2007 SAP Trends Gather Steam in 2008

By Sam Sliman
President, Optimal Solutions Integration

2007 was an exciting time for SAP and SAP customers alike. SAP ERP upgrades, enterprise SOA adoption and MDM initiatives were among the top SAP trends in 2007, and all signs point to these interrelated trends gathering steam in 2008.

Upgrades abound – Since its debut in May 2006, more than 6,000 SAP ERP customers have upgraded to SAP ERP 2006 (previously known as MySAP 2005). There were over 1,000 implementations of this newest version of SAP ERP in just the first seven months following the product’s launch, giving it the fastest adoption rate of any SAP product in the company’s 35-year history.

To help fuel upgrades, SAP has committed to keeping the core of SAP ERP 2006 unchanged through 2010, providing SAP customers the visibility and stability they need to innovate without fear of interruption or obsolescence. Eschewing the massive, time- and cost-intensive upgrades of the past, SAP now releases SAP ERP upgrades via smaller functional enhancement packages that include both horizontal and industry-specific functional enhancements, core application upgrades, process and user interface simplifications, and new Web services derived from SAP's business applications.

SAP customers are free to implement functional ERP enhancements in an iterative, as-needed basis, which greatly simplifies the upgrade process and helps to lower the overall upgrade cost. To date, SAP has issued two enhancement packages – in line with its plan to issue two enhancement packages for SAP ERP 2006 per year.

According to AMR Research, SAP R/3 serves as the application backbone for more than 20,000 midsize and large companies worldwide. Right now, under a licensing structure introduced in 2004 dubbed 5-1-2, extended maintenance on R/3 is available though 2007 at a two percent fee. Following that, the charge for extended maintenance for two additional years is four percent. Cost for post-2009 support is negotiated on a case-by-case basis.

As the maintenance window closes for SAP customers presently running SAP R/3 4.6C (or earlier SAP R/3 releases), it is important these customers carefully map out a strategy for their future business processes; and, in connection with this, educate themselves on the significant gap in capabilities between SAP ERP 2006 and the SAP R/3 system they’re currently running.

SAP CEO Kagermann predicts that 75 percent of SAP's 36,000 customers will upgrade to SAP ERP 2006 by mid-2008. To be sure, SAP still has much work to do in educating its customers on the business benefits of upgrading to SAP ERP 2006; and SAP customers running SAP R/3 can expect additional, creative incentives from SAP to further grease the path and absorb the cost of upgrading, but SAP has made it abundantly clear that SAP ERP 2006 is the ‘go-to’ release for its ERP customers, and upgrade fence sitters hearing the tick of the dwindling maintenance clock are well advised to heed the upgrade call – and begin realizing in 2008 the benefits of business process innovation SAP ERP 2006 enables.

SOA takes flight – SAP ERP 2006 is powered by the SOA-enabled NetWeaver platform – the industry’s first business process platform enabling rapid business process innovation and incremental transitioning to enterprise service oriented architecture (SOA). Accordingly, making the case for upgrading to SAP ERP 2006 is inseparable from making the case for SOA adoption. And it is here where the full potentialand perhaps greatest valueof upgrading to SAP ERP 2006 is realized. While increasing ROI and reducing the total cost of ownership of SAP investments are key benefits of upgrading to SAP ERP 2006, greater still is the ability to rapidly improve business performance and sustain a sharp competitive edge through fast and strategic business process innovation.

The promise of SOA is very real, and mainstream enterprise transitioning to SOA is assuredly more of a question of ‘when’ than ‘if.’ SAP has long been at the forefront of the SOA wave, and today market adoption of SAP NetWeaver is growing steadily, with more than 13,760 customer deployments in production.

As an integral part of its strategy to reduce risk, lower the barrier of entry and speed up adoption of SOA, SAP has aggressively developed and promoted composite applications (xApps) as a means for its customers to take the initial steps toward enterprise SOA. xApps are comprised of ‘enterprise services’ that reside on the network and are combined into applications that address immediate business needs. Since SAP’s introduction of the xApp term in 2003, the software giant has branded and brought to market more than 60 xApps – not including mobile business xApps, analytic xApps and several hundred smaller xApps embedded in other solutions. This explosion in xApp development is driving SOA adoption.

Gartner heralds SOA as the undeniable future of IT, predicting that service-oriented architecture will be used in more than 60 percent of new mission-critical operational applications and business processes designed in 2008 and in more than 80 percent by 2010. Gartner research director Frank Kenney recommends that organizations “aggressively invest in SOA, as it will rapidly become the architectural foundation for virtually every new business-critical application.”

Gartner positions SAP as both a leader and a visionary in its 2Q 2007 Magic Quadrant for Application Infrastructure for Composite Application Projects. In a research note issued in September 2007, Gartner states that SAP is “well on its way to delivering on its [SOA] vision.” Gartner concludes its research note by answering the question of whether or not waiting to move on SOA is an option for SAP customers with a straightforward, unequivocal “No.”

MDM on the rise – The adoption of SOA fuels the demand for master data management (MDM) initiatives. SOA, at bottom, is about integration, and this integration is typically envisioned as happening at the application layer, with myriad enterprise applications drawing upon bits of each other’s service-enabled functionality in real time to transform existing or create new business processes that drive operational efficiencies and provide greater visibility across the enterprise.

As SOA moves beyond the conceptual level and into real-word deployment, the preeminent role of MDM becomes abundantly clear. Without a single source of accurate, consolidated, harmonized and centrally managed data, the efficacy of any new or improved business process which is dependent on an SOA-based application is severely limited. It is essential that a well-designed MDM model be in place to weave all the various application data together into an accurate, complete, and actionable picture. It is well known that SAP NetWeaver MDM is well suited for this purpose.

What is perhaps less well known is that SAP MDM’s SOA value extends well beyond providing enterprise-wide data consolidation, harmonization and central management. Because it is built on the NetWeaver platform, the technical enabler of SOA, SAP MDM also holds open the possibility for data itself to be exposed as a service.

The implications of this ‘data-as-a-service’ capability, or ‘data visualization’ as it is called, are profound. In essence, coupling MDM with enterprise SOA allows for a fast and radical transformation of the information supply chain within an enterprise. Exposing data as a service significantly increases the data’s operational and transactional value, which in time will spur the development of a virtually infinite array of industry-specific composite applications capable of feeding line-of-business workers the information they need in real time to make better, faster, smarter decisions.

Determining precisely what data can be exposed as an enterprise service, and how best to cobble together into a composite application bits of functionality from disparate applications remains a formidable challenge. But what is certain right now is that SAP NetWeaver MDM stands fast as the linchpin for unleashing the full future value of enterprise SOA. Accordingly, look for MDM to be a staple among 2008 SAP initiatives..