SAP's strategy of offering software upgrades via small enhancement packages is paying off in encouraging customers...
to upgrade to ERP 6.0, according to new research from Forrester.
The looming prospect of the end of support for R/3 4.6C is a significant factor as well.
Customers who have already upgraded to ERP 6.0 are finding that the packages, which offer more frequent software updates in smaller doses, are increasing the value of the upgrade, according to a new report by Ray Wang, principal analyst at Cambridge, Mass.-based Forrester Research. ERP 6.0 runs on NetWeaver 7.0, SAP's service-oriented architecture platform, which delivers the enhancements.
The enhancement packages simplify the upgrade process while minimizing disruptions, Wang said. Customers appreciate that they can choose just the functions they want and have to test only those enhancement packages that they decide to take. They're spending less time and money deploying the new functionality, Wang said, and they have the option of getting increased functionality every six months instead of every two to three years.
"It's been pretty minimal in terms of disruption," Wang said. "[It has] extended functionality to people waiting for it."
Customers have been quick to adopt ERP 6.0, according to Philip Say, vice president of SAP ERP solution marketing. A total of 6,700 SAP customers, about 20% of the existing customer base, have moved onto ERP 6.0. SAP has shipped 1,400 enhancement packages in the year since they became available.
"We're really encouraged by that statistic," Say said, adding that it's much higher than typical adoption rates. He did not specify what those were.
SAP currently offers three enhancement packages, which fall across four themes, according to Wang. They provide simplification and usability of the user interface by bringing together common screens and reducing the overall number of clicks per transaction, and they give customers horizontal functional enhancements like an enhanced closing cockpit, which provides automation and collaboration for financial closes.
There are also industry specific enhancements, such as catch-weight management in inventory accounting, used in the meat and dairy industries, in which weights of products can vary from piece to piece. Each package also promises to deliver new enterprise services, Wang said.
The fourth enhancement package will be in ramp-up stage in November and generally available in 2009, according to Say. It will offer, among other things, more industry-specific enhancements for discrete industries.
Many customers are planning upgrades this year because they're coming to the end of their support agreements, Wang said. Of the 131 SAP users Forrester surveyed, a third are considering an upgrade this year. The extended maintenance agreements for SAP R/3 4.6C users end in 2009.
Moving to ERP 6.0 is the only way to get the enhancement packages, Say said.
"Vendor-imposed end-of-support deadlines were one of the driving forces for considering an upgrade for 95% of the respondents who are considering upgrades," Wang wrote.
But despite his praise for the new packages, Wang said there still has to be a good business rationale for the upgrade. Beyond just vendor-imposed deadlines, look at whether you're trying to add new customers, seeking more vertical functionality, or looking to move to a better user interface. Consider the benefits of instance consolidation and shared services as a business driver to upgrade, he said.
If you're not ready to upgrade to ERP 6.0, Wang recommends seeking a customer-specific maintenance option from SAP, considering third-party maintenance, or, in a worst-case scenario, moving to another vendor.
"SAP's done everything it can from an incentive perspective to get SAP customers to upgrade," Wang said. "Now, it's a question: Do customers have the right business drivers to say [whether they] want to do an upgrade?"