SAP Australia is under fire from local IT professionals who criticise the vendor's planned R/3 upgrades as costly and complex with a poor level of implemention support.
The criticisms echo a damning study by AMR Research, which claims that the R/3 upgrade process for business software implementations will be "potentially long, complex, messy and expensive".
The report said companies with at least 1000 users will spend an average $US4.5 million to upgrade a full SAP R/3 system comprising financial, sales, inventory, logistics and manufacturing applications.
As a result of the study AMR analyst David Boulanger warned IT managers to look at the cost of the upgrade to find a balance with competing needs.
"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, including better reporting and business intelligence tools," Boulanger said.
"Customers taking the latter approach will typically pay 25 to 33 per cent of their initial investment in SAP to do an upgrade because of all the business and implementation factors that come into play."
Centrelink's national manager for corporate systems, Di Fielding, said she was "outraged" by the lack of project support from SAP considering the high cost of an R/3 system upgrade to 4.6.
Fielding said Centrelink invested $12 million to $13 million on the original R/3 system implementation and the planned upgrade will cost a further $3 million.
"With 22,000 users a planned R/3 upgrade is a huge and costly project and past project development support by SAP has been unspeakably bad," she said.
"Quite frankly, it has no idea in project development and I have no choice but to upgrade to stabilise the current system. This new release is causing grief for other IT managers who have had similar experiences."
Fielding said this is particularly true for other government departments that undertake extensive development projects and require SAP support.
Meanwhile, business unit manager for the Western Australian Police Service Mark Davey said the potential costs and complexities involved in the R/3 system upgrade have led to a review of available options.
Davey said the cost of the upgrade the WA Police Service is considering is expected to be "in the millions" and a decision will not be made until July.
"About a week ago we began studying the sensibilities of going to 4.6 but won't make a decision until July," he said.
An SAP Australia spokesman admitted the AMR survey highlighted issues relating to an R/3 upgrade but said it was risky to quote specific figures on how much the average upgrade will cost.
"It is dangerous to quote specific figures relating to costs as it depends on the specific needs of each company and how broad the upgrade will be," he said, but added that "the survey helps companies identify issues for planning as upgrades can be expensive".
"Furthermore, SAP is presently conducting seminars for customers planning R/3 upgrades as part of our process of development support."
SAP Australia president and chief executive officer Les Hayman said the pricing options provided for upgrades are much more flexible than the AMR survey reported.
Hayman said in addition to credit options provided to customers a maintenance program without any incremental costs is available. An estimated 10 per cent of customers had already upgraded and pricing depended on the size and range of the upgrade, he added.
"For example, a full 4.6 upgrade is an extensive process including the upgrading of hardware and the front end while the cost of software is small. 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," he said.
An estimated 400 Australian companies are either undertaking R/3 system upgrades or planning upgrades in the next 12 months, according to SAP.
SAP lashes out at software upgrade study SAP blasted a study on the cost of R/3 upgrades that was released by AMR Research, calling the report "incomplete" and "biased".
Eric Rubino, chief operating officer at SAP America, said the study didn't look at all the facts regarding upgrades of the German vendor's business applications. For example, he claimed that AMR didn't take SAP's software pricing flexibility into account. Users can license R/3 modules on an individual basis, Rubino added.
Rubino and other SAP executives also said the vendor's customers were left with the wrong message about the upgrade process. Calling R/3 upgrades "long and complex", as AMR's report did, is misleading, an SAP America spokesman said. That description doesn't depict the "wide range of [product] upgrades and opportunities" that are now available to R/3 users and more that will be announced in the next couple months, he said.
But Dave Boulanger, the AMR analyst who wrote the research report, said the upgrade cost figures cited in the survey were only meant to be benchmarks for users who are planning upgrades. In its study, AMR surveyed 60 SAP customers that are either in the midst of R/3 upgrades or plan to do one later this year. Most of the companies questioned by AMR are moving from SAP's earlier R/3 3.x releases to the latest version, called R/3 4.6.
But three other SAP customers disagreed, saying the AMR study didn't look at all the factors involved in an upgrade or the long-term benefits.
Peter Burrows, chief technology officer at Reebok International, said he expects to spend about 10 per cent of the AMR average for a major software upgrade that includes R/3. The move for the footwear company will include at least 1000 users in 10 countries, with two SAP consultants advising. "There's pain involved in waiting too long to upgrade," and R/3 upgrades are a "significant thing, not trivial", Burrows said. But he added that AMR's report doesn't reflect an actual situation with end users and a real-world software configuration. The survey appears to have been aimed at "attention-grabbing headlines", Burrows said.