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INTRODUCTION TO ENTERPRISE
RESOURCE PLANNING SYSTEMS
AND SAP

Spring 2010

Fundamentals of Business Information Systems

Rationale for ERP System Introduction

Historically, functional areas
maintained independent
information systems.
Systems not designed to interface with
one another.
Information exchange often paper
based.
Unified system for data handling should
provide efficiencies and permit more
effective management.

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SAP History
"I think the most profound effect R/3 has had is the general
availability of real-time information. Within a company, somebody
is fulfilling a task. The task ends. And all information that was
affected by this task is available immediately in the new form.
That means you can improve workflow significantly. In conventional
organizations, it's a sequential process. You have to pass the work
forward. Something changed, and somebody else has to react to
that. From the beginning, it was our idea that everyone could do
everything at once. You would have access to current information
wherever you were and could get everything that you wanted to
know. We had to struggle for years on end. People debated this and
said that is not the right way of looking at things.
Now that has changed because of the Internet."
Hasso Plattner, CEO, co-chairman, and co-founder of SAP AG
Anticipating Change: Secrets Behind the SAP Empire

Reasons for Implementing ERP System2000 study

Replace legacy systems
Simplify and standardize systems
Improve interactions with suppliers and customers
Gain strategic advantage
Link to global activities

4.06
3.85
3.55
3.46
3.17

Solve the Y2K problem

Pressure to keep up with competitors
Ease of upgrading systems
Restructure organizations

3.08
2.99
2.91
2.58

1 = Not Important

5 = Very Important

"Enterprise Resource Planning Survey of U.S. Manufacturing Firms," Production and Inventory Management Journal
41 no 20 (2000) by V.M. Mabert et al

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Discussion
Premise:
ERP software allows a company to unite its
information handling.
United information handling mechanisms improve
operating efficiency and decision making.

Why aren't all companies using ERP systems?

Work with neighbor(s) and come up with a list of 5
reasons. Make your list as specific as you can.

Why aren't all companies using ERP systems?

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Key Risk Areas in ERP Implementation

Organizational fit
Skill mix
Management structure and strategy
Software systems and design
User involvement and training
Project management

Critical success factors

Top management support
Implementation team competence
Interdepartmental cooperation and communication
Clear goals and objectives

Effective project management

Reasonable, clear expectations

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Critical success factors

Project champion
Vendor support
Careful data handling focus (specification, conversion,
etc.)
Adequate resources
User training
Business process reengineering
Customization minimization (Configuration, not
customization)

ERP System Return on Investment (ROI)

Cost of ERP implementation highly dependent on
company size, number of users, modules
selected, and other factors.
Almost always more spent on system installation,
implementation, data migration, and training
than on software acquisition/licensing.
Meta Group 2002 study: average cost of ERP
ownership $15 million.
Wide distribution from $500,000 to $300 million.

Will ROI justify investment?

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How can an investment in ERP software pay for itself?

Improved decision making yielding competitive

advantage in market.
Improved production efficiency--greater yield with
fewer resources.
Improved management of labor cost--dominant
manageable business cost.
Reduced inventory risk (obsolescence, spoilage,
etc.)
Improved reporting and compliance (reduction of
manpower required, improved accuracy and
currency)

To understand why we are where

we are, it is helpful to study the
recent past.

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Pre-history of business computing

Early history of business computing

1960s Focus on inventory management and
control in production environments
LEO I (Lyons Electronic Office) debuted in 1951. First
computer specifically focused on business
computing.

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Early history of business computing

1970s MRP software debuts to assist in production
scheduling and inventory mgmt.

(More) contemporary history of business computing

1980s MRPII expands focus of previous systems

into management of entire production
process
1990s ERP systems apply same data collection and
handling mechanisms organization-wide

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Evolution of Business Computing

MRP--Materials Requirement Planning (1970s)
Focuses on resources needed to accomplish scheduled
production and when they are needed.

MRPII--Manufacturing Requirements Planning (1980s)

Expanded approach to production planning,
incorporating non-production data such as from
marketing and finance. (What should be made?)

ERP--Enterprise Resource Planning (1990s)

Expansion of MRPII concepts to all business functions,
not just production related. Integrated planning
focus. (How can we best operate?)

Functional model of business

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Process model of business

How do they differ?

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Enter SAP
SAP pioneered the ERP software market.
Five former IBM employees in Manhheim, Germany
founded SAP in 1972.
Systemanalyse und Programmentwicklung
Systems Applications and Products (now), System
Analysis Program Development (then)

Goals:
Create software that would integrate business
processes.
Make data available interactively and in real time.
Users work with computer screen, not printed output.

SAP Software Timeline

1973 "System R" (real-time data processing) released
to market. (Later came to be called "R/1")
1978 "R/2"

http://www.sapdesignguild.org/resources/r3_history.asp

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SAP Software Timeline

1992/93 SAP R/3--3 tiered architecture
Database, application, user interface (client)
Open architecture
Improved user interface

1994 and beyond

Enhancements and additional modules to R/3
Various "marketing names": SAP ECC, SAP Business
Suite, mySAP, mySAP Business Suite, mySAP.com.
SAP ERP, SAP Business Suite (preferred current
names)

SAP ERP 3-tiered Client-server architecture

Application
Server

Application
Server
USER PCs

USER PCs
Database
Server

Application
Server

Application
Server

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Client-server system

Database and
Application
Server

Nothing important is saved on your PC.

Only things saved on the server are saved,
and they are saved for good.

http://sap.uwm.edu/UWMDefault.htm

Who is SAP today?

SAP AG
Worlds Largest Business Software Company
Worlds Third-largest Independent Software Provider
Annual revenues exceeding $10 billion.

Company Statistics
51,400 employees in more then 50 countries
1,500 Business Partners
75,000 customers in more then 120 countries
12 million users
100,600 installations
Source: SAP AG website

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SAP Software Applications

Small & Medium Size Solutions:
Business One
1-50 employees. SE (Small Enterprise) focus.
Bought (not made) by SAP. Not sold by SAP directly.

Business by Design
50-100/500 employees. SME (Small, Medium
Enterprise) focus.
Based on Service Oriented Architecture (SOA).

SAP All-in-One
100/500-1000 employees. ME (Medium Enterprise)
focus.

http://www.sap-best-fit-adviser.com/adviser.aspx

SAP Business Suite

SD

FI

MM

SAP PLM

CO

PP

AM

SAP R/3
Client/Server
ABAP
Basis

QM
PM
HR

PS
WF
IS

SAP
SRM

SAP
ERP

SAP
CRM

SAP SCM

SAP NetWeaver

Old Diagram

New Diagram

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SAP Business Suite

mySAP PLM

SAP
SRM

SAP
ERP ECC 6.0

SAP
CRM

SAP SCM

SAP NetWeaver

SAP NetWeaver
Set of cooperative technologies that provide
internal connectivity between SAP modules and
external connectivity with other systems.
NetWeaver Exchange Infrastructure (NetWeaver XI)
NetWeaver Portal
NetWeaver Web Application Server
NetWeaver Business Intelligence (NetWeaver BI)

Composite Application Framework (CAF) allows

services to be abstracted and joined together
into a customized process.

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SAP R/3 ERP Modules

FI
Financial
Accounting

Workflow

QM

PS

PM

Quality
Mgmt.

Project
System

Plant
Maint.

PP

SD

MM

Prod.
Planning

Sales &
Distrib.

Materials
Mgmt.

HR

AM

Human
Resources

Asset
Mgmt.

CO
Controlling

SAP Industry SolutionsBest Practices

Aerospace & Defense

Automotive
Banking
Chemicals
Consumer Products
Defense & Security
Engineering, Construction
Healthcare
High Tech
Higher Education
Industrial Machinery
Insurance
Life Sciences
Logistics Service

Media
Mill Products
Mining
Oil & Gas
Pharmaceuticals
Postal Services
Professional Services
Public Sector
Railways
Retail
Telecommunications
Utilities
Wholesale Distribution

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SAP Duet
Microsoft, SAP partnership to add SAP functionality
directly to Microsoft Office products
http://www.sap.com/solutions/duet/demos/index.epx

ERP System Functional Details

ERP Systems are large-scale applications that run on
top of database systems for storage and data
management.
SAP typically used with Oracle, DB2, or MS SQL.
Basic SAP installation--over 28,000 tables.

ERP Systems are not "install and go." Configuration

required.
Configuration: making the standard software fit your
business processes.
SAP: over 8,000 configuration decisions.
ERP Configuration Management--full time job

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ERP System Functional Details

Systems are large-scale distributed applications that
need system level administration and control.
Performance tuning, network and equipment
management, redundancy and backup,
development and test systems, transport.
SAP "Basis Administration", "NetWeaver
Administration" non-trivial for large company with
significant infrastructure.
SAP Configuration, Development

Copyrights
Presentation prepared by and copyright of Dr. Tony
Pittarese, East Tennessee State University, Computer and
Information Sciences Dept. (pittares@etsu.edu)
Podcast lecture related to this presentation available via
ETSU iTunesU.
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