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Not surprisingly, when it comes to timing and costs, traditional on-premise ERP implementations are taking a back seat to Software-as-a-Service (SaaS) and hosted/on-demand offerings. SaaS is implemented in less time (11.6 months) and at a lower cost (6.2% of sales) than traditional on-premise ERP solutions (18.4 months and 6.9% of sales, respectively), according to Panorama Consulting Group’s 2010 ERP report.

SaaS may seem like an ideal alternative to on-premise, but the road ahead isn’t free of potholes.

Implementing SaaS is likely to result in delivery of fewer business benefits than expected — only 23.5% of implementations realize at least 50% of the benefits (on the flip side, 42.9% of traditional ERP solutions deliver 50% or more of the benefits expected), according to the report.

The report attributes those drawbacks to unrealistic implementation expectations, as organizations might fall victim to hype from SaaS vendors. As such, those companies underestimate the time and resources needed to come out with a successful implementation.

Late last year, SAP expressed its vision for hybrid on-premise, on-demand deployments at large companies. The vendor is also planning to finally release SAP Business ByDesign, its SaaS offering for small to mid-sized companies. SAP is also trying to have it both ways when it comes to on-premise versus on-demand business intelligence (BI).

It has continued to stress how serious it is about on-demand, and that on-demand software would be a big focus for the vendor this year with applications such as on-demand supply chain management (SCM) software as well as a host of other SaaS offerings.

Will the vendor be able to deliver the best of both worlds — quicker implementations and more tangible business benefits — with its applications?

There are areas in which SAP is making positive progress, mainly in the embedding of communities and in collaboration with customers and vendors. SAP has learned a lesson from the enthusiastic engagement of Global Communication and the community experts. SDN is doing great and discussing product strategies in SDN would give better insight than listening to internal plans for the future.

A new member in the family is the SAP EcoHub. The idea is great. It creates a marketplace where SAP third party-vendors and SAP customers can meet in a single place. The questions that remain are: Why is a marketplace not simply called a marketplace, and why did EcoHub come into being shortly after some former SAP employees started a similar project under the name SolutionsScout.com?

The business counterpart to SDN, the Business Process Expert community (BPX), is getting more and more popular. A BPXer is a knowledge engineer, an advisor who should be able to explain the technology to business and explain the real business needs to the technical staff. Here is where paths cross: Listening to the true BPX community would give SAP an idea of where they need to invest, rather than investing in something later pushed into a market that hasn’t asked for it.

SAP has established standards for certified Business Process Experts. The idea here is to deliver a canonical set of knowledge and methods as the common ground for everyone working as ERP consultants. There are plans for training and certification in order to make BPX more popular and to quickly get a critical mass of qualified BPXers all over the world.

SAP is a good company and SAP has great products. SAP customers enjoy working with the ABAP stack; not for nostalgic reasons but because it is reliable, stable, still elaborate by design and superior to everything else that competes with it. SAP ERP is also the best choice for SMBs, if it is installed and if all service is rendered by an experienced SAP partner who specializes in the SMB customer’s industry sector. SAP ERP is still the best, and only Microsoft Dynamics AX will come close.

There is still potential for SAP, but management has to understand that listening to customers and freely giving out information early — even if details change later — is better than hatching strategies in an ivory tower. SAP leaders, wake up: Listen to your community and treat customer complaints as sacred!

In part one of this blog, published earlier this week, Axel Angeli discussed why he isn’t fond of SAP CEO Leo Apotheker, SAP’s service fee increases or elements of NetWeaver. In part two, Axel criticized some of SAP’s technology decisions.

SearchSAP.com site expert Axel Angeli isn’t one to pull his punches when it comes to SAP and he makes no exception in discussing SAP’s technological direction in this guest blog.

Has SAP lost its mojo?

In the good old days, SAP was an extremely successful technology company and the darling of many analysts. This was in the last millennium, before SAP lost its belief in its own strengths and virtues.

In 1998 SAP undertook its last breath-taking act of innovation when it introduced the BAPI framework. BAPIs had been designed to transform SAP’s transaction-based system into a component-based service suite where any functionality would be programmatically accessible. Back then, SAP was already an SOA-aware software package! But this successful path was needlessly abandoned in the years to come. The old SAP crew that defined the company’s technological success — in terms of ABAP, RFC and Batch Input — was mugged by the dogma of Java.

Even though it was implemented in the mindset of assembler programming, Java is a language that decorates itself with the feathers of object-oriented programming. It is unstable, unreadable, incomplete and completely redundant, since it did not introduce a single new feature that the world had been waiting for.

How should SAP escape the Java trap? Go back to its old merits. Make a clear and non-negotiable decision in favor of ABAP. This would also mean polishing up ABAP with a more modern syntax. The new ABAP 7.2 kernel has already taken some first steps in this regard. Technically the rudders are in the right direction. What is missing is the clear commitment of the SAP board.

In terms of SOA, there is another problematic area that requires immediate action: Process Infrastructure (PI). SAP doesn’t have the power to make technology changes from the inside and needs to shore up PI by buying a standing technology as an enhancement package for the existing stack. IBM bought Mercator Datastage TX, Progress took IONA, Oracle snagged BEA and Software AG showed mercy to suffering webMethods. The number of possible candidates for purchase is limited. If looking for quality products with an inherent Event-Driven ESB architecture, there are mainly Fiorano, ActiveBPEL or the not-for-sale SAP partner Seeburger. 

In part one of this blog, published last week, Axel Angeli discussed why he isn’t fond of SAP CEO Leo Apotheker, SAP’s service fee increases or elements of NetWeaver. In the next part of this blog, Axel will explain what SAP is, in his opinion, doing right.

SearchSAP.com site expert Axel Angeli isn’t one to pull his punches when it comes to SAP and he makes no exception in discussing SAP’s recent earnings in this guest blog.

SAP has seen better times. The company’s quarterly revenues have declined and SAP is tightening its belt accordingly. What’s really to blame for the tension in Walldorf?

Deputy CEO Leo Apotheker blames the financial crisis. This is an attempt to avoid mentioning the turmoil ignited by the raising of annual SAP service fees from 17% to 22%. Customers haven’t shown the least bit of understanding for this decision. As a consequence, many customers have put their SAP purchases on hold. For example, the German SAP User Group (DSAG) decided in a common action to withhold any SAP purchases until next year.

The new enterprise support is a marketing disaster. The way it was communicated left the impression that SAP makes decisions behind the backs of its customers. Since Apotheker is the SAP marketing guru, he has turned into a burden for all of SAP. There is no one he can blame for this unfortunate move, and I have no idea how Apotheker will be able to escape from this trap. I myself am a techie and therefore feel indifferent towards Leo Apotheker; he is simply not my kin. But the analysts, also, do not seem to like him very much, which makes it difficult for him to explain his position. If this mishap would have been linked to Henning Kagermann, he might have escaped with a simple “Sorry, we meant it differently!” But the contract of the congenial, bright-minded professor is ending soon and he seems to be partially retired, like many of the old SAP crew. 

The explanation given by SAP for the steep increase in support fees is the same old story: Due to the increasing complexity of the full NetWeaver stack, the costs invested by SAP into support rose heavily and now need to be recouped. Customers see it differently. The higher costs stem only from the new dimension of components that SAP introduced in the past decade, against customer wishes.

High support costs and a high frequency of support requests are signs of low quality or a depreciation of support-friendly design. And the same products that have been under fire for years have caused the problems. These are the products that require the Java stack, with the biggest culprits being Enterprise Portal (EP) and Process Integration (PI). PI is awkward to use, costly to install and operate, difficult to examine for causes of malfunctions and no longer based on state-of-the-art Enterprise Service Bus technology. There is no time to pimp up PI into a full featured, modern Event-Driven-Architecture process engine.

In part two of this blog, Axel Angeli discusses ways for SAP to get back on track.

Implementing or upgrading SAP can make or break not only a CIO’s career but also impact the financial position of a company. This is a major issue going into TechEd 2008, where plenty of discussion will be devoted to the finer points of ensuring a successful SAP implementation or upgrade. We looked back through the SearchSAP archive to find five particularly helpful pointers on this topic. Whether you’re a CIO, an SAP consultant, or a member of an SAP project team, studying this content will give you a leg up on understanding — and avoiding — the pitfalls while executing on the best practices.

Important points for planning an R/3 upgrade project: These 10 tips, ranging from the big picture (understanding your system landscape) to important details (dealing obsolete ABAP statements) offer a conceptual foundation for SAP R/3 upgrades.

Ten critical steps when undertaking an SAP upgrade: This high-level overview of the SAP upgrade process gives you tips on everything from how to prepare your organization to how to handle the SAP graphical user interface front-end.

SAP consulting versus SAP support for upgrades: Partners are one of the most important success factors in an SAP upgrade or implementation. This article will clue you in to the distinct services you can expect from SAP consulting and SAP support.

SAP implementation challenges, potential pitfalls: SAP end user Rosenthal USA achieved a successful SAP implementation by avoiding common pitfalls and adopting best practices. As a smaller company, Rosenthal USA offers helpful tips for negotiating with VARs and other strategies for driving down the price of an SAP implementation or upgrade.

Podcast: Run SAP and Solution Manager. Implementing or upgrading SAP is only half the battle. In order to keep your business running, and to optimize your SAP ROI, you have to learn how to run your SAP solutions in the most efficient possible. Fortunately, SAP can help you do this with the Run SAP methodology and the Solution Manager tool.

If you have follow-up questions generated by this content, don’t hesitate to leave your comments below.

Demir Barlas, Site Editor

SAP Korea will be the third R&D center of note in Asia, joining SAP Labs India and SAP Labs China. Korea.net reports that SAP Korea will be dedicated to business intelligence (BI) and database management.

In addition to establishing the R&D center, SAP has signed a partnership with South Korean company Samsung SDS aimed at growing SAP’s share of the Asian ERP pie while expanding the IT service opportunities available to Samsung SDS in the region. Samsung SDS CEO Kim In mentioned China as a big target of the alliance: “The mutual and comprehensive partnership will help us sustain the domestic ERP market of 10 percent annual growth and lay a solid foundation for the rapidly expanding Chinese ERP market.” Analyst David Mitchell of Ovum is bullish on the Chinese opportunity, but sees challenges ahead: “The Chinese ERP consulting, implementation and management services market is going to be an extremely contested ground. Korean companies will attack it.”

Demir Barlas, Site Editor

Competition is the aspect of the relationship that is coming to the forefront right now, as Microsoft’s ongoing interest pits Redmond against Walldorf for high stakes: The small and medium-sized business market. Convergence 2008, for example, has highlighted Microsoft’s ERP and CRM products, both of which play to the mid-market.

Cooperation between the two companies is largely in the form of Duet, the technology partnership that allows Microsoft products to serve as a front end for SAP applications. Duet has several hundred thousand customers and is generating revenue for both companies.

With both Microsoft’s business applications and Microsoft-SAP Duet going strong, the question is when the existing ‘co-opetition’ between the two companies will tip over into full-fledged rivalry. The mid-market is a hugely lucrative space for e-business software providers and may yet break up the Duet.

Finally, it’s interesting to see how Microsoft’s messaging geniuses managed to pull one over on SAP on Microsoft’s SAP partnership page. Here, Microsoft defines itself as making SAP “People-Ready,” as if SAP on its own is not people-ready. It’s a subtle point, but it illustrates the scope of Microsoft’s ambition and calls into question Redmond’s ability to sustain a long-term partnership with a ‘co-opetitor’ such as SAP.

Demir Barlas, Site Editor

• ERP that provides integrated order entry, procurement, planning and production, and financial management.
• CRM, logistics, and delivery management systems integrated with manufacturing operations [themselves owned by ERP].
• Forward and backward traceability.
• Attribute-based rules and routing.
• Supplier compliance and collaboration.
• Enterprise Asset Management (EAM).

Being a good process manufacturer isn’t as simple as your ERP strategy, but the best process manufacturers do indeed have a recognizable approach to ERP characterized by the action points above.

Aberdeen adds that sound business process discipline, knowledge management, performance management, and reporting (e.g. for regulatory reasons) also characterize best-in-class process manufacturers.

SAP was one of the Aberdeen report’s sponsors.

Demir Barlas, Site Editor

Today, SAP upped the ante with a slew of PLM enhancements. We can expect new portfolio planning processes and portfolio management capabilities by the end of this year, followed by an extensive interface overhaul of the SAP PLM interface in 2008. This move will cut down on manual tasks and training time. 2009 and 2010 will see even further integration support, along with tidbits like new product information management capabilities and enhanced RFID/barcode functionality.

This is part of SAP’s plan to outmaneuver arch-rival Oracle, which in turn made headlines with its $495 million Agile acquisition earlier this year. But is SAP equipped to pull this off? Blogger Chris Kelley is skeptical. PLM is ‘messy’ by nature; it has to be flexible, juggle multiple input sources and so on in real time, he said. The strength of ERP titans like SAP has always been that rock-solid structure that prevents messiness.

“PLM is just too different from what they are good at,” Kelley said. “It’s too ‘miscellaneous’. Its too dynamic. Its too creative.”

Roy Wildeman, senior analyst for Forrester, doesn’t agree.

“Manufacturers that are also SAP ERP customers will want to investigate SAP’s PLM offering,” Wildeman said. “[Look closely at] the potential integration benefits from interdependent process areas like project and portfolio management, direct material sourcing, and configuration management.”

Stay tuned as we follow up with SAP career expert Jon Reed’s take on what this PLM growth trend brings in terms of new job opportunities tomorrow.

Matt Danielsson
Editor