What can SAP do?

SAP will change everything. That’s the gospel according to everyone who knows anything about this integrated software system. What exactly is the beast? And why does the thought of it throw people into a dither?

SAP ( Systems Applications and Products ) is basically an ERP.* : 

Ask an information-technology specialist, and you’ll get something like: "SAP is a completely integrated, enterprisewide information system that replaces legacy systems with a series of software modules that communicate with each other seamlessly, replacing current business processes with best practices."

In layperson’s terms, SAP software is a total information system that weaves together all the data from manufacturing with all the data from inventory with all the data from purchasing with all the data from accounting with all the data from sales......ad infinitum. If your company makes jars of glop, SAP allows you to find out how much glop you’ve made, how much you’ve got on hand, who bought it, when they are picking it up, when they intend to pay for it, how much more glop they may buy in the future and so on... until you run out of questions about glop.

Yes, you might be able to find the answers to all those questions using your company’s current information system, but chances are you’d be hunting in a crazy quilt of databases. With SAP, all that data is integrated. That’s why "integration" is the buzz in SAP circles. Everything is interconnected by a series of relational databases: What Frank in accounting enters into the system directly affects what Dave in purchasing sees on his materials management reports and what Sarah in inventory planning uses to make decisions.

What does that mean to Joe Blow on the production floor? Probably that Joe’s job will be analyzed, dissected, reassembled and reconfigured so that it follows processes prescribed by SAP software. These prescriptions have been developed by SAP based on "best practices" in companies that have already implemented SAP. So if SAP forces you to reshape a function or process, it’s often because a lot of companies have discovered that’s the best way to reengineer that function. This software affects so many departments - from accounting to inventory to production to human resources - that a lot of people will be force-fed into the system and spat out with new jobs, new titles, and even new departments.

The integrated nature of SAP forces employees to understand how other functions in the company operate. For example, employees who take customer orders will have to understand the sales cycle because the information they enter into the system can directly affect decisions the sales people will make. If, for example, a sales rep looks at the database and finds out his client placed an order yesterday, he knows he doesn’t have to visit that customer today; instead, he can send a thank-you note.

Prior to SAP, a production worker decided where to put a finished product in the warehouse. After SAP, that decision shifted to the person in-charge of the warehouse, who now has access to information about what orders are due, which customers are coming to pick up which products, which customers need to see accounting about paying bills, and which customers have priority.

It may be perfectly logical that the warehouse person should make those decisions. Trouble is, a lot of your existing business processes may not stand up to the logical scrutiny that SAP imposes on your company. A lot of clients, says Miller, questioned about why they do things a certain way, only shrug and confess, "That’s the way we’ve always done it."

Now, where something gets put in the warehouse may not seem like a big deal, but SAP software is changing who makes decisions about what in hundreds, sometimes thousands, of tasks. And those decisions are being made by people with access to more information about how the company works than they’ve ever had before.

With this software, information is entered into the system once: No entering and re-entering or checking and double-checking. Once the information is in, it becomes part of the entire organization’s central nervous system. That capability makes for enormous efficiencies, of course, but it also has its downside. That is, every action you take has a consequence.

You have to realize that every change you make to the system is immediately available, and used and treated as gospel by perhaps a hundred other people. So you don’t muck around. The information entered into SAP’s system, gets used by dozens, perhaps hundreds, of other people in ways that the person entering the data can’t possibly imagine.

SAP R/3 has taken the software industry by storm, selling its rather pricey software to 90 percent of Fortune 500 companies.

How pricey exactly? Depending on how many employees you have, the cost ranges from $1.5 million to $5 million. And after buying the software, most companies then shell out anywhere from $10 million to $100 million on consulting fees to get the system up and running.

And if the direct costs aren’t intimidating enough, there’s the time it takes to implement SAP software. Most projects are measured in years, not months. "Converting to SAP is a long, arduous process. One company calls it Project Infinity," says Bill Stetar, president of Performance Technology Group Inc.

SAP’s R/3 software isn’t the only player in the game, but it took an early lead and is the predominant package on the market. Other software companies that compete with SAP include Oracle, PeopleSoft and Baan. They all sell software touted as total information systems, and the consequences of implementing them are similar.

If you think you’ll escape all the hubbub because you work for a midsized company (between $50 million and $200 million in revenues), think again. SAP is coming out with a version called Certified Business Solutions for the middle market, so you’ll likely run into one of these systems sooner or later.

SAP software is paradoxical: It changes your business processes dramatically, but it’s also infinitely customizable. In other words, you can force the software to mimic your current practices - though it takes a lot of force - or you can adopt the SAP way of doing things. If you customize it extensively, most experts agree, you lose some of the money-saving, time-saving advantages of the software. Nevertheless, you can’t just take SAP out of the box and install it on your network server. It must be customized somewhat to work at all.

Nancy Bancroft, author of Implementing SAP R/3 and president of Bancroft, Brite and Associates, a consulting firm in Denver, cites another paradox: "The value of SAP is that it is totally integrated; and the downside of SAP is that it’s totally integrated." Every bit and byte and factoid pumped into this collection of software modules creates ripples throughout the organisation. If the information is right the first time, the need for paper-shuffling dramatically decreases. If it’s wrong, however, decisions based on misinformation can directly affect the bottom line.

By eliminating the existing, isolated information systems in individual departments, this software mashes everyone together, forcing them to deal with people they barely knew before and to make decisions that affect other departments. Sometimes this forced interaction is beneficial, says Jennifer Jackson, a principal with Elliot Jackson Communications, a SAP consulting firm in Calgary, Alberta. "But sometimes it can be rather explosive."

Ideally, of course, your company is already integrated and cross-functional. If not, SAP will force those issues in ways that TQM, teamwork and reengineering never did.

"TQM or even some of the ISO 9000 work or any of that kind of stuff won’t shut your business down," says David Amborski, senior manager for education services for Deloitte Touche Consulting Group / ICS in Atlanta. " You’ve bet the farm once you’ve got this thing, so it’s a scary proposition."