What Should Drive Your SAP Upgrade Strategy

What Should Drive Your SAP Upgrade Strategy

By Sam Sliman
President, Optimal Solutions Integration, Inc

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.

The window is slowly but surely closing for those wait-and-see SAP R/3 customers who opt for extended maintenance as they map out their upgrade strategy. The smartest SAP upgrade path, however, should not be solely determined by maintenance expiration. Rather, an honest and thorough assessment of whether or not your company will have the flexibility and adaptability it needs to succeed in an increasingly dynamic, hyper-competitive market should take precedence in the upgrade decision process. More pointedly, gaining a competitive edge through business process innovation and optimization, both within and beyond the enterprise, should be at the heart of every SAP upgrade strategy.

SAP customers presently running R/3 4.6C or earlier releases and looking to upgrade have the following options:

• Upgrade to SAP R/3 4.7 released in 2002 (which brings little more than a maintenance extension)

• Upgrade to mySAP 2004 (which, though it is a proven and stable release, brings no new functionality and is not enterprise SOA)

• Upgrade to SAP ERP–formerly mySAP ERP 2005–(which will remain stable through 2010, includes over 300 functional enhancements and enables the transition to SOA)

SAP has made it clear which upgrade strategy it deems most fitting for customers, anointing SAP ERP the “go to” release for R/3 customers in September of 2006 and concurrently committing to keeping the core of SAP ERP unchanged through 2010, which provides SAP customers with the visibility and stability they need to innovate without fear of interruption or obsolescence. SAP exudes confidence in this strategy, and with good reason—customer adoption rate for this newest version of SAP ERP is the fastest in the company’s history, racking up over 1,000 implementations within seven months of the product launch. SAP CEO Kagermann goes so far as to predict that seventy-five percent of SAP's 36,000 users will upgrade to SAP ERP by mid-2008, a huge jump from the 2,547 live implementations this year—which is itself a bump up from the 225 customer implementations in 2006.

Together with SAP NetWeaver, SAP ERP represents 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 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 is realized. While increasing ROI and reducing the total cost of ownership of SAP investments are key benefits of upgrading to SAP ERP, greater still is the ability to rapidly improve business performance and sustain a sharp competitive edge through fast and strategic business process innovation.

No doubt there are thousands of SAP customers who are not in a position to immediately upgrade from R/3 4.6C, R/3 Enterprise 4.7 or earlier releases, and SAP’s extended maintenance program affords these customers an opportunity to carefully map out a strategy for their future business processes. While end-of- maintenance doesn’t happen for this group until 2009, the gap in capabilities between SAP R/3 Enterprise and SAP ERP is quite large. Accordingly, it behooves R/3 customers to understand the capabilities of SAP ERP relative to the SAP system they’re now running. Equally important, SAP R/3 customers should know that the move to SAP ERP is in no way a ‘rip-and-replace’ endeavor. Rather, SAP ERP allows customers to upgrade incrementally as business needs evolve. However, even with the grace period of extended maintenance, R/3 customers are well advised to heed that while the maintenance clock slowly ticks away, the greater risk—falling behind the business process innovation curve—looms large.