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Commentary: Don't rush to mySAP ERP

Gartner Inc. analyst Yvonne Genovese helps answer the question on the minds of executives around the globe: When do I upgrade to mySAP ERP?

MySAP ERP this year or next? NetWeaver or WebSphere? And what is ESA? Yvonne Genovese, a SAP expert and Stamford,...

Conn.-based Gartner research vice president, has answers to tough SAP questions. With upgrades at the top of SAP to-do lists around the globe, Genovese said she isn't counseling customers to rush ahead. Rather, she is encouraging them to understand SAP's new long-term maintenance strategy, the benefits of ESA and their unique business needs. In this column, Genovese outlines the top eight priorities for SAP decision makers –- and offers advice for how to proceed.

1. When should you upgrade to mySAP ERP?

The No. 1 issue for everyone (not already running mySAP Business Suite) is justifying the timing of upgrading R/3 to mySAP ERP. Until SAP says what mySAP ERP 2005 will look like, customers are having a difficult time justifying the business case.

Yvonne Genovese

I was talking to a customer recently; they have already purchased 2% [maintenance license] at one year. They know it takes them about a year to do an end-to-end upgrade, and they were feeling the pressure to upgrade. But we don't know what's in 2005 as far as new functionality; I said I couldn't provide a justification for them to upgrade now.

I don't think that at this point there is any way I could say to a customer, "You need to upgrade by next year." I don't know that.

Although SAP has said that mySAP ERP will replace R/3 Enterprise, more than half the users will not have upgraded by 2007, due to a lack of detail provided for their business case.

2. How does the long-term maintenance strategy work?

The minute that they know mySAP ERP replaces R/3, SAP customers will be concerned with the long-term maintenance strategy. It is a 5:1:2 maintenance program. Five years of standard support. After that it's one year at 2% additional maintenance fee (17% plus 2%) and then after that an additional two years at 4% additional maintenance (17% plus 4%). We are not finding a great deal of customers who have issues with this program. Most are glad to have the planning horizon.

Compared to the other vendors, I give SAP very good marks here. Nobody else comes out and says, "It's always going to be a standard 5-1-2." PeopleSoft offered a 4-1-1 strategy when it found out it had problems with version 7.5, but that's not a standard. I haven't found one customer who has complained about that 2% or 4%.

3. Should you adopt NetWeaver?

Is it NetWeaver or WebSphere? Is NetWeaver truly good enough to be an enterprise-wise application platform? Most clients think this is a "yes" or "no" question. It isn't.

I tell them: 'NetWeaver is a given. You already paid for it. If you go and pay for WebSphere or any other platform, then you are can possibly be paying for duplicate functionality capabilities. The portal is probably one of the best ones on the market. And there was proof even before SAP acquired it that it could be used enterprise wide.

But XI? For integration? Most users are using it to extend their SAP environment. There is nothing that says it can't be used independent of that -- but there are not a lot of references who have.

4. What is Enterprise Services Architecture (ESA)?

Customers are wondering what ESA is and what its impact will be.

ESA is SAP's way of getting to service-oriented architectures. That will be the difference users will see between R/3 Enterprise and mySAP ERP.

This is an evolutionary process so the most visible differences will come in mySAP ERP 2007. SAP will be opening up the business rules engines to expose transactions and processes to NetWeaver components such as the portal, BW and XI.

At the same time, they will enhance the functionality (or change it) to be more "process oriented" -- both internal and external to the enterprise.

For more information

Get more advice from top SAP experts

Read about SAP's new 5-1-2 strategy

5. Are we locked in?

Customers are thinking, "Are we locked into SAP forever?" Well, if you buy Oracle, you are locked into the database. Frankly, most of these customers were locked in when they bought business applications, but they just didn't realize it. It's not that you are more locked in now than you ever were. You were locked in from the time you made the decisions to deploy business applications. It's very difficult to change business application vendors in the current business climate. So, yes.

6. When do I start extending mySAP ERP?

When do I start extending into SCM and CRM? If I'm going to upgrade, why don't I go ahead and do the whole Business Suite? But I have to make sure I have the justification. Is SAP CRM good enough at this point that it could replace Siebel? I have to make sure I have the justification.

The answer is that SAP -- in most of the areas -- has better than 50% of the functionality available in point solution products. It gets down to what industry you are in. SAP has done a good job of getting down to the functionality.

7. Do I deploy SAP throughout the enterprise?

SAP comes in and says, "If you are going to do the Business Suite, why don't you do it in the manufacturing site and your satellites." All-in-One has been pretty good success, but what I've seen is that they don't cover all industries and all geographic areas.

8. Are skills readily available?

There are tons of skills out there available for implementation. These are intense, high-cost, and high-revenue areas for system integrators. But, when the time comes to just do business process improvements, these are shorter projects with potentially lower costs. Then you need someone to figure out how to get closer to your business process. We don't see many large SI's wanting to participate in this part of the projects.

SAP doesn't deliver solutions. They deliver applications and technology. They kind of skirt around it by saying that they have been close with our partners for a while, and we have a building in Walldorf where they can keep offices.

But I say that the services piece of NetWeaver needs to be managed by SAP. I think Shai and the NetWeaver team understand that more than anyone. They know that they are doing is rolling out capabilities for customers to have more custom-code content—and how is that going to get supported?

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