platform?

Here's where you may want to look for quantified value, with the first being more direct (hard) benefits, followed by the more indirect (soft) benefits:

1) Can the new system provide lower total cost of ownership (TCO) – many times, the latest upgrades provide systems that are easier to manage and maintain than prior versions, are faster and require less hardware, or are licensed differently leading to lower support and administrative costs. For TCO to be lower, look for savings in:

a. Less server hardware required to host the application
b. Lower database size or less instances
c. Less development / test staff for application customization / integration
d. Less application software annual maintenance and support fees
e. Lower application / database administration and support costs
f. Lower IT operations and support staff managing the infrastructure
g. Avoidance of consulting and professional services / mission critical support fees
h. Lower bandwidth consumption

2) Streamlined business processes – with system upgrades new capabilities are provided, helping to streamline and automate additional business processes or share data to optimize the process.

a. Additional improvements in business processes

    i. Task avoidance ii. Process fees and expenses iii. Reduced errors iv. Improved transactions

3) Improved availability and service levels – often, system upgrades can provide higher availability and service levels – as applications mature they become higher performance and more reliable (most of the time).

a. Less downtime
b. Less performance tuning
c. Improved user productivity via higher performance
d. Improved transactions via higher performance

4) Higher agility – with some system upgrades, the development and deployment team can do more with less resources, and faster.

a. Value of deploying new applications / business process improvements sooner.

This was first published in March 2006