Hard to make a case for technical SAP ERP upgrades in this economy

It's getting harder to justify SAP ERP technical upgrades, but there are still ways to find a return on investment.

If you're struggling to build a business case for an SAP ERP upgrade in this recession, you're not alone.

Only about one-third of SAP customers have upgraded to ECC/ERP 6.0, according to analysts. And of those, 90% have opted to do only technical upgrades in order to save time and money, one analyst said.

"I think the economy is going to reinforce the likelihood that companies want to do a technical upgrade," said Derek Prior, research director at Boston-based AMR Research. "The bad news is, there's no business payback for doing the upgrade – the only thing you end up doing is staying on support.

"If you're saying [to the board] the business justification is staying on support -- guess what? They're going to cross you off their Christmas card list," Prior said.

But there are ways to do a technical upgrade and stay on the Christmas card list, he said -- if you get creative in finding payback.

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No one likes to use staying on support as the main justification for an upgrade. Other business drivers for SAP upgrades include the benefits of new business and technical functionality and creating a foundation for other business initiatives, according to Richard Porto, vice president of professional services for Meridian Partners LLC, an SAP services firm based in Miami Beach.

There are some support-driven reasons to upgrade that could pay off, however.

One of the drivers is mitigating the risk of receiving slower maintenance responses from SAP, according to Porto. Also, with a technical upgrade, SAP can leverage your existing resources to do the upgrade.

In turn, look to hardware replacement for cost savings. Changing the underlying hardware platform is one option, Prior said. For instance, switching to Windows operating system from Unix could substantially lower costs, he said. In turn, look into changing the application servers, such as putting in energy-saving, Linux blade-type servers.

"It could be that some of those things pay for the technical upgrade," Prior said.

Mindtree Ltd, a Warren, N.J.-based IT services firm, recently completed an upgrade from R/3 4.7 to ECC 6.0. It also upgraded to BI 7.0 and CRM 2007. Mindtree CIO Sudhir Reddy recommends getting more value from the SAP ERP upgrade by coinciding it with a server or landscape upgrade.

"Our servers were about three years old and due for an upgrade," Reddy said. "That, I find a very important step."

Also, having the right software tools to perform the SAP ERP upgrade will help maximize its value. Use tools like those provided by HCL, Intellicorp or Panaya to gain insight into how the current, live production system and older systems are being used, Prior said. For instance, you may find a bunch of users still licensed on the system that are no longer using it.

Those tools will also help identify how end users are using the system. If organizations have previously done a lot of customization on older versions, those tools can help them look at exactly how the standard and customized parts of the system are being used, he said.

While end users may still be active, they may not be using the system in the way that managers thought. Organizations can possibly remove some of those customized areas, Prior said, and focus the testing areas to contain costs.

"Focus on the most important areas to test," he said, "and focus away from the areas not being used."

In turn, SAP Solution Manager, offered as part of Enterprise Support, has an upgrade roadmap built into it, Prior said, noting that it's very helpful but far underutilized.

Mindtree's upgrade was driven in part by seeking business benefits. End users complained about the user experience, and Reddy wanted to create a better interface for them, using NetWeaver.

But the upgrade was also driven by another factor (and perhaps one more reason to complete the SAP technical ERP upgrade) -- not having to do any more of them.

Being on the NetWeaver platform and ERP 6.0 will allow companies to adopt SAP enhancement packages – downloadable, new functionality and, eventually, updates to the core platform. SAP has said many times this means the end of the traditional upgrade.

"SAP is claiming that this will be, at least in their term, the last upgrade," Reddy said, "after which, they say, you can upgrade in modules."

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