From a series of articles on the leaders in the business applications software field originally published in Computer Business Review, a sister publication.
For a few months in late 1996, word went around that SAP, the market leading supplier of business applications software, was about to lose its momentum. Articles appeared criticizing the implementation times of its R/3 package. Forrester Research wrote a report warning of the need for a major overhaul of R/3. And Dutch rival Baan boasted of several big contracts won at the expense of R/3. Executives at SAP did not appear to be troubled by the stories. Dietmar Hopp, SAP’s chief executive, said that, if anything, his company would further extend its lead in the market, and he predicted R/3 sales growth in the region of 25%. Hopp, it would appear, has so far been proved right. For 1996 the company reported annual sales of $2.4bn, up 38%, making it larger (in applications software) than its three nearest competitors combined. In March, Henning Kagermann, an SAP board member, forecast that revenue growth for 1997 would continue at around 25% to 30%. In fact, SAP’s first quarter results, showed revenue up 47% to $615m, with net income up 54% to $108m. In spite of its size, SAP is essentially a one product company (although it still earns some revenues from its earlier R/2 mainframe product). R/3’s success is partly due to SAP’s early entry into the market for Unix and Windows based-client/server business systems. By the time competitors were able to claim they had comparable products, R/3 was well established, had proven resilience, and had started to attract the beginnings of what has now become an army of R/3 implementers across the world.
Lengthy implementation times
Now, virtually every large systems integrator and consulting firm has an R/3 division and there are dozens of smaller companies which have built their businesses around R/3 implementation. R/3’s strong points are its functionality, its flexibility, and its pioneering approach to integration. R/3 was the first package to enable users to set up tight, automatic links, not only between the core financial human resources and manufacturing modules, but also with other specialist, add-on functions. This integration encouraged thousands of companies across the world not only to replace several core packages with R/3, but to re- engineer their businesses around it. In spite of all this success, SAP does face some challenges. The complexity of the R/3 package means implementation times are lengthy – six months or a year is common and all-module, company-wide implementations have stretched to three years. This is particularly a problem for small and medium sized companies, so early this year the company launched Accelerated SAP, or ASAP, which is a fast implementation version of R/3 (largely because it is delivered in a semi- configured form). Of even greater concern is R/3’s highly centralized structure. Last year, Hasso Plattner, the company’s chief technology officer, began a vast project to ‘componentize’ R/3 so that its various modules could be installed, maintained and updated separately. This project will take several years and, while desirable, is likely to create some concern among a user base which is so heavily committed to the existing package.