Five things to consider before committing to SAP

Understand SAP's business and product strategies before spending money on its software

Installing SAP applications is no picnic. Employees who are capable of deploying and maintaining SAP software are in high demand and practically form a whole profession by themselves.

SAP, which built its reputation with ERP software, is rarely chosen by enterprises for one-off applications, AMR Research analyst Jim Shepherd notes in a report this month titled "The five SAP strategies that you need to understand." "For huge organizations, this is typically a multiyear, multimillion-dollar effort to transform the business," he writes. Unfortunately, executives often pay little attention to SAP installations after they are deployed, he adds.

That's a big mistake. Let's take a look at the five SAP strategies Shepherd details in his report, and how they affect your technology decisions.

SAP's growth strategy

SAP tries to increase revenue by licensing 75 per cent or more of each customer's employees, and by convincing ERP customers to sign up for an ever-expanding portfolio of business tools, such as Microsoft Office integration and Business Objects' set of reporting, business-intelligence and analytics applications. "The strategy is to create capabilities that either encourage additional user seats within the existing products or require licensing brand-new products outside the Business Suite [software line]," Shepherd writes.

Customer challenge: SAP's large customers generally expect to pay a lot of money upfront on licensing charges, and then a lesser amount in ongoing payments for additional licenses as needed and maintenance fees. SAP does want a lot of money upfront -- but it also wants a lot of money later, and this creates "considerable debate and tension," Shepherd writes.

Customers think new capabilities should be available for free as product enhancements, but SAP likes to position new capabilities as brand-new products, Shepherd adds."Like most established software vendors, SAP derives most of its revenue from the installed base," he writes. "Its object is to ensure that customers never stop buying licenses, maintenance and servers.

SAP's platform strategy

SAP's platform concept emerged in 2003, when it packaged a large number of technology components and renamed them the NetWeaver line. SAP built the platform to develop its product line for service-oriented-architecture (SOA) deployments, and it has been successful even though there doesn't seem to be any huge increase in demand for a business-process platform.

Customer challenge: With the SAP platform, customers are expected to deploy standard SAP applications and use NetWeaver's development tools and library of Web services to build new applications and modify existing ones to adapt to changing business processes.

"The reality is that SAP customers have to use NetWeaver because their applications won't run without it, and over time, they tend to begin to use the optional components, such as business intelligence, the portal, and integration," Shepherd writes.

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