Advantages and Disadvantages of SAP

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Advantages and disadvantages of SAP ERP

Advantages:

• ERP 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
• Creates a more efficient work environment making it easier for employees to do their job which leads to effectiveness[1]
• 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 exactly and customization can be very expensive
• Return on Investment may take too long to be profitable
• SAP ERP implementations have a risk of project failure [1]
  

Advantages of Using SAP R/3 in comparison with other Similar Tools

Category: SAP R3
Comments (1)

ERP system takes a lead role because of some of the following reasons:

Many large corporations use several different and separate information systems, often because they have merged with and/or acquired other companies with varied systems. An ERP system integrates these separate information systems and results in improved data reliability and processing efficiency. ERP systems are not only used by large corporations but becoming popular with small to mid-sized companies also.

Simplify business transaction processing and thus work load is reduced.

Some of the main advantages of using SAP R/3 are listed below:

SAP's R/3, introduced in 1992, is the most used ERP system in the world.

The R/3 software package is designed to allow businesses to effectively and efficiently operate a variety of business processes within a single integrated information system.

The software is customizable using SAP's proprietary programming language, ABAP/4. R/3 is scalable and highly suited for many types and sizes of organizations and runs on six different platforms.

SAP’s R/3 has been designed to be the best ERP system in the four areas of human resources, financial, supply chain management, and marketing. R/3 is also an international product, and meets the local fiscal, language, and tax requirements of most countries.

SAP’s R/3 is very versatile, as it will operate on six different platforms, including the recently added Microsoft NT.

The R/3 package includes several very attractive features like it has a three-tier client/server system. Providing three tiers offers scalability and easier adaptation to the specific needs of large companies and fast-growing companies.

SAP’s R/3 is available in 14 different languages (German, English, Spanish, etc.) and also incorporates multiple currency features that provide essential information processing capabilities for multinational corporations.

R/3’s modules are organized by the functional areas of financial, human resources, supply chain management, and marketing. While information is entered separately for each specific module, the modules are fully-integrated and provide real-time applications. This means that data entered into one module is immediately and automatically updated and reflected in all oft the functional areas.

R/3 is composed of a single, virtual file structure with no subsystems.

In addition, SAP has released “MySAP.com” which is software that provides for data interaction and processing connections with the Web.

Financial and managerial accounting tools in SAP R/3 are contained in the financial accounting (FI) and the controlling (CO) modules. The General Ledger function in the FI module provides a comprehensive record of all information needed for external financial reporting. The accounting data is complete and accurate because the SAP system fully integrates all business transactions that were entered from all the operational areas of a company. In addition to the FI and CO modules, the SAP system includes the Investment Management (IM), Sales and Distribution (SD), Materials Management (MM), and Human Resources (HR) modules.

Management accounting tools in SAP R/3 are cost center accounting, internal orders, product costing, and activity based costing, profitability analysis and profit center accounting.

SAP R/3’s accounting features are modeled on German approaches to accounting, and thus they are well-organized and very efficient in processing accounting information and providing accounting statements and financial reports.

As stated previously, R/3 offers multiple currency features and a three-tier system that is capable of meeting very high demands from the accounting system for eithertransaction processing or financial reporting.

SAP was the first to implement integrated treasury capabilities. This attractive feature allows a corporate treasury department to function as an in-house bank by automating the control of cash flow, investment trades, and portfolio management.

R/3 provides check writing capability in its Accounts Receivable component which very few other programs offer.

Additionally, there is equal access to all data in the system. This means that personnel can access financial data directly from a computer screen rather than physically meet with the treasurer, controller, or some other similar person. In other words, R/3 offers real-time, immediately updated reporting.

R/3 also provides for a "single data entry point" where the data entered from any location is instantly sent to all other appropriate modules in theERP system.

The accounts payable component of SAP R/3 contains four types of transaction blocks namely:

● The audit block
● The receiving block
● The vendor block
● A manual block

These blocks make it much less likely that improper payments will occur.

SAP R/3 is organized with the concept that a business operates as a series of processes, which means that the company implementing R/3 may have to change and reorganize itself to properly fit with R/3 and use it effectively.
Thus SAP R/3 on the whole as stated above gives:

Significant cost and time savings.

Minimum operating costs: no retention of redundant data in the back office.

High level of stability and performance: response times are consistently under one second.

Good user interface available which makes system user friendly and requires no training for the end user.

Thursday, June 7, 2007

Advantages and Disadvantages of SAP

Advantages and Disadvantages of SAP SAP Advantages: 1. Integration Integration can be the highest benefit of them all. The only real project aim for implementing ERP is reducing data redudancy and redudant data entry. If this is set as a goal, to automate inventory posting to G/L, then it might be a successful project. Those companies where integration is not so important or even dangerous, tend to have a hard time with ERP. ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment. ERP improves the cooperation of users. 2. EfficiencyGenerally, ERP software focuses on integration and tend to not care about the daily needs of people. I think individual efficiency can suffer by implementing ERP. the big question with ERP is whether the benefit of integration and cooperation can make up for the loss in personal efficiency or not. 3. Cost reductionIt reduces cost only if the company took accounting and reporting seriously even before implementation and had put a lot of manual effort in it. If they didn't care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been fincancially-oriented, then no cost is reduced. 4. Less personnel Same as above. Less reporting or accounting personnel, but more sales assistants etc. 5. Accuracy No. People are accurate, not software. What ERP does is makes the lives of inaccurate people or organization a complete hell and maybe forces them to be accurate (which means hiring more people or distributing work better), or it falls. Disadvantages: 1. ExpensiveThis entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective. 2. Not very flexibleIt depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.

ERP Implementation Advantages/Disadvantages

1/19/2006 By ITtoolbox Popular Q&A Team for ITtoolbox as adapted from ERP-Select discussion group

Summary:
What are the benefits and disadvantages of implementing ERP software?

Full Article:

Disclaimer: Contents are not reviewed for correctness and are not endorsed or recommended by ITtoolbox or any vendor. Popular Q&A contents include summarized information from ERP-Select discussion unless otherwise noted.

Adapted from a response by miklos.hollender on 1/11/2006

Advantages:

Integration

Integration can be the highest benefit of them all. The only real project aim for implementing ERP is reducing data redudancy and redudant data entry. If this is set as a goal, to automate inventory posting to G/L, then it might be a successful project. Those companies where integration is not so important or even dangerous, tend to have a hard time with ERP. ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment. ERP improves the cooperation of users.


Efficiency

Generally, ERP software focuses on integration and tend to not care about the daily needs of people. I think individual efficiency can suffer by implementing ERP. the big question with ERP is whether the benefit of integration and cooperation can make up for the loss in personal efficiency or not.

Cost reduction

It reduces cost only if the company took accounting and reporting seriously even before implementation and had put a lot of manual effort in it. If they didn't care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been fincancially-oriented, then no cost is reduced.

Less personnel

Same as above. Less reporting or accounting personnel, but more sales assistants etc.

Accuracy

No. People are accurate, not software. What ERP does is makes the lives of inaccurate people or organization a complete hell and maybe forces them to be accurate (which means hiring more people or distributing work better), or it falls.


Disadvantages:

Expensive

This entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective.

Not very flexible
It depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.

Disclaimer: Contents are not reviewed for correctness and are not endorsed or recommended by Toolbox.com or any vendor. Popular Q&A contents include summarized information from erp-select discussion unless otherwise noted.

Advantages and Disadvantages of SAP

SAP Advantages:

1. Integration
Integration can be the highest benefit of them all. The only real project aim for implementing ERP is reducing data redudancy and redudant data entry. If this is set as a goal, to automate inventory posting to G/L, then it might be a successful project. Those companies where integration is not so important or even dangerous, tend to have a hard time with ERP. ERP does not improve the individual efficiency of users, so if they expect it, it will be a big disappointment. ERP improves the cooperation of users.

2. Efficiency

Generally, ERP software focuses on integration and tend to not care about the daily needs of people. I think individual efficiency can suffer by implementing ERP. the big question with ERP is whether the benefit of integration and cooperation can make up for the loss in personal efficiency or not.

3. Cost reduction

It reduces cost only if the company took accounting and reporting seriously even before implementation and had put a lot of manual effort in it. If they didn't care about it, if they just did some simple accounting to fill mandatory statements and if internal reporting did not exists of has not been fincancially-oriented, then no cost is reduced.

4. Less personnel

Same as above. Less reporting or accounting personnel, but more sales assistants etc.

5. Accuracy
No. People are accurate, not software. What ERP does is makes the lives of inaccurate people or organization a complete hell and maybe forces them to be accurate (which means hiring more people or distributing work better), or it falls.

Disadvantages:

1. Expensive

This entails software, hardware, implementation, consultants, training, etc. Or you can hire a programmer or two as an employee and only buy business consulting from an outside source, do all customization and end-user training inside. That can be cost-effective.

2. Not very flexible

It depends. SAP can be configured to almost anything. In Navision one can develop almost anything in days. Other software may not be flexible.

Some of the main advantages of using SAP R/3 are listed below:

SAP's R/3, introduced in 1992, is the most used ERP system in the world.

The R/3 software package is designed to allow businesses to effectively and efficiently operate a variety of business processes within a single integrated information system.

The software is customizable using SAP's proprietary programming language, ABAP/4. R/3 is scalable and highly suited for many types and sizes of organizations and runs on six different platforms.

SAP's R/3 has been designed to be the best ERP system in the four areas of human resources, financial, supply chain management, and marketing. R/3 is also an international product, and meets the local fiscal, language, and tax requirements of most countries.

SAP's R/3 is very versatile, as it will operate on six different platforms, including the recently added Microsoft NT.

The R/3 package includes several very attractive features like it has a three-tier client/server system. Providing three tiers offers scalability and easier adaptation to the specific needs of large companies and fast-growing companies.

SAP's R/3 is available in 14 different languages (German, English, Spanish, etc.) and also incorporates multiple currency features that provide essential information processing capabilities for multinational corporations.

R/3's modules are organized by the functional areas of financial, human resources, supply chain management, and marketing. While information is entered separately for each specific module, the modules are fully-integrated and provide real-time applications. This means that data entered into one module is immediately and automatically updated and reflected in all oft the functional areas.

R/3 is composed of a single, virtual file structure with no subsystems.

In addition, SAP has released "MySAP.com" which is software that provides for data interaction and processing connections with the Web.

Financial and managerial accounting tools in SAP R/3 are contained in the financial accounting (FI) and the controlling (CO) modules. The General Ledger function in the FI module provides a comprehensive record of all information needed for external financial reporting. The accounting data is complete and accurate because the SAP system fully integrates all business transactions that were entered from all the operational areas of a company. In addition to the FI and CO modules, the SAP system includes the Investment Management (IM), Sales and Distribution (SD), Materials Management (MM), and Human Resources (HR) modules.

Management accounting tools in SAP R/3 are cost center accounting, internal orders, product costing, and activity based costing, profitability analysis and profit center accounting.

SAP R/3's accounting features are modeled on German approaches to accounting, and thus they are well-organized and very efficient in processing accounting information and providing accounting statements and financial reports.

As stated previously, R/3 offers multiple currency features and a three-tier system that is capable of meeting very high demands from the accounting system for either transaction processing or financial reporting.

SAP was the first to implement integrated treasury capabilities. This attractive feature allows a corporate treasury department to function as an in-house bank by automating the control of cash flow, investment trades, and portfolio management.

R/3 provides check writing capability in its Accounts Receivable component which very few other programs offer.

Additionally, there is equal access to all data in the system. This means that personnel can access financial data directly from a computer screen rather than physically meet with the treasurer, controller, or some other similar person. In other words, R/3 offers real-time, immediately updated reporting.

R/3 also provides for a "single data entry point" where the data entered from any location is instantly sent to all other appropriate modules in the ERP system.

The accounts payable component of SAP R/3 contains four types of transaction blocks namely:

● The audit block● The receiving block● The vendor block● A manual block

These blocks make it much less likely that improper payments will occur.

SAP R/3 is organized with the concept that a business operates as a series of processes, which means that the company implementing R/3 may have to change and reorganize itself to properly fit with R/3 and use it effectively.Thus SAP R/3 on the whole as stated above gives:
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Significant cost and time savings.

Minimum operating costs: no retention of redundant data in the back office.

High level of stability and performance: response times are consistently under one second.

Good user interface available which makes system user friendly and requires no training for the end user.
If you compare with other ERP's (like PeopleSoft);

SAP Advantages:

SAP can provide many Functions to business like HR, Finance, Suppy Chain, CRM etc. so Integration can be the highest benefit of them all;
And under each Functions, there are lot of features and covers many countries; so if you have business that is multinational, it really helps them;
it is very reliable;

Disadvantages:

IT is very very expensive;
It is Not very flexible; Not that User-Friendly;
Implemetation takes lot of time, resources;

Source(s):

http://www.sapcert.info for Free SAP Certification Tutorials

Companies warned over custom SAP costs

By Cath Everett, ZDNet.co.uk, 13 February, 2008 17:12

Around 90 percent of European SAP customers could save six- or seven-figure sums each year by avoiding the creation of bespoke code on top of the ERP platform, an IT consultant has claimed. According to a study undertaken by IT consultancy West Trax, released last week, companies could see their SAP development, support and maintenance costs fall by using standard software more efficiently and upgrading more often. West Trax, which specialises in SAP deployments for large companies, said the study was based on the logs of 245 SAP systems operating in 13 different industries in the UK and Germany.
The study showed that 45 percent of the SAP deployments of the financial services firms thast were surveyed contained bespoke code created by the end-customer. Energy companies were next, with 40 percent, followed by telcos and services-based organisations, at 38 and 37 percent respectively.
"There are two elements here — people often do a lot of customisation and don't use a large proportion but still maintain it anyway, while others use customised code where they could use standard code," said David Long, chief executive at West Trax.
Companies have also failed to introduce effective business process re-engineering or change-management strategies when implementing their original SAP systems, West Trax claims. This means that they either had to customise applications to conform with existing ways of working or they found that staff used workarounds, which they were subsequently forced to support, said West Trax's Long.
The study found that the majority of those surveyed use only about 25 percent of the sections of the SAP deployments they have created in-house on a regular basis, while more than a third of such applications were never accessed at all. "In every case, 50 percent of customised code only ran about 20 times in a quarter, which is once a working day, if that. But if you break it down, you find that 90 percent of that 50 percent is accessed zero times per quarter. Therefore, our recommendation is that companies see if it's possible replace these programs with standard code," Long said.
Winfried Rapp, SAP's chief financial officer for the UK and Ireland, agreed that organisations would benefit from reducing current levels of custom code usage. He said that the introduction and use of bespoke applications is most closely linked to inefficient or broken business processes but admitted it is necessary in some situations.
"It's always a balance to understand your own processes, fit them around a standardised product and see how they best come together. Matching business processes with IT products is a complex task and you can do it in quite different ways depending on the situation," he said. "This is why people often purchase and build on the expertise we've gained in implementing software with similar customers."
As well as spending money on creating bespoke code, West Trax has warned that companies are not fully utilising all the functionality in the core SAP packages. The IT consultant cites comments made by SAP's UK managing director Steve Rogers at an SAP user conference last year. "I find it frustrating that the majority of you only seem to be using a modest slice of the software you have acquired," Rogers is reported to have told the audience of SAP users.
While the functionality of particular applications such as goods management and sales and distribution is used heavily, the same is not true of areas such as personnel administration and development, West Trax said.

SAP costs too much – customers

By Ashlee Vance in San Francisco

Posted in Hardware, 31st March 2003 23:02 GMT
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Every now and then, an analyst firm gathers up its collective courage and issues an ROI study which contradicts everything a vendor's marketing department would have you believe.
So hats off to Nucleus Research for firing a salvo at SAP for causing customers to shell out millions on software with little more than added worker productivity in return.

The force of the criticism is weakened somewhat by the small data sample from which Nucleus draws its conclusions: the US analyst firm interviewed 21 customers only. But they are reference sites, so, small as the sample may be, it seems safe to say that many SAP users are a tad concerned about mounting bills and questionable ROI.
Most customers surveyed had used SAP software for close to three years and 57 per cent of them said they've paid more for the code than it's worth.



The average cost for a three-year SAP deployment is $10m, with consulting accounting for $3.6m, personnel soaking up $2.5m, software licenses another $2m, and related hardware and training costs picking up the rest of the tab.
Companies surveyed saw some benefits from workers being able to manipulate data more quickly with SAP products and better company-wide access to information. "However, a positive return on the SAP investment was achieved only when there was both a sufficient number of users and sufficient frequency of use (breadth and repeatability) to reap significant productivity based gains from the solution," Nucleus writes.
Beyond these few cases of positive return, SAP users feel let down by their romp in the world of customer relationship management, business automation and the like. ®

Nucleus Research finds 57 percent of SAP Reference Customers have not Achieved a Positive ROI

Monday, 31 March 2003

Customers will see benefits after lengthy implementations, but many deployments anchored down by excessive consulting costs Nucleus Research (NucleusResearch.com), the leading provider of bottom-line focused technology research, today announced the results of an independent study of SAP AG (NYSE: SAP). According to the results, 57 percent of SAP reference customers interviewed believed they had not achieved a positive return on investment (ROI) from their SAP deployment. However, customers with less customization and consulting requirements were more likely to receive enough returns to drive a positive ROI. Despite having used the SAP applications for nearly three years and having spent, on average, more than $5.4 million on license fees and deployment consulting costs, more than half of these SAP reference customers did not realize a positive ROI. Most of these customers were hampered by excessive customization of the solutions and its interfaces, and extensive consulting costs, which averaged more than $3.6 million per implementation. For deployments in which consulting amounts to more than twice the cost of software, a positive ROI is unlikely. Where customers did derive benefits, they came from increased productivity, reduced headcount, improved operations management, and improved information organization and access for decision making. The full report is available from Nucleus Research at: NucleusResearch.com SAP: From Incredible Bulk to Discrete Modules While the press has taken the entire ERP market to task as hulking behemoths that plagued customers with lengthy, costly deployments, SAP has continued to grow at a tremendous pace and, more recently, diversified its monolithic ERP offerings into more discrete bundles of business applications. Now, companies license and use SAP applications either as separate modules or as part of the overall mySAP.com suite of e-business solutions. These solutions include product data management (mySAP PLM), supply chain management (mySAP SCM and mySAP SRM), customer relationship management (mySAP CRM), business information (mySAP BW) and corporate financials. Nucleus interviewed customers representing a cross-section of SAP's ERP systems and individual modules. "Among the 'Real ROI' research we've done, SAP emerges as an anomaly for those technologies with unimpressive ROI trends. More than half of the reference customers aren't recognizing a positive ROI, yet the prognosis isn't as bleak as it is for other vendors' enterprise software," said Rebecca Wettemann, Nucleus Research's vice president of research. "Most of SAP's customers expected a lengthy implementation. Companies that can manage this process without purchasing software that is beyond their business and functional needs, and without excessive customization of the solution and its interfaces, will be poised for significant benefits." The report is the latest in Nucleus Research's "Real ROI" series, which most recently has included reports on Manugistics (MANU), i2 (ITWO), Siebel (SEBL) and Cognos (COGN). The "Real ROI" reports provide Nucleus' research subscription customers with fair, unbiased data about the costs, benefits and financial best-practices associated with deploying a specific vendor's enterprise technology deployment. Nucleus' analysts use a standard methodology built around a series of in-depth interviews with independently researched customers who have implemented a specific technology. Nucleus analysts independently contact these vendors' reference customers—without the vendor's knowledge—in order to take a broad look at the returns and costs associated with various technology deployments. Key ROI Challenges Fifty-seven percent of SAP customers—who had been using SAP for 2.8 years—interviewed did not believe that they had achieved a positive ROI from their deployments. During the last decade, SAP emerged as a "simple" solution to Y2K issues, as companies looked to replace obsolete legacy solutions with new systems for the sake of business continuity. However, many of these companies bought more SAP than they needed: they purchased large SAP licenses without explicitly examining costs and benefits, considering payback period or developing a clear roadmap to fully exploit SAP's capability. And the costs were hefty: among those companies surveyed, the average license investment was more than $1.8 million, with SAP maintenance fees running at a standard 17 percent. However, when consulting, hardware, personnel and training were added, the figure ballooned to a three-year median cost of more than $5.2 million. Most companies had evolved significantly during the implementation period, and evolving market conditions prevented IT departments from extending SAP functionality to enough users and departments to offset the high deployment costs of SAP. Additional factors included: High personnel costs and support. Nucleus found that high personnel costs associated with implementing SAP were a huge challenge to the timely achievement of a positive ROI. The ERP deployments, for example, required the involvement of anywhere from 25 to 200 full-time internal personnel for implementation, and the SRM project teams ranged in size from 10-70 full-time business and IT staff members. Additionally, the time and costs spent on training was significant in many cases. Excessive customization for implementation. Many companies found that the consulting costs associated with customizing SAP were very high. Some early adopters of SAP's ERP suites told Nucleus that they customized their systems too much and developed too many individual interfaces. The ongoing risk with monolithic deployments such as these is that companies either spend more on customization than planned, or have to undertake a business process reengineering project they hadn't anticipated. Potential for ROI Benefits Nucleus found companies achieving benefits from SAP in three areas: Increased employee productivity and reduced headcount. SAP provides a positive return when there is a broad enough audience to reap significant productivity-based gains from the solution. Companies using SAP's BW solution, for example, reported significant improvements in reporting accompanied by increases in the productivity of end users (who could create their own reports) and IT personnel (who no longer had to support the end users to create reports). Customers using SAP PLM received similar benefits. Improved operations management. Several companies reported cost reductions resulting from improved financial and operational management through their use of SAP. Many companies found that the visibility into operations along with the automation of various business processes led to significant reductions in costs and more profitable management of business operations. SAP SRM customers found they were able to negotiate lower prices with suppliers, reduce order-processing costs, and increase compliance with supplier contacts. Users of R/2 and R/3 similarly found increased supply-chain efficiency. Improved information organization and access. Users of various SAP solutions—specifically, BW and CRM, benefited from increased visibility into their business operations and the ability to analyze their customer bases and revenue sources across territories and product categories. Furthermore, companies that migrated from paper-based or Excel-based reporting protocols to SAP BW found that the standardization of data and improved access to management information allowed executives and managers to make better business decisions that were based on sound data. Study Methodology Nucleus reviewed the SAP Web site for companies that were listed as reference users of SAP. From queries put out to a pool of 93 reference customers, Nucleus received responses from 41, 21 that agreed to participate in the interviews, 20 that declined to participate for various reasons. Nucleus included data from all customer interviews in this report, with the majority of participants agreeing to participate on condition of anonymity. Nucleus asked companies about various aspects of their SAP deployments that would impact ROI, including the following: Why and when did you select SAP? Which SAP solutions have you implemented? How long did your SAP deployment take? Did you stay within your deployment budget? What are the most significant returns and benefits from your SAP applications? How much did you spend on the project; in particular, how much did you spend on software, hardware, consulting, training, and personnel? What were the key deployment challenges? Do you think that the costs of your SAP deployment have been outweighed by the returns? The full report is available at NucleusResearch.com. Nucleus Research clients who are interested in more detailed information concerning the costs and returns of specific SAP applications should contact Nucleus Research client services. About Nucleus Research Nucleus Research is an independent global research and advisory firm that provides CFOs and CIOs with the financial and technology insight they need to make clear, accurate assessments of the returns from their technology investment. The company is the first firm of its kind to blend financial analysis with comprehensive technology expertise to deliver 100% impartial return-on-investment (ROI) information to organizations worldwide. Nucleus Research uses an uncompromising set of processes and tools to evaluate the financial return on IT assets throughout a technology's life cycle, from selection and deployment to upgrade and retirement. Nucleus Research's ROI assessment methodology can be applied to virtually any technology investment.

How much does SAP costs me?

There is a defining moment in the journey of all companies on the road to SAP nirvana. This moment comes just after the company has concluded that it want’s SAP, it needs SAP, it’s gotta have SAP … then comes the question ‘so what does it take to implement it’?

This is the question which separates those who are ready from the wannabees. At the heart of every good business decision lies a cost benefit analysis. If this cannot be complete with a positive outcome, the initiative (whatever it is) should probably not be launched. Same goes for a SAP implementation.

Implementing SAP is an expensive business. No doubt about it. But the potential rewards can dwarf the costs and the list of organisations that have realised this is growing every day . One customer reportedly made enough savings on the procurement of a single raw material to pay for the entire enterprise-wide SAP implementation! Of course these are hard to substantiate, but visit SAP’s website and take a look at the customer testimonials.

SAP sells it’s R/3 product on a ‘price per user basis’. The actual price is negotiated between SAP and the customer and therefore depends on numerous factors which include number of users and modules (and other hundreds of factors which are present in any negotiation). You should check with SAP, but for an initial planning number you could do worse than starting with $4000 per user. There is also an annual support cost of about 10% which includes periodic upgrades. Again, check with SAP for further details.

Then there is the implementation cost. What? It is about now that you need to get the business case out again and remind yourself why you need to do this. The major drivers of the total implementation cost are the Timeframe, Resource Requirements and Hardware.

Timeframe - The absolute quickest implementation we have ever heard of is 45 days … but this was for a tiny company with very few users and no changes to the delivered SAP processes. At the other end of the scale you get the multi-nationals who are implementing SAP over 5 to 10 years. These are not necessarily failures … many of them are planned as successive global deployments (which seem to roll around the globe forever). Of course the really expensive ones are those we don’t hear about! For the most part, you should be able to get your (single instance) project completed in a 9 to 18 month period.

People – The smallest of SAP implementations can get done on a part-time basis without outside help. The largest swallow up hundreds of people (sometimes over a thousand) and include whole armies of consultants. This adds up fast. Again, get that business case out. The types of people you will need run the range from heavy duty techies to project managers.

Hardware – The smallest of SAP implementations probably use only three instances (boxes) … one for the production system, one for test, and one for development. The largest implementations have well over 100 instances, especially if they involve multiple parallel projects (otherwise known as a program).

Adding all this up, your SAP project can run anywhere from $400,000 to hundreds of millions of $$$’s. As you can see, SAP can be all things to all companies … so it’s best to talk to them (or your consulting firm) about your specific requirements.