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If Cost-Cutting and Efficiency Aren't Enough for Solid Competitive Advantage, What Then? An Introduction to SAP's Next Generation ERP Solution

by Arne Schmidthals | SAPinsider

April 1, 2004

by Arne Schmidthals, SAP AG, and Deborah Schmidt, SAP America, Inc. SAPinsider - 2004 (Volume 5), April (Issue 2)

The most basic goals of enterprise resource planning — increasing business performance and achieving greater business efficiencies — will always apply. But even these fundamental values have changed and evolved over the past few decades. In the 1970s, it was sufficient to be efficient. In the 1980s, companies focused on making better business decisions through decision support. But as your business needs change, so do your expectations of your ERP systems.

Of course, driving costs out of your operations is still business-critical. But it is now clear that this alone can't fully address the host of new challenges facing business.

As increased customer and shareholder demands and regulatory requirements are combined with fast-paced competitive environments, leaders require greater insight and visibility into their internal and external organizations. You need to ensure that resources are being used optimally, that each opportunity is realized, that you gain continuous return on investment while decreasing total cost of ownership, and that innovation is fostered regardless of market conditions. Reducing costs and increasing productivity alone will no longer sustain business — but creating competitive advantage will.

This means that an ERP solution must help you evaluate where your company is now, but with a broader vision that also includes your customers and partners. You must evaluate your past operational effectiveness and plan for future opportunities. So an ERP solution must now create strategic value that allows you to answer questions like:

  • Where do I create new opportunities or uncover new value to grow the business?
  • Exactly how will these opportunities help my company stay competitive in the marketplace?
  • Are we ready to execute this new initiative?
  • What historical or customer trends are shaping my business now?

What's more, how you achieve these operational and strategic goals has changed dramatically — companies are finding that ERP solutions put in place years ago cannot fully embrace all the technology that should be at their disposal, including portals, Web services, reporting, analytics, and mobile technologies. Companies are looking for the right combination of technology and functionality to enable greater efficiencies as well as greater strategic value across the enterprise. mySAP ERP is such an enabler.

What Is mySAP ERP?

mySAP ERP is SAP's next-generation enterprise resource planning solution. SAP has always developed its ERP solutions to streamline back-office operations in order to eliminate manual processes, redundancies, and inefficiencies, and to reduce cycle times across the business. mySAP ERP covers end-to-end requirements across five key functional areas:1

  • Analytics
  • Financials
  • Human Capital Management
  • Operations
  • Corporate Services

As you can see, some things don't change: operations, HR, and financials functions are the mainstay of SAP's ERP solution, just as they have been for three decades. Now, mySAP ERP expands the scope of these functions, while also adding analytics for strategic planning and greater insight into your business, incorporating built-in, highly integrated analytics for strategic planning, and supporting it all with self-services and an open solution and integration platform — SAP NetWeaver. Figure 1 highlights some of the new offerings across mySAP ERP's functional areas.

Figure 1
New Functions Across All Areas of mySAP ERP

Combine Technology and Applications for a More Effective Enterprise

In fact, this is one of most dramatic changes in mySAP ERP — the combination of applications and built-in integration with SAP NetWeaver technology. Across the five functional areas, embedded SAP NetWeaver capabilities provide the full set of enabling software technologies that include functionality for portals, business intelligence, process integration, Web Application Server, mobile technologies, and more, to extend ERP functions, visibility, and reach.

Take reporting and analytics as an example: In the past, R/3 reports were solely based on the underlying ABAP-based technology stack. Now, the inclusion of SAP Business Information Warehouse allows you to move from traditional reporting capabilities to BW's multi-dimensional, hierarchical, and more advanced analytics capabilities. Or take self-services, which bring ERP to every desktop and every user, with manager and employee desktops based on SAP Enterprise Portal.

What's more, SAP NetWeaver is the foundation for future developments from SAP, so you will be prepared to optimize these innovations as they are offered. And with mySAP ERP as the core of all SAP business functionality, you can add any or all of the full range of solutions in mySAP Business Suite, like mySAP Supply Chain Management (mySAP SCM) or mySAP Customer Relationship Management (mySAP CRM), to automate all processes across and outside of the business.

Three of the Ways mySAP ERP Supports Business Advantage

Here are just three examples of concrete opportunities to improve business performance with mySAP ERP:

1. Enhance your business insight throughout the enterprise — and beyond internal operations

Effective companies use a closed-loop process of planning, reporting, and analysis to respond quickly to business change. Sound performance management practices are also able to bridge the world of financial data, which reflects past performance, and operational data, which projects future financial results.

mySAP ERP includes performance management solutions such as SAP Strategic Enterprise Management (SAP SEM), along with analytics solutions, to help translate business strategy into everyday action and transform business data into real-time insight to help answer questions such as:

  • Are the sales plan, production plan, and financial plan synchronized?
  • Are my lines of business meeting revenue and profit expectations?
  • What is the effect of a 10% material cost increase to my bottom line?
  • Does my four-quarter rolling revenue forecast meet external revenue guidance?
  • What is the consolidated net income under both US GAAP and IAS?

The result can be faster and better decision-making, improved financial and operational planning and forecasting, up-to-the-minute business monitoring for one version of the truth, and plan and performance alignment.

2. Instill sound corporate governance, ready to adapt to changing regulations

Credibility and investor trust in listed companies has never been lower. You need a financial management solution that you can trust; in particular, an accounting system that is reliable, transparent, and fast. This is nothing new — SAP has been offering this for 30 years now. With mySAP ERP, you continue to get a complete, proven solution that enables financial control and delivers trusted accounting.

mySAP ERP assists companies that are faced with the challenge of ensuring accurate and timely financial statements, creating a sound internal control environment, and mitigating and monitoring risks in their organization.

As compliance requirements are developed to respond to global regulatory challenges, mySAP ERP will continually work to complement existing functionality with the latest solutions (such as SAP Compliance Management for Sarbanes-Oxley), improve financial consolidation functionality, and improve general ledger capabilities to prepare you for the future.2

3. Leverage existing investments to lower TCO

Today, technology investment is not about getting more, but about getting more out of what you already have. mySAP ERP, powered by SAP NetWeaver open technology, allows you to leverage the investments you've already made in SAP and other vendors' systems. For example, you might decide to keep some or all of your current systems and add value-add capabilities (e.g. Business Analytics) on top of them. Or, you might decide to utilize the process integration tools to streamline the integration between SAP and non-SAP systems.

In addition, people's skills and training, as well as corporate data locked away in legacy systems, can be easily extended to the mySAP ERP environment. For example, with mySAP ERP, unless you decided to streamline and change them, your existing financials, HR, and operations processes will still work the same way. This will allow you to minimize training effort, both for IT experts and system users. With mySAP ERP, powered by SAP NetWeaver technology, you can streamline your IT landscape further, with minimal disruption to your business, while lowering your operational costs.3

Transitioning to mySAP ERP

For almost any organization, there are significant short-term functional benefits of moving from SAP R/3 to mySAP ERP, with quick returns to be gained by such features as self-services. In some cases, organizations are facing the end of support and maintenance for their older R/3 offering. But because of the differences between mySAP ERP and SAP R/3 (a single installation of a single instance), your business goals and timelines can play a large role in when and how to start transitioning from SAP R/3 and adding the new functionality available to you with mySAP ERP. Once you choose to move to mySAP ERP, you can determine when to implement each of its components, and the transition of your R/3 system can be done incrementally, so your system can evolve over time.

And with mySAP ERP as the core of all SAP business functionality, you can add any or all of the full range of solutions in mySAP Business Suite, like mySAP Supply Chain Management for transportation optimization or mySAP Customer Relationship Management for call center management. Note that with mySAP Business Suite, you also still get the full mySAP ERP functionality, as mySAP ERP is a solution in mySAP Business Suite.

From a functional perspective, the best transition path for your organization will depend on your business objectives and your existing system environment — including your current R/3 release and the schedule for maintenance and support.4 In fact, once you've moved to mySAP ERP, when and how you upgrade components is up to you. For most companies, the next steps will be determining (see Figure 2):

  • When to upgrade your R/3 environment. You will want to consider factors such as the maintenance support timeline, functional considerations, integration implications, for example.
  • When to implement additional technical components that are part of mySAP ERP, such as SAP BW or SAP SEM. Here you can consider factors such as integration possibilities, as well as short- and long-term benefits.

For example, perhaps you're using SAP R/3 Enterprise, but for enhanced reporting and analytics you want to incorporate BW and SEM. Moving to mySAP ERP will allow you to implement BW on top of your SAP R/3 Enterprise system, gain short-term business benefit on an R/3 system while it's still fully supported by SAP, and begin planning for a later upgrade of the R/3 system. Or perhaps you are looking to streamline integration between SAP and non-SAP systems. You might want to consider the SAP NetWeaver Exchange Infrastructure capabilities.

Figure 2
Implementation Options

While you plan for your current upgrade from SAP R/3 or R/3 Enterprise while you plan for your upgrade, another option will become available down the road — SAP ERP Central Component 5.0 (SAP ECC 5.0), which continues the concepts pioneered with SAP R/3 Enterprise and, at the same time, introduces additional technology and functional capabilities.5

Next Steps

Simply put, evaluate mySAP ERP. Get a sense of low-hanging fruit — things like self-services or analytics — that will provide the greatest ROI and the most value. Investigate the benefits that operational planning, strategic planning, technology, integration capabilities, or self-service procurement can bring to your organization. Look ahead to the support timeline for your current R/3 environment.

Once you have the full set of mySAP ERP capabilities, applications, and technology at your disposal, you can choose the upgrade path that makes the most of your current environment, while preparing you for the inevitable changes down the road. After all, cost efficiencies and higher productivity aren't all you need to maintain a competitive advantage in today's uncertain times.

For more information on mySAP ERP, please visit or

1 For more details on mySAP ERP functionality, see the article by Martin Przewloka and Thilo Liebermann in this issue of SAP Insider (

2 See "Compliance or Bust! Three Strategies for Enlisting SAP Solutions in Your Corporate Compliance Efforts" by Kraig Haberer in this issue of SAP Insider (

3 For more on mySAP ERP for NetWeaver, see "SAP NetWeaver — The Technology Platform for mySAP ERP" by Matthias Haendly, Ralf Strassner, and Markus Hermann in this issue of SAP Insider (

4 For detailed information on the schedule for mainstream support and maintenance for SAP R/3 and SAP R/3 Enterprise, please see the article by Ralf Strassner and Juergen Jakowski in this issue of SAP Insider (

5 For more details on SAP ECC, timelines for support and upgrades, and transitioning to mySAP ERP, see the article by Ralf Strassner and Juergen Jakowski in this issue of SAP Insider (

Arne Schmidthals is responsible for marketing and communications within the Global ERP Initiative at SAP AG. Arne's experience with ERP goes back to 1993, when he joined SAP as an R/3 application consultant helping various large and mid-size SAP customers to successfully implement R/3. He continued to gain extensive experience in different roles in consulting, project and support management, and business development. Responsible for the SAP R/3 Enterprise Ramp-Up in the Americas, Arne was one of the key drivers behind the successful launch of SAP R/3 Enterprise in 2002. Arne holds a degree in Computer Science and Business Economics from the University of Kaiserslautern in Germany.
Debbie Schmidt is the vice president of the Industry and Solutions Group at SAP America, Inc., where she is responsible for the leadership and direction of mySAP ERP, including both the Human Capital Management (HCM) and Financial Management (FI) lines of business. She is also responsible for business planning, business development, field enablement, and sales support. Prior to this, she was the global vice president of Human Capital Management at SAP AG. recently included Debbie in the list of the ten most influential women in the HCM software industry. Additionally, Debbie has been a featured speaker at several ERP, HCM, Financial, and learning conferences. Debbie received an M.B.A. with an emphasis in organizational development from DePaul University in Chicago, Illinois, and a bachelor's degree in business administration from Marquette University in Milwaukee, Wisconsin.


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