SAP says slow movement to mySAP ERP necessary

By Robert Westervelt, News Editor 17 Aug 2005 | SearchSAP.com

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SAP customers are still deliberating in great numbers over whether and when to upgrade to mySAP ERP, but the executive leading SAP's global ERP initiatives said a slow and steady movement to the latest version of SAP's software suite is anticipated.

We're not expecting customers to all move now. We are very satisfied with the numbers and it is going fully according, if not exceeding, to plan. Thomas Bauer, senior vice president of global ERP initiatives, SAP AG

More than half of SAP's customer base remain on versions of SAP R/3, older versions of its business software suite, according to several analyst firms.

But the number of customers remaining on R/3 is vague because many large firms have multiple instances of SAP running and are not migrating all at once, according to Thomas Bauer, a senior vice president at SAP in charge of global mySAP ERP initiatives.

With standard maintenance agreements set to expire at the end of 2006, SAP faces having to educate and motivate its customer base to upgrade before representatives of archrival Oracle Corp. step in.

Meanwhile, SAP is meeting or exceeding its goal of signing at least 1,000 contracts a year, with existing customers to migrate to mySAP ERP, Bauer said. That figure is in addition to the customers already licensed for mySAP.com and the mySAP Business Suite, SAP's software package for large enterprises, he said.

Bauer stepped into his role of overseeing global ERP initiatives in 2004, replacing Robert Cummings, who oversaw the introduction of R/3 Enterprise and the discontinuation of maintenance of older versions of R/3. Upgrades of mySAP ERP have continued to lag, and today SAP offers incentives to customers to make the move, including discounts of up to 70% on the old R/3 licenses.

The evolution of mySAP ERP: SAP R/3 through version 4.6c consisted of various applications on top of SAP Basis, SAP's set of middleware programs and tools. When SAP R/3 Enterprise was launched in 2002, all applications were built on top of the SAP Web Application Server. Extension sets were used to deliver new features and kept the core as stable as possible. The Web Application Server contained all the capabilities of SAP Basis. The first edition of mySAP ERP was launched in 2003 and bundled previously separate products, including SAP R/3 Enterprise, SAP Stategic Enterprise Management (SEM) and extension sets. The SAP Web Application Server was wrapped into NetWeaver, which was also introduced in 2003.  A complete architecture change took place with the introduction of mySAP ERP edition 2004. R/3 Enterprise was replaced with the introduction of ERP Central Component (SAP ECC). The SAP Business Warehouse, SAP Strategic Enterprise Management and Internet Transaction Server were also merged into SAP ECC, allowing users to run them under one instance. Architectural changes were also made to support an enterprise services architecture to transition customers to a services-oriented architecture. More than 2,300 customers are using the latest version of mySAP ERP, since it was released earlier this year, according to SAP. SAP reported a 20% growth in new ERP license deals in the second quarter of 2005.

"We're not expecting customers to all move now. We are very satisfied with the numbers and it is going fully according, if not exceeding, to plan," Bauer said. "We are convinced that speed will fully accelerate for a reason."

Some analysts believe that part of the slow migration may have been the time it took for customers to begin understanding SAP's NetWeaver technology, which was introduced in 2003. At the time, SAP executives also began telling customers to skip R/3 Enterprise and upgrade to mySAP ERP, a recommendation that customers are taking cautiously.

"SAP should be concerned," said Joshua Greenbaum, principal consultant at Berkeley, Calif.-based Enterprise Applications Consulting. "There is no doubt that there is a very large number of SAP implementations out there that have yet to make the shift, but today's complex user environments don't allow for full scale enterprise upgrades."

Bauer said a majority of customers currently on SAP R/3 versions will have made the switch to mySAP ERP by 2009. SAP's focus has been to gradually migrate customers when the need and business case can be made, he said.

Customers also tend to resist upgrades until a strong argument can be made that truly defines the reason for a move. Upgrading to mySAP ERP, using all the features of NetWeaver and finally transitioning to a service-oriented architecture, is not a small change, Greenbaum said.

"We're talking about an architectural change that's pretty significant, and no company should just jump in because their vendor says to do so," he said.

The state of the software market is also unclear, causing companies to take pause, Greenbaum said. Whether one vendor dominates or whether the market will play out to be a mixed vendor environment still remains unclear.

"SAP needs to make a better case for why NetWeaver and mySAP is right for their customers, and Oracle needs to prove the value of [Project] Fusion over NetWeaver, particularly with the jump start that SAP has," Greenbaum said.

Related information: Do I need to upgrade R/3 4.0B to mySAP ERP? Commentary: Don't rush to mySAP ERP Difference between mySAP and SAP R/3

Bauer pointed to SAP's maintenance strategy, which gradually extends maintenance for SAP R/3 Enterprise software through 2009, as being the key to slowly migrate customers to the latest version. Customers running SAP R/3 4.6c have until the end of 2006 on standard maintenance.

"We strongly want to engage with our customers and give them the best advice for their business -- what they should do and when," Bower said.

SAP is also offering a program to assess how and when a current customer should upgrade to the latest version. Accelerated Value Assessment for mySAP ERP is aimed at midsized implementations and includes an initial preparation session and on-site evaluation with SAP to determine the right time to upgrade, Bower said.

"We are providing up to 70% credit to our customers in 2005 on contract to convert to mySAP ERP," Bauer said. "They can make their move from today up until the end of 2009."

Tags: SAP implementation and upgrades,  SAP trends, strategy and ERP market share,  SAP ERP software,  VIEW ALL TAGS

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