LAS VEGAS – SAP‘s senior executives Monday said that they want to lay out the next three to four years of their architecture in a more iterative fashion to allow customers a gentle, not jarring, upgrade path.
During a keynote address that opened SAP AG’s annual analyst conference held here this week, CEO Henning Kagermann said, “It’s not a big bang like we tried to have in 2000. It’s coming to a more natural way that is not as big a disruption to businesses.”
Kagermann said that customers will be able to build on the mySAP ERP 2005 platform without fear of obsolescence. Based on a services-oriented architecture approach, the company plans to release add-ons over the next few years that will improve that platform but won’t require a deep investment.
SAP announced the first of its enhancement packages for mySAP ERP on Monday with improvements in human capital management, financials, adaptive manufacturing and, for retail customers, demand management and point-of-sale integration.
“This is not something where you replace one software architecture with another,” said Kagermann. He added that businesses are being forced to react more quickly and deal with change due to a growing number of compliance regulations. Not only are businesses having to operate within the regulatory constraints of their own nations, but also any others where they do business. Canadian businesses, for example, are affected by Sarbanes-Oxley, a U.S. regulation that places a premium on transparent accounting practices.
“The question is, are you going to go faster than other (businesses) and create a culture of change in your organization?” said Kagermann.
By adopting a more staggered approach to upgrades, Kagermann predicted that SAP customers can remove about 50 per cent of their existing upgrade costs.
President of SAP’s product and technology group Shai Agassi, who spoke after Kagermann, said that customers won’t be able to stretch their IT budgets – they’ll be looking to get their money’s worth out of their existing investments.
IT departments are currently burdened by what Agassi called “taxes.” These “taxes” include training costs, uptime costs, troubleshooting, etc. Basically, “any dollar our customers spend that don’t go into our pockets.,” he said. “We have to find a way to eliminate these taxes or there is no growth.”
More mySAP ERP enhancement packages will be released steadily over time, said Agassi – one every six months or so. “Customers can pick which ones they want to deploy and which ones they don’t.”
Lions Gate CIO Leo Collins said SAP is “a world in which we feel comfortable.” The film studio, which has offices in Los Angeles, New York and Vancouver, has been using the company’s software since 2002.
Collins praised SAP’s approach to software upgrades. “As we buy additional apps, it’s easier to bolt them into the existing system,” he said. “We don’t have to spend a lot of time on infrastructure questions. . . Years ago, we made a huge bet that SAP would be able to carry our business forward.”
IDC Canada Ltd. analyst Joel Martin said that a lot of customers may be receptive to SAP’s approach. “Where we’re seeing a different strategy is with SAP saying, ‘We believe we have the right core. We’re not going to version you to death,’” he said.
“If you’re a CEO, you buy into it. . . . The challenge for SAP is to take their story . . . down to the IT directors and get those guys involved so that they’re all on the same page.”
IDC Canada estimates that the Canadian ERP market will grow approximately six per cent over the next five years.
“It should open more doors for SAP,” said Martin. “The challenge for SAP is to close the door behind them.”
During a press luncheon, Agassi stressed than when 2010 finally rolls around, customers won’t be forced to tackle a major upgrade. The year 2010 is when SAP will offer a new ERP platform, but it will be based on MySAP ERP 2005 with all the enhancements rolled in. It may also draw in more elements of SAP’s CRM platform. “It’s not that I’m coming in and ripping out all the ERP or all the CRM and starting again from scratch,” said Agassi, but he acknowledged that as the 2010 deadline approaches, some users will wait for the complete package.
Next year the company will introduce products designed to drive its presence further into the mid-market, including an SOA approach for SMBs. The company aims to increase its customer base from the current 35,000 to 100,000 by 2010. Attracting smaller businesses in addition to its traditional enterprise base will be key to accomplishing this goal, said Agassi.
SAP’s analyst summit wrapped up Tuesday.