Study: R/3 Users Face High Costs for Upgrades

FRAMINGHAM (04/26/2000) - SAP AG users will have to contend with a "potentially long, complex, messy and expensive" upgrade process for their R/3 business software implementations, according to a survey conducted by AMR Research Inc.

The Boston-based research firm, which released the results of the survey today, said companies with at least 1,000 users will spend an average of $4.5 million to upgrade a full SAP R/3 system comprising financial, sales, inventory, logistics and manufacturing applications.

If it costs that much to upgrade an R/3 system, information technology managers will have to take a hard look at where an SAP upgrade fits in with their other IT initiatives, said David Boulanger, an analyst at AMR.

"Chief financial officers will have to look at the cost of the upgrade and balance that with competing needs," Boulanger said. As a result, IT budgets may have to be reshuffled to fit all of those needs, he added.

According to the study, about 20% of SAP's Fortune 2,000 global companies and an estimated 30% of small and medium-size businesses will upgrade their R/3 setups this year. AMR Research surveyed more than 60 SAP users that are in the middle of upgrades or plan to do an upgrade later this year.

Users need to decide between a straightforward technical upgrade and a more complex one that includes streamlining of business processes and the implementation of additional functionality and things such as better reporting and business intelligence tools, AMR said.

Customers taking the latter approach typically will pay 25% to 33% of their initial investment in SAP to do an upgrade because of all the business and implementation factors that come into play, AMR added. Training and testing will also be part of the additional costs.

Meanwhile, the study said companies are upgrading for various reasons, including the need to tie R/3 into their e-commerce infrastructures and the expansion of the software to more internal business units.

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