My SAP ERP Yvonne Genovese Vice President Research

My. SAP ERP Yvonne Genovese Vice President, Research Director Gartner, Inc.

my. SAP ERP - The big AHA! By 2005, my. SAP ERP will be a different product than R/3 Enterprise (. 8 probability). User Imperative: The question is not “if” to upgrade - it’s when!

Key Issues n What is my. SAP ERP and how will it impact SAP users? n How will SAP’s technology and application strategy affect users through 2008? n What are SAP users key challenges in selecting to deploy my. SAP ERP over R/3 Enterprise?

From R/3 to R/3 Enterprise R/3 4. 6 C 4. 5 B 4. 0 B 3. 1 I R/3 Enterprise Core Stable Extensions Technology: BASIS 4. 6 D WAS 6. 20 Availability: Now End of Support: August 2003 (4. 6 C: March 2005) Evolving

From R/3 Enterprise to my. SAP ERP my. SAP Application Strategy, Part 1 2003 x. App my. SAP Business Suite x. App PLM x. App CRM SCM R/3 Enterprise my. SAP ERP Net. Weaver Web. AS Extensions SRM

From R/3 Enterprise to my. SAP ERP my. SAP Application Strategy, Part 2 2003 x. Apps my. SAP Business Suite PLM CRM my. SAP ERP SCM Net. Weaver Extensions R/3 SRM

R/3 Enterprise vs. my. SAP ERP n R/3 Enterprise – New functionality over 4. 6 c – Unicode – Based on Net. Weaver Web. AS – Enhancements encapsulated in Extensions n my. SAP ERP – R/3 Enterprise Functionality plus Analytics, SEM, Financial Supply Chain Management, MSS/ESS, SAP Learning solution, E-Recruiting, Self Service Procurement, Internet Sales R/3 Edition – Core remains “stable” – Full Net. Weaver Suite – No license upgrade – Requires new license contract – License conversion option for installed customers

my. SAP Business Applications Evolution Technology Transition forces Application Code Change R/3 Enterprise Net. Weaver Optional my. SAP ERP 2002 Includes Net. Weaver my. SAP ERP 2003 Based on Net. Weaver my. SAP ERP 2006 Designed for Net. Weaver • Requires Componentization of R/3 Enterprise code within my. SAP ERP • R/3 Enterprise code will remain a “black box” inside my. SAP ERP Result - At some point, users must migrate from R/3 Enterprise to my. SAP ERP

my. SAP ERP: Componentization of Objects 1. Applications Business Process R/3 Enterprise 2003 Order Entry Fulfillment Receivables Application 2. Micro-Flows Credit Business Objects. Configure Check Price Ship Bill Collect my. SAP ERP 2005 3. Enterprise Process Enterprise. Spanning Business Process 4. Value Chain Optimization Multienterprise Business Process Demand to Service my. SAP 2008 Copyright © 2003

SAP Net. Weaver - Vision vs Reality The Vision: People Integration Multi-Channel Access Portal Collaboration Information Integration Business Knowledge Intelligence Management Master Data Management Process Integration Broker Business Process Management Application Platform J 2 EE Life Cycle Management Composite Application Framework SAP Net. Weaver ABAP and. OS OS Abstraction DBDB and … . NET Source: SAP AG Web. Sphere • Single Architecture • Java commitment • Integrates APS and SES • Composite Application Framework • Web services pioneer • Bus Apps Differentiator • Enabler of x. Apps agility The Reality (Aug 2003): • Many separate components • Big variation in component maturity and time lines • SAP now competing head on with IBM, MS, Oracle, BEA

SAP Net. Weaver - Vision vs Reality MI Composite Application Framework BW SAP Net. Weaver The Reality (Aug 2003): People Integration • Many separate components • Big variation in component maturity Multi-Channel Access Portal Collaboration Information Integration Business Knowledge Intelligence Management Master Data Management Process Integration Broker Business Process Management Application Platform J 2 EE Life Cycle Management EP KM ABAP and. OS OS Abstraction DBDB and … . NET Source: SAP AG Web AS Web. Sphere MDM XI: SAP/ non-SAP XI: SAP/ SAP

The Challenge: When to Upgrade, Not “IF” SAP R/3 Enterprise my. SAP Business Suite Contract my. SAP ERP Contract Latest release of SAP R/3 >Maintenance: Until Q 1/2009< SAP R/3 Release 4. 6 C >Maintenance: Until Q 1/2006< SAP R/3 Release 4. 6 B and below >Maintenance: Until end of 2003< ! Risk for customer to go out of maintenance ! SAP R/3 Contract License Types SAP R/3 Release 4. 6 B and below SAP R/3 Release 4. 6 C SAP R/3 Release Types SAP R/3 Enterprise

Measuring Upgrade Business Benefits and ROI is Tough Hard Business Benefits ($) must be tied to real Key Performance Indicators (KPI’s) Difficult to Justify Technology only Upgrade KPI’s must be measured before and after any SAP project or improvement KPI’s • Inventory level • On time delivery Witchcraft needed because everything changes simultaneously during the SAP project: Industries, Enterprise economics, technology, other Projects, . . . BUT: Smart Enterprises can still do it In tough times we have to try harder THE RESULT IF YOU DON’T: Potentially more expensive upgrade later

SAP Customer Dilemma: Lack of Best/Next Practice Resources Customer Choices: 1) Build Internal through Competency Center 2) Develop Relationship with Regional ESP Implementation Go-Live COST Upgrade Current System Production Best Practices Next Practices • ESP • SAP PSO TIME

SAP License Terms to Negotiate: License Model Choice of e-business platform or component strategy. Fee for three role-based, named users. Automated B 2 B transactions charged via software engines based on sales and purchase orders. Maintenance: 17 - 23 percent Top Five Terms to Negotiate: g Full 100 percent credit for R 3 investment, and for future conversion from my. SAP ERP to my. SAP Business Suite if required. g On larger deals, minimize uplifts outside Euro-zone countries g Understand ‘indirect access’: Specify exactly when licenses for external systems accessing SAP software required, be particularly careful with BW (Open. Hub) g Right to outsource g Rights to custom-developed code

SAP Licensing: ‘This Is Getting Harder…’ Pricing Type Strengths Challenges Business Suite Licensing Solution Licensing Access to Everything Pay as required Shelfware Higher Overall Cost Maintenance New functionality Engines Data Extraction (BW, XI) International No Option Next/Best Practices Industry Functionality Pay as required Transl/Local. Maint for Shelfware SAP Option to Charge Separate Pricing Not Included in Suite Price Uplift

Functionality / Price my. SAP Business Suite Pricing Model: Named User fees (4 categories) Developer ? Up to E 5700 Professional Limited Prof. E 3800 E 1600 (mobile E 800) Employee E 400 n my. SAP FIN n my. SAP HR n my. SAP PLM n my. SAP ERP n my. SAP SRM n my. SAP SCM n my. SAP CRM Software Engine fees: (e. g Purchase Order/ Sales Order Industry Solutions based on industry metrics)

SAP Maintenance n Standard offering (17%) – Technical Support and Rights to New Versions – 2 Early Watch checks and either SAP Going. Live Check, SAP Going. Live Functional Upgrade Check, or SAP OS/DB Migration Check. n Max-Attention Service Level offering (20%) – Guaranteed response time for very high priority incidents – Safeguarding for up to 2 mission critical projects and named contact in SAP support services n Max-Attention On. Site offering (23%) – Above plus two full-time on-site consultants

SAP License Terms to Negotiate: License Model Choice of business suite platform = all SAP applications or solutions = my. SAP ERP, or other single application. Fee for three role-based, named users. Automated B 2 B transactions charged via software engines based on sales and purchase orders. Maintenance: 17 - 23 percent Top Five Terms to Negotiate: g Full 100 percent credit for R 3 investment, and for future conversion from my. SAP ERP to my. SAP Business Suite if required. g On larger deals, minimize uplifts outside Euro-zone countries g Understand ‘indirect access’: Specify exactly when licenses for external systems accessing SAP software required, be particularly careful with BW (Open. Hub) g Right to outsource g Rights to custom-developed code

Six Steps of Preparation for my. SAP Licensing 1. Establish a negotiating team with representation from all participating business units. 2. Define requirements (technology and functionality) over two to three years with focus on funded projects. 3. Perform a physical inventory of SAP licenses and existing contract terms; understand new models and terms. Compare with new proposal. 4. Determine whether purchase can be made under existing agreement (my. SAP Business Suite -. com). Weigh re-licensing benefits against loss of favorable terms. 5. Balance additional discount with potential shelfware.