SAP to Lure Users Off R/3

SAP will use its Sapphire User Conference to try to persuade customers to move from R/3 to MySAP ERP.

SAP will use its Sapphire User Conference the week of May 15 to try to persuade customers to move from R/3 to MySAP ERP.

The company, based in Walldorf, Germany, seeks to entice customers with the recent development bonanza around its ESA (Enterprise Services Architecture) concept and underlying NetWeaver integration platform, including ecosystem initiatives like its Industry Value Networks. SAP also will announce at the Orlando, Fla., show the long-awaited release of MySAP ERP 2005, which brings full NetWeaver capabilities. Under the covers, pushing customers to MySAP, will be users growing unease with rising maintenance costs and the perception, at least, that older R/3 products will be retired.

SAP executives say the value of upgrading to MySAP ERP 2004 and 2005 stems from the more modern development concepts in play at SAP, particularly around the service enablement of MySAP ERP.

The problem with upgrading is that the technology is confusing, expensive and difficult to implement, customers say. "In the past, when you just ran R/3, you had a single environment to deal with," said John Wheeler, CIO of Nova Chemicals, in Calgary, Alberta, which is upgrading to MySAP ERP 2004. "Now, all the new products run in separate environments, so instead of one production management environment, you end up with something thats four or five times more complex. If one doesnt mitigate that complexity, its a significant increase in your IT budget."

To date, SAP has 15 customers on MySAP ERP 2005, according to Gartner, of Stamford, Conn.

With IVN, SAP is seeking to define a services standard for various industries. The goal, SAP officials say, is to enable users to conduct business processes across IT systems using SAP and partner services. However, IVN also ties users to NetWeaver.

The work SAP is doing with Nova Chemicals and Pavilion Technologies around the IVN for chemicals is a prime example. Using NetWeaver and SAP composite applications, Pavilion has been able to tie in the production processes that its software controls in Novas manufacturing plants with the business processes contained in Novas ERP system.

Pavilion and Nova also are taking advantage of SAPs ESA capabilities by service-enabling Novas manufacturing processes. "As part of the Nova pilot, we have a Web services interface into the production model," said Matt Tormollen, vice president at Pavilion, in Austin, Texas. "Then we expose the ability to be able to integrate that model ... into any application."

SAP execs said they hope this type of innovation between IVN partners will spur users to adopt its next-generation software.

"If SAP doesnt get its installed base to come along with it, its going to be hard to maintain the level of development that theyre doing," said Gartner analyst Yvonne Genovese. "A lot of people who have signed license agreements [for MySAP ERP products] havent upgraded. To me, if you signed a license agreement and havent upgraded, that makes an unhappy customer."

Sap Puts Industries on the Conveyor Belt

SAPs current Industry Value Networks, which standardize processes on top of NetWeaver, serve banks, the chemical industry and the consumer packaged goods industry. More details:

* Introduced in September 2005

* Designed to identify customer pain points, then work with customers and partners to innovate across the industry-specific ecosystem to create and deploy solutions

* Uses enterprise services (defined by SAP) as a common language

* Provides industry solution maps that identify areas of current and future collaboration