SAP ERP
Encyclopedia
The SAP ERP application is an integrated enterprise resource planning
(ERP) software manufactured by SAP AG
that targets business software requirements of midsize and large organizations in all industries and sectors. It allows for open communication within and between all company functions.
business data system. The first name chosen for the company was not Systeme, Anwendungen und Produkte in der Datenverarbeitung (German
for "Systems, Applications and Products" or the acronym SAP) but originally Systemanalyse und Programmentwicklung (in English, "Systems analysis and programming"). It uses the concept of modules (individual programs that can be purchased, installed, and run separately, but that all extract data from the common database).
SAP AG, the company that provides the enterprise resource planning solution has upgraded the package and launched it as SAP ERP Central Component (ECC) 6.0 in 2005. The purpose of positioning it as ECC is to enable SAP to build and develop an environment of other products that can function upon the foundation of the central component.
SAP's ERP solution includes several modules that support key functional areas, including:
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 keep the core as stable as possible. The Web Application Server contained all the capabilities of SAP Basis.
As a result of marketing changes and changes in the industry, other versions of SAP have been released that address these changes. The first edition of mySAP ERP was launched in 2003 and bundled previously separate products, including SAP R/3 Enterprise, SAP Strategic 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.
SAP HANA which is a combination of inmemory software and hardware can improve data processing at extremely high speeds.
Although there can be major benefits for customers of SAP ERP, the implementation and training costs are expensive. Many companies experience problems when implementing SAP ERP software, such as: failing to specify their operation objectives, absence of a strong commitment or positive approach to change, failing to deal with organizational differences, failing to plan the change to SAP ERP properly, inadequate testing. All these factors can mean the difference between having a successful implementation of SAP ERP or an unsuccessful one.
If SAP ERP is implemented correctly an enterprise can go from its old calculations system to a fully integrated software package. Potential benefits include: efficient business process, inventory reduction, and lead time reduction.
IEEE scholar journal reports an industrial case in which the senior management successfully dealt with a troubled SAP R/3 implementation in an international fast moving consumer goods (FMCG) company during 2001 and 2002.
It is estimated that "for a Fortune 500 company, software, hardware, and consulting costs can easily exceed $100 million (around $50 million to $500 million). Large companies can also spend $50 million to $100 million on upgrades. Full implementation of all modules can take years," which also adds to the end price. Midsized companies (fewer than 1,000 employees) are more likely to spend around $10 million to $20 million at most, and small companies are not likely to have the need for a fully integrated SAP ERP system unless they have the likelihood of becoming midsized and then the same data applies as would a midsized company.
Independent studies have shown that deployment and maintenance costs of a SAP solution can greatly vary depending on the organization. For example, some point out that because of the rigid model imposed by SAP tools, a lot of customization code to adapt to the business process may have to be developed and maintained. Some others pointed out that a return on investment
could only be obtained when there was both a sufficient number of users and sufficient frequency of use. Deploying SAP itself can also involve a lot of time and resources.
and DIAG) and the http and https protocols. These systems do not have encrypted communications out of the box; however, SAP does provide a free toolkit for server-to-server communications. With the recent acquisition of relevant parts of SECUDE
, SAP can now provide cryptography libraries with SAP ERP for Secure Network Communications
and Secure Socket Layer.
Disadvantages
Enterprise resource planning
Enterprise resource planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application...
(ERP) software manufactured by SAP AG
SAP AG
SAP AG is a German software corporation that makes enterprise software to manage business operations and customer relations. Headquartered in Walldorf, Baden-Württemberg, with regional offices around the world, SAP is the market leader in enterprise application software...
that targets business software requirements of midsize and large organizations in all industries and sectors. It allows for open communication within and between all company functions.
Overview
SAP AG was founded by five former IBM employees in 1972 who wanted to create a real-timeReal-time computing
In computer science, real-time computing , or reactive computing, is the study of hardware and software systems that are subject to a "real-time constraint"— e.g. operational deadlines from event to system response. Real-time programs must guarantee response within strict time constraints...
business data system. The first name chosen for the company was not Systeme, Anwendungen und Produkte in der Datenverarbeitung (German
German language
German is a West Germanic language, related to and classified alongside English and Dutch. With an estimated 90 – 98 million native speakers, German is one of the world's major languages and is the most widely-spoken first language in the European Union....
for "Systems, Applications and Products" or the acronym SAP) but originally Systemanalyse und Programmentwicklung (in English, "Systems analysis and programming"). It uses the concept of modules (individual programs that can be purchased, installed, and run separately, but that all extract data from the common database).
SAP AG, the company that provides the enterprise resource planning solution has upgraded the package and launched it as SAP ERP Central Component (ECC) 6.0 in 2005. The purpose of positioning it as ECC is to enable SAP to build and develop an environment of other products that can function upon the foundation of the central component.
SAP's ERP solution includes several modules that support key functional areas, including:
- SAP ERP Financials
- SAP ERP Operations
- SAP ERP Human Capital ManagementSAP Human Resource Management SystemsSAP HR or SAP Human Resources or SAP HCM or SAP Human Capital Management or SAP HRMS or SAP Human Resources Management System is one of the largest modules in the SAP R/3 system which consists of many sub modules like:* Organizational Management...
Development
SAP R/3SAP R/3
SAP R/3 is the former name of the main enterprise resource planning software produced by SAP AG. It is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing.- History of...
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 keep the core as stable as possible. The Web Application Server contained all the capabilities of SAP Basis.
As a result of marketing changes and changes in the industry, other versions of SAP have been released that address these changes. The first edition of mySAP ERP was launched in 2003 and bundled previously separate products, including SAP R/3 Enterprise, SAP Strategic Enterprise Management (SEM) and extension sets. The SAP Web Application Server
SAP Web Application Server
SAP NetWeaver Application Server is a component of the NetWeaver solution which works as a web application server to SAP solutions. From the SAP point of view the Web AS is the foundation on which most of their product range runs....
was wrapped into NetWeaver
NetWeaver
SAP NetWeaver is SAP's integrated technology computing platform and is the technical foundation for many SAP applications since the SAP Business Suite. SAP NetWeaver is marketed as a service-oriented application and integration platform...
, 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.
SAP HANA which is a combination of inmemory software and hardware can improve data processing at extremely high speeds.
Implementation
SAP ERP consists of several modules including: utilities for marketing and sales, field service, product design and development, production and inventory control, human resources, finance and accounting. SAP ERP collects and combines data from the separate modules to provide the company or organization with enterprise resource planning.Although there can be major benefits for customers of SAP ERP, the implementation and training costs are expensive. Many companies experience problems when implementing SAP ERP software, such as: failing to specify their operation objectives, absence of a strong commitment or positive approach to change, failing to deal with organizational differences, failing to plan the change to SAP ERP properly, inadequate testing. All these factors can mean the difference between having a successful implementation of SAP ERP or an unsuccessful one.
If SAP ERP is implemented correctly an enterprise can go from its old calculations system to a fully integrated software package. Potential benefits include: efficient business process, inventory reduction, and lead time reduction.
IEEE scholar journal reports an industrial case in which the senior management successfully dealt with a troubled SAP R/3 implementation in an international fast moving consumer goods (FMCG) company during 2001 and 2002.
Deployment and maintenance costs
SAP ERP systems effectively implemented can have cost benefits. Integration is the key in this process. "Generally, a company's level of data integration is highest when the company uses one vendor to supply all of its modules." An out-of-box software package has some level of integration but it depends on the expertise of the company to install the system and how the package allows the users to integrate the different modules.It is estimated that "for a Fortune 500 company, software, hardware, and consulting costs can easily exceed $100 million (around $50 million to $500 million). Large companies can also spend $50 million to $100 million on upgrades. Full implementation of all modules can take years," which also adds to the end price. Midsized companies (fewer than 1,000 employees) are more likely to spend around $10 million to $20 million at most, and small companies are not likely to have the need for a fully integrated SAP ERP system unless they have the likelihood of becoming midsized and then the same data applies as would a midsized company.
Independent studies have shown that deployment and maintenance costs of a SAP solution can greatly vary depending on the organization. For example, some point out that because of the rigid model imposed by SAP tools, a lot of customization code to adapt to the business process may have to be developed and maintained. Some others pointed out that a return on investment
Return on investment
Return on investment is one way of considering profits in relation to capital invested. Return on assets , return on net assets , return on capital and return on invested capital are similar measures with variations on how “investment” is defined.Marketing not only influences net profits but also...
could only be obtained when there was both a sufficient number of users and sufficient frequency of use. Deploying SAP itself can also involve a lot of time and resources.
Communications
SAP systems - including client systems - communicate with each other using SAP-specific protocols (e.g., RFCRemote Function Call
Remote Function Call is the proprietary SAP AG interface for communication between a SAP System and other SAP or third-party compatible system over TCP/IP or CPI-C connections...
and DIAG) and the http and https protocols. These systems do not have encrypted communications out of the box; however, SAP does provide a free toolkit for server-to-server communications. With the recent acquisition of relevant parts of SECUDE
SECUDE
SECUDE is a developer of IT-security software solutions and services.-Company Profile:The company was founded in 1996 out of a partnership between SAP AG and the Fraunhofer Institute, Germany. In January 2011, SECUDE sold its security software, identity and access management software and relevant...
, SAP can now provide cryptography libraries with SAP ERP for Secure Network Communications
Secure Network Communications
Secure Network Communications is a software layer in the SAP system architecture that enables the use of stronger authentication, encryption and single sign-on mechanism. SAP provides SNC for server to server communications only...
and Secure Socket Layer.
ERP advantages and disadvantages
Advantages- Allows easier global integration (barriers of currency exchange rates, language, and culture can be bridged automatically)
- Updates only need to be done once to be implemented company-wide
- Provides real-time information, reducing the possibility of redundancy errors
- May create a more efficient work environment for employees
- Vendors have past knowledge and expertise on how to best build and implement a system
Disadvantages
- Locked into relationship by contract and manageability with vendor - a contract can hold a company to the vendor until it expires and it can be unprofitable to switch vendors if switching costs are too high
- Inflexibility - vendor packages may not fit a company's business model well and customization can be expensive
- Return on InvestmentRate of returnIn finance, rate of return , also known as return on investment , rate of profit or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or...
may take too long to be profitable - Implementations have a risk of project failure
See also
- SAP R/3SAP R/3SAP R/3 is the former name of the main enterprise resource planning software produced by SAP AG. It is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing.- History of...
- SAP NetWeaver
- SOAService-oriented architectureIn software engineering, a Service-Oriented Architecture is a set of principles and methodologies for designing and developing software in the form of interoperable services. These services are well-defined business functionalities that are built as software components that can be reused for...
- List of ERP software packages
- SAPguiSAPguiSAPGUI is the GUI client in SAP R/3's 3-tier architecture of database, application server and client. It is software that runs on a Microsoft Windows, Apple Macintosh or Unix desktop, and allows a user to access SAP functionality in SAP applications such as SAP ERP and SAP Business Information...
- Secure Network CommunicationsSecure Network CommunicationsSecure Network Communications is a software layer in the SAP system architecture that enables the use of stronger authentication, encryption and single sign-on mechanism. SAP provides SNC for server to server communications only...
- Secure Socket Layer
- Profitability AnalysisProfitability AnalysisProfitability Analysis is a module of the enterprise resource planning software SAP that allows users to report sales and profit data using different customized characteristics and key figures CO-PA derives its data from the SD , MM , and CO...