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The Why and How of mySAP ERP

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BIO

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The why and how my mySAP ERP

By Celestine Vettical, Debbie Schmidt and Jesse Deol

Celestine Vettical—Mr. Vettical is a solution principal, NetWeaver, for SAP America. He has over 15 years of IT industry experience, including five years in software development and solution architecture, with 10-plus years in enterprise software, application platform suites (including business process integration, EAI messaging, BPM, portals, business intelligence, service-oriented architectures, Web services platforms, and collaboration). Prior to joining SAP, Mr. Vettical was the Chief Technology Officer of TI Electronics Corp. He holds a B.S. degree in electrical engineering and an M.S. in computer science.

Debbie Schmidt—Ms. Schmidt is the Vice President of the Business Solutions Group at SAP America. She is responsible for the leadership and direction of mySAP ERP. Previously at SAP, she was Vice President of Business Development for the Human Resources sector, and prior to that she was Vice President of the Workplace (recently renamed SAP Enterprise Portal). HR.com recently included Debbie in the list of the Ten Most Influential Women in the ACM software industry. Ms. Schmidt holds an M.B.A. and a B.A.

Jesse Deol—Jesse Deol is Director of the SAP Alliance, HP Americas. In this role, he helps drive the development of SAP solutions that result in innovative customer offerings, differentiated industry partnerships and significant customer successes. In his 16 years in the IT industry, Mr. Deol has specialized in enterprise servers, enterprise software partners, B2B and e-commerce solutions, and also has professional experience in sales support, customer services and sales focused on the enterprise.

This IT Briefing is based on a SAP/TechTarget Webcast, "The Why and How of mySAP ERP." To view this webcast online, please click the link.

This white paper gives an overview of the mySAP ERP solution. Topics covered:• Business trends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1• The evolution of ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1• mySAP ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2• mySAP NetWeaver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3• IT infrastructure considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6• Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10• Common questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

1 IT Briefing:The Why and How of mySAP ERP Sponsored By:

The why and how of mySAP ERP

Business trendsSAP AG was founded 30 years ago with the intention to help customers improve business performance and create competitive advantage through the SAP application portfolio. To do so, SAP as an enterprise must be in tune with business trends today.

In business today, there seems to be somewhat of an upturn in the marketplace, but there is much doubt as to how long that will continue. Business today face a tremendous challenges, including distrust of corpo-rate leadership and ethics; weak corporate gover-nance; skills shortages; globalization; outsourcing considerations; the need to leverage intangible assets to prevail in the marketplace; the need for smarter customer information access; Sarbanes-Oxley; and Basel II. All of these things put a great deal of pres-sure on businesses today, yet our customers expect greater levels of service, greater innovation and greater productivity from us as companies.

The challenge that presents to SAP customers is how do we create value continuously? In most instances value created today will not be sustainable in the future. It is critical, therefore, to take every opportu-nity to reduce costs and improve cycle time. But it is equally important to understand where new business opportunities lie and ensure that we have a solution to address the evolving needs of our customers. Companies today must leverage all assets, including the intangibles. In effect, many executives are looking to intangible assets as a source of value creation. Intangible assets include research and development, brand equity and innovation, as well as the knowl-edge, skills and capabilities of your people. In fact, financial analysts are now including non-financial variables in their valuations of organizations.

The evolution of ERPWhen we look at Enterprise Resource Management, we see a complete evolution (see Figure 1). Thirty years ago when SAP created Enterprise Resource Management it focused on creating operating effi-ciencies for organizations, to give companies a better

view into what was happening in the business—one version of the truth, if you will. Over time, SAP cus-tomers demanded more. Customers wanted to lever-age this information to make better business decisions, to gain greater insight into what was hap-pening in the business. Today, SAP customers are demanding even more. They want to leverage their ERP application to help them identify and execute on strategic opportunities. This means the ERP of yester-day is in many ways the ERP of tomorrow. Now you need to do more than just increase operating effi-ciency. Now you need to take information, package it and make it available to a much broader ecosystem across your organization.

Companies are facing a number of major business issues and challenges today. They need to make bet-ter business decisions, and in order to do that they need better data. Take the example of Sarbanes-Oxley and Basel II. From a regulatory and compliance per-spective the environment is much more complex. Another major issue that companies face is produc-tivity. How do we continue to drive greater productiv-ity? Certainly today the environment is quite challenging.

Recently SAP brought together a number of custom-ers to conduct an exchange. We wanted to find out from our customers what we could do to help them expand and extend the value they were realizing from their SAP ERP implementations. Companies are look-ing for SAP to help them improve the productivity of their employees, their customers, their partners and their suppliers. They are always looking to drive the costs out of their operation. They're looking to change how they spend their money. They're looking to move from operational investments to invest-ments that foster innovation. SAP NetWeaver helps companies do that.

SAP customers also need better analytics—greater opportunities to understand what's happening in the business and why it's happening. Only when we have that type of transparency and visibility across the

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enterprise can we get to the point of predicting the outcome of any actions we take in the marketplace.

mySAP ERPToday SAP is in a leadership position in terms of ERP applications. Industry analysts, such as META Group, IEC and GartnerGroup, put SAP in the No. 1 ERP position, both from a vision perspective and an exe-cution perspective. In order to maintain that position, it's imperative that SAP understand the business environment in which our customers operate today. In March last year the company launched mySAP ERP.

What exactly is mySAP ERP? mySAP ERP is an appli-cation portfolio that includes not only human capital management and financials, but operations as well. This component also includes analytical capability and sits on top of the NetWeaver technology stack, giving the opportunity to extend access to the SAP solution across the enterprise. mySAP ERP is an application portfolio that is a core component of the business suite. mySAP ERP gives the customer the opportunity to build, extend and leverage the partner-ship they have with SAP over time.

The components of mySAP ERP comprise analytical capability, financials, human capital management, operations, corporate services and SAP NetWeaver, coupled with self-service. We have assembled this portfolio of applications to help our customers improve productivity across their enterprises, grapple with the demands of compliance, reduce working capital and reduce their total cost of ownership. We believe that this application portfolio is critical for any organization to compete effectively in today's market-place.

What's different about mySAP ERP vs. R/3? Figure 2 highlights some of the areas that are specific to mySAP ERP but are also included in the mySAP ERP business suite. These include analytics, strategic enterprise management, learning and recruiting, self-service, the financial supply chain, Internet sales, exchange infrastructure, the NetWeaver technology stack, including the portal in the business warehouse. We've taken ERP, which was fundamentally a back-office application, extended it out to give our custom-ers the ability to push this across the enterprise, giv-ing them the analytics required to make better business decisions.

Figure 1

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Many of SAP customers have moved to take advan-tage of some of these components. Recently SAP completed value assessments in partnership with Gartner Consulting. Dow Chemical is one example. In both cases these customers have implemented SAP financials, components of operations, human capital management, self-service and pieces of ana-lytics. As a result, they've been able to realize over 120% return on investment in a payback period of less than four years.

These customers often say they've just scratched the surface because with the SAP implementation, they have the ability to continue to enhance and extend the application portfolio. For example, traditionally travel management is approximately the fifth largest expenditure of most companies. When you look at human capital management, it is certainly number one or at least in the top three in terms of expense. So there's an opportunity here to reduce costs. But it is just as important to leverage the intangibles, to make sure you have the right people in the right place at the right time. We are giving our customers the opportunity to do that through the portal, through self-service and through some other applications.

mySAP NetWeaverFigure 3 shows a sample customer IT landscape. For some readers this may be a familiar picture. Due to acquisitions or various divisions purchasing different IT assets, you end up in a fractured heterogeneous environment like this. In this example, there are more than 8,000 interfaces. Experts estimate that a single interface costs approximately $28,000 to $36,000 to develop and another $4,000 to $6,000 per year to maintain. The total cost of ownership includes cost of integration platforms, cost of integrating platform components, then cost of integrating applications and platforms and the cost of applications.

In today's landscape, most of the money goes to maintenance of the current IT infrastructure. Only a small amount is available to develop new functional-ities to drive new business opportunities. The major portion of money in this area goes into the cost of integrating the new functionality into the existing infrastructure. SAP NetWeaver as a cohesive integra-tion platform reduces integration costs and hence the total cost of ownership and enables faster time to benefits. It helps you achieve greater business capa-bilities with the same budget. SAP NetWeaver pro-

Figure 2

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vides a platform for innovation, the platform to exploit enterprises services' capabilities to extend the enterprise in order to reach for industry scale.

SAP's next-generation technology and integration platform, NetWeaver, gives you the agility and the effi-ciency needed in today's economic environment. Fig-ure 4 illustrates the value of one integration platform integrated out of the box. It reduces total cost of own-ership and provides adaptability to changing busi-ness needs. In the next section we will examine the key values brought by NetWeaver in mySAP ERP, including how it helps you extend user access and productivity and achieve more efficient decision sup-port.

The first value is people-centric usability. This brings screens and interaction to the users that are easier, more intuitive to use, requiring little or no training. This is one of the values that comes with mySAP ERP. The concept is to bring ERP from the back office to every desktop. In the past, mainly professional users have worked with ERP systems: the purchasing department, the sales department, the financial clerks and the HR people. The idea with mySAP ERP is to bring more and more functionality to occasional

users who might, for example, want to change their address data or do other things.

The second category of value is adaptability. Compa-nies change very quickly themselves, due to mergers and acquisitions, divisions being sold off and the like. It is more and more important that the IT system landscape be able to reflect these business changes as quickly as possible. This adaptability is provided in part via NetWeaver's exchange infrastructure compo-nent. The exchange infrastructure, also called SAP XI, provides a warehouse of ready-to-use application adapters and open interfaces that virtually eliminates the need for point-to-point and hardcore system interfaces. These adapters provide seamless integra-tion among SAP, legacy and third-party applications, while also providing trading partner connectivity and support for industry standards like RosettaNet, Sydex, PyTex and UCCnet.

The business process management functionality, the capability in XI, lets you execute and monitor busi-ness processes that cross applications and systems. The adaptability is also provided by the mySAP ERP core functionalities, allowing quicker and more incre-mental deployments than in the past.

Figure 3

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The number three value is transparency and analytic insights. There are two different aspects here. One is the legal requirements on transparency. More and more legislation is coming up that urges companies to provide better, more up-to-date, more integrated financial information. This is provided on the one hand via the back-office functionality, the financial information. But in combination with the business information warehouse, this becomes a much more powerful tool.

On the other hand, to make the right decisions and ultimately track how these decisions are executed, it is important to provide a tool that allows you to make sure that everything goes in the right direction. With the business information warehouse, the BW compo-nent and also strategic enterprise management, this value is provided in mySAP ERP.

The number four value is integration. There was always integration from the logistics standpoint; for example, new goods movement in your warehouse was automatically reflected in the financial books. This integration has not gone away. But more impor-tant is the integration to other applications such as supply chain management solutions or customer relationship management solutions, other third-party

applications, along with the ability to interface to your partners more tightly. These four main value catego-ries are included in mySAP ERP.

Figure 5 shows the technology transition to mySAP ERP. At the high level, all release levels up to 4.6C contained basis layer functionality.

That included the development workbench, the screen painter, the collection and transport systems, and also on top all the applications pieces: finance, logistics, HR. Up to version 4.6C, these two worlds are merged together, so you could not upgrade just the technology side or upgrade the applications side alone.

The first step we took with R/3 Enterprise was to move the basis layer over to the Web applications server. It has been decoupled from the applications side. The 4.6C functionality has been moved over to the application core 4.7 and the new functionality comes via extension functionality in these decoupled objects. With this approach, if you need to take advantage of new technologies like Blade or Great-Computing, you have the flexibility to do that inde-pendently of upgrading the functionality. Similarly, if you have some new key core extensions available to

Figure 4

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take advantage of the new business functionality, you don't have to upgrade the technical infrastructure. With R/3 Enterprise, we therefore have the three lay-ers: Web application server, the core and the exten-sion.

Now moving over to mySAP ERP, we have taken these concepts and moved them one step further. We have expanded the technology layer from the Web applications server to the complete SAP NetWeaver stack, including the business information warehouse, the portal and the exchange infrastructure. On the applications side we have included functionality that in the past was outside of the traditional R/3 system (for example: strategic enterprise management, Inter-net sales, the complete HR and financial functional-ities).

Recall the 8,000-plus interfaces in Figure 3. Now you can undertake NetWeaver projects to reduce the complexity of your landscape and reduce the number of point-to-point interfaces. Exchange infrastructure is at the heart of migration strategy from customized R/3 3.0x and 4.0x systems to mySAP ERP.

For example, Texas Instruments is using this strategy to reduce the complexity of its environment and make the transition into mySAP ERP risk free and smooth. BW is again at the heart of the decision sup-port strategy, slowly moving away from legacy data warehouses and utilizing the business intelligence component of NetWeaver. You can launch smaller, self-funding projects where value is seen quickly. Smaller and incremental implementations of XI, BW or portals can be done for faster ROI and lower risk. In this new landscape, upgrading to mySAP ERP can be a plug-and-play exercise. You can now produce more business capabilities with the same budget. You can now look at the extension or expansion or reuse of software, rather than replacement. You can now choose to deal with fewer vendors, concentrat-ing on those that will be true partners.

IT infrastructure considerationsWhen it comes to IT total cost of ownership, the sim-ple notion is that over the life of three to five years of an average IT investment, indirect costs (such as the physical facility, app development, implementation, training and upgrade costs) are higher than the initial hardware/software investment.

Figure 5

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The move to mySAP ERP offers the promise of better integration and lower costs of management and sup-port. But you will also need to evaluate infrastructure issues such as how much capacity do you need as you add more users, bring in more business units, or merge and acquire new companies as part of your growth plans? What kind of performance will those servers and storage subsystems need to keep up with peak usage as you introduce more casual users using the portal technology, using XI to integrate with third-party and legacy applications? These issues have a number of implications.

Another consideration might be how to do more with less. What are total cost of ownership alternatives? Can you do the same work with your technology with a lower cost of operating system, database, hardware architecture, and set of services to enable those? Do you have alternatives? The answer is always yes. The question is whether you can take advantage of those alternatives and reap the savings. As the environment gets more complex, with hundreds of different appli-cations, multiple databases, multiple server types and storage families, the ability to manage these pro-actively from a single console becomes critical—especially if your SAP environment is distributed. If you don't have all your systems in one data center, it becomes very difficult without a software manage-ment scheme of some sort.

You also need to consider the growth factor. Are you going to merge? Are you going to acquire somebody? Are you going to bring new modules online with new users? How do you plan for that and minimize the disruption of your operations, manage within your budget, and address the shortage of critical skill sets you may need to take advantage of the new function-ality that technology offers?

HP has adopted a comprehensive approach combin-ing HP services, our technology and our partners. Before you invest in new application infrastructure to drive new business results and competitive advan-tage, it makes sense to go through an assess-and-design period. This could break down to two or three simple areas where you assess your IT environment for weaknesses such as a single point of failure and performance bottlenecks. You would size and charac-terize this environment to understand your capacity needs. HP will provide a joint system landscape opti-mization or joint solution assessment with SAP. We will come in and proactively provide recommenda-tions to improve performance, reduce downtime and prepare for the next generation of applications.

Just migrating from one generation of SAP to the next in terms of business functionality and software typi-cally requires 40% to 50% more computing power and certainly two to three times more storage as you add more users and enterprise data, especially if you introduce new partnerships and external communi-ties as part of your workflow. These are all very busi-ness-centric elements that drive IT events.

The most common things we see at HP today with our customers is the consolidation of servers and storage, migrating to a lower-cost platform; and the inevitable buying of bigger, more robust and high-per-forming storage and servers as you migrate to that next generation of capabilities. All of these fall under the umbrella of HP Financial Services to offer an inte-grated one-stop shop.

There are five ways in which HP can add value in SAP projects (see Figure 6). Each aims to drive a better return on IT investment. At the end of the day, can you do more with less? Three to five years payback is pretty intuitive; nothing new in terms of the insights but perhaps relevant to our conversation today, the idea of simplification. You're managing a lot of heter-ogeneous servers, storage, operating systems and databases.

How can we simplify that? HP and SAP have just announced a joint intent to simplify IT services man-agement as a joint offering to package HP OpenView capabilities and plug-ins to manage SAP proactively and SAP services to provide customers with a better return on IT. We have a consolidation strategy and have learned a great deal from our internal consolida-tion of our multiple SAP instances through the merger of Digital, Compaq and HP. HP has saved 35% of operational expenses and with a payback period of nine months internally.

HP has empirical customer data that indicates that there is a repeatable item that most companies are overlooking these days: Migration. The simple idea is the idea is to move to a lower cost, industry stan-dards-based, Windows-, Linux-, Intel-based technol-ogy platform, where the ROI potential is very high. We're talking about systems that come in about half the price of traditional legacy environments. Even with increased staffing requirements and skill set transfer and training, the overall TCO savings are very compelling. HP customers can attest to that fact.

Once you've implemented and consolidated your databases, your architecture, your data centers and

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perhaps even your applications, you'll need to look at what you have to do to improve business continuity, achieve a better return on data, protect your data dur-ing an emergency, or on-demand solutions (where you pay as you go). As you need more storage and servers to grow with your business, you will need a way to match your IT expense flow with your business benefit.

What's the payoff for HP customers? The idea of managing heterogeneous environments in a single console is quite powerful. IDC helped HP do an anal-ysis of our customers. The empirical evidence indi-cates customers have 26% more productivity when using HP OpenView compared to point solutions. There is 74% less down time because you're more proactively looking for issues, bottlenecks, as well as performance and capacity issues rather than reacting to them. It consequently takes 50% less time to resolve each of these. This is a huge savings from a staffing perspective, as well.

As an example of consolidation, Celanese Chemicals has consolidated tens of applications and multiple data centers. We've seen operating expenses reduced by 20% to 30%, depending on company size, up to

$10 million a year at Bell Canada alone in operational costs savings. That money is now accessible for other business functionality, software and services projects. The payback period on consolidation is as short as nine months or 18 months for more complex distrib-uted environments. The key idea here is to maximize the utilization of your IT assets and business continu-ity.

As for optimization, if you could control 60% to 70% of your downtime, that would be worth a lot. If you can pay as you go, matching your IT expense with the business benefits on on-demand computing, that would be quite valuable. Finally, with sourcing, HP is SAP's largest outsourcing partner. With our guaran-teed SLAs and global coverage and risk management, outsourcing with HP is a compelling alternative.

Figure 7 outlines how HP addresses some key SAP upgrade challenges. You can reduce costs by optimiz-ing and consolidating infrastructure. Independent of which technology provider you use, HP OpenView supports heterogeneous third-party storage and serv-ers. Outsourcing hosting is always an alternative, depending where you are, and creative financing options are available.

Figure 6

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As for complexity, HP offers assessment services to analyze your total cost of ownership, how much it costs to manage that environment and run it, sizing proof of concept capabilities if you're unsure of the scale of technology you need to drive the transactions in the planned consolidated environment. HP also offers accelerated pilots to help jumpstart projects. For example, we initiated the NetWeaver XI Starter Pack which combines SAP consulting and HP tech-nology for a 90-day free trial to integrate XI with your critical business applications.

In October 2003 GartnerGroup cited HP not only as a leader in high-availability services but as being in a leadership position to provide our customers with business information protection and recovery capa-bilities.

In an independent poll of Information Week with about 500 CIOs and IT executives recently, HP was named the No. 1 managed services and outsourcing provider. This might be surprising, as HP does not outsource across the board like a company like EDS but we clearly partner with key consulting firms as well as outsource for a great deal of companies such

as Proctor & Gamble, Delphi and Celanese Chemi-cals.

If you are looking for a streamlined, coordinated, sim-plified, consolidated, and easy to mange IT infrastruc-ture to reduce your TCO, you should consider managed services. SAP and HP are working together jointly to support customers with complex IT environ-ments and SAP environments. This is a combination of SAP services and HP IT outsourcing support, which is branded under SAP hosting. HP also offers traditional outsourcing.

It is up to you to take the first few steps as you begin the journey to integrate, update and upgrade your overall business functionality. HP has capabilities in mySAP installations, migrations for your landscape test equipment. Storage optimization is a big item on a lot of IT shops' agendas. It seems to be growing nonstop with no end in sight, and yet you need to rationalize it and contain your expense structure, so we have a lot of capabilities in that arena. We offer mission-critical support capabilities to keep you up and running all the time with committed SLAs and refunds based on actual performance. We can help

Figure 7

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you assess your TCO, looking at every layer of your infrastructure, consolidate your SAP environment and improve your availability.

HP provides a number of incentives for you to start that journey, to migrate and upgrade to mySAP ERP a little easier, a little faster, and certainly a lot safer with HP. HP is offering several special offers, including a 20% off server promotion for mySAP ERP upgrade customers.

SummarySAP's general recommendation is to move to mySAP ERP because we believe it helps customers realize value. However, we recognize that every customer's

situation is unique. When we put together the road-map for a specific customer, we take into account not only the investment's value but also the return on investment and the total cost of ownership as well. We have put together an upgrade team as well as a value engineering team to help you plan a path that makes the most sense for your organization.

With mySAP ERP you have the opportunity to extend to a broader number of users the ability to leverage the information stored in ERP to make better busi-ness decisions. At the end of the day, we aim to not only comply with any applicable regulations and increase efficiency but also improve productivity across the enterprise.

Common Questions

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Question: Will the integration capability within mySAP ERP help to replace EDI in its current form?

Answer: It's a good question. Using the exchange infrastructure capabilities with mySAP ERP, there are several different efficient and cost-effective ways of establishing trading-partner connectivity and docu-ment exchange. You can consider moving away from the traditional WAN-based EDI to EDI-INT, the AS/2 to EDI over the Internet. You can also look at XML-based or industry standards like RosettaNet-based data exchange. With the cost savings in moving from traditional EDI over to the EDI end, you can imple-ment the exchange infrastructure. It will pay for itself. You are getting the foundation, the platform to expand the use of this new platform for enhanced col-laboration. SAP offers some rapid EDI implementa-tion support packages in our professional services organization. Contact your account executive or the customer engagement manager for the details on doing quick, rapid EPI implementation projects.

Question: Is mySAP ERP the preferred migration platform rather than R/3 Enterprise?

Answer: From our perspective we do believe that mySAP ERP gives our customers the greatest oppor-tunity to deliver additional value to their employees. Our recommendation is that you work with our cus-tomer engagement manager to make the right deci-sion for your company.

Question: We already have BW and we are looking at implementing XI. Will it be easy to implement mySAP ERP now?

Answer: Absolutely. You have already addressed your information integration challenges with BW. Now you have the interfaces for bringing data from different systems. You are now looking at reducing the number of point-to-point interfaces with the exchange infra-structure, so all the interfaces between SAP and the non-SAP applications and maybe some external sys-tems—all of these may be moving over to the exchange infrastructure. With that, you have addressed complexity in your landscape, so you are ready for a smooth transition to mySAP ERP.

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