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Customers upgrade to SAP ERP 6.0 for support, software consolidation

SAP customers are upgrading to SAP ERP 6.0 for systems support and software consolidation.

Customers upgrading to SAP ERP 6.0 are doing so primarily because they've reached the end of their extended support agreements for R/3 4.6C, analysts say.

"When you survey people, functionality is the No. 1 reason [people say] they're upgrading," said Jim Shepherd, senior vice president of research at Boston-based AMR Research. "And they're always lying."

SAP is ending extended support agreements for its R/3 4.6C products next year. In February, SAP announced it was ending its lower-cost support option, and offering support at 22% of license fees instead of 17%. For an additional 2% fee, R/3 4.7 users can extend maintenance until March 2010.

But analysts agree there are other reasons to upgrade to SAP ERP 6.0 besides being pushed off R/3 4.6C, or even 4.7.

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Foremost among those reasons is consolidating software instances. According to Ray Wang, principal analyst with Cambridge, Mass.-based Forrester Research, consolidating instances will facilitate a better return on investment (ROI). It allows faster and more accurate production of orders, consistent customer experiences, decreased error rates and facilitated compliance.

Yvonne Genovese, vice president and distinguished analyst with Stamford, Conn.-based Gartner Research, said clients are finding they have dozens of instances of SAP running in their organizations, and reducing those is a strong driver for an upgrade.

In addition, ERP 6.0 offers new functionality not only in industry-specific enhancements but in horizontal enhancements like talent and travel management, Wang said.

That new functionality is a factor even 4.7 customers should consider in deciding whether to upgrade to ERP 6.0, Shepherd said. They're missing out on product improvements and adopting other parts of the SAP suite, including customer relationship management (CRM) and product lifecycle management (PLM), which may not be fully compatible with 4.7.

"There's a ton of new functionality available in ERP 6.0 that they don't have available to them," Shepherd said.

SAP customers should also be pulled toward ERP 6.0 because of NetWeaver, the service-oriented architecture (SOA) platform on which it runs.

"People want to start using NetWeaver capabilities," Genovese said.

NetWeaver has made the upgrade process easier as well. Customers on ERP 6.0 get upgrades faster and cheaper because of SAP's enhancement packages, Wang said. Upgrades are delivered through the NetWeaver platform and offer customers the ability to adopt the new functionality they want in packages and pass by those that they don't need.

As more customers become aware of the enhancement packages, more are moving toward an upgrade now so that it'll be easier down the road, according to Shepherd.

"They want to get onto that 6.0 platform so, in the future, they're not facing another major upgrade," he said.

ERP 6.0 also has a much simpler user interface.

"There's a new look and feel, and look and feel is always important," Shepherd said. "SAP has made significant improvements in the usability of the system since 4.6C or 4.7."

If you're struggling to find reasons to move, analysts say you're not alone.

And SAP isn't going to stop supporting you.

"Yes, they will charge them more money, and they can't ensure those old releases will run on new technologies," Shepherd said. "It sort of takes both the carrot and the stick to get companies to move. The vendors have this problem of [wanting] to annoy customers enough that they'll move forward."

If you won't, or can't, upgrade, there are other options available.

Wang recommends negotiating for customer-specific support. Siemens, the German electronics and electrical engineering giant, is still on SAP R/2, with customer-specific maintenance, he said.

Or customers can look to third-party maintenance providers. Las Vegas-based Rimini Street plans to support SAP customers on R/3 software by early 2009, Wang said. And San Francisco-based SYSTIME already supports R/3 customers.

If worse comes to worst, he said, customers could contemplate a full applications replacement – but don't do that unless you're serious enough to actually switch vendors.

"SAP has a very good track record of keeping its customers," Shepherd said. "You almost never hear of anyone replacing it. For the most part, customers grudgingly move forward."

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