An Unbiased Look at SAP® in the Small, Mid-Sized Business Arena

This article explores the opportunities Small, Mid-Size Businesses (SMB) have before them: in their desire to compete on a national or global scale.Specifically, leveraging the power SAP's SMB applications offers.

Also outlined are some Best Practice approaches an SMB entity should consider before undertaking this organizational-shift; and finally, we will examine an additional critical solution every SMB considering the use of SAP should also consider.

They may have IT budgets rivaling or exceeding most world economies and vast resource pools - but it also means they tend to experience waste on a scale equally large. So being a player in the newer-technologies vanguard has its obvious drawbacks - which for an SMB is a good thing. This means large enterprises will experience all the initial "bleeding edge" mistakes and pitfalls (paid for with their highly capitalized $ or €) while the SMBs can quietly bide their time, grow at a single-digit pace and wait for the technology to mature - with most of the bugs worked out and necessary Best Practices now in place.

In this article, we will examine how SMB firms can take advantage of SAP's new offerings - along with a sampling of Best Practices. Finally, we will examine another technology an SMB should consider, while it is implementing SAP.

Knowledge learned in this article can be used by:

• Decision makers wanting to know more about SAP's SMB solutions
• Executives desiring an understanding of how an SMB can position itself to take advantage of the SAP offerings - especially via accelerating their ROI and managing their TCO
• Anyone desiring an understanding of what is an "SAP-centric" enterprise reporting application

The differentials between the large enterprise organization's experiences and an SMB's typically include:

• Best Practices for implementation, sustainment and long-term maintenance (which, for the most part did not exist during the large enterprise implementation) have been discovered and codified
• The "downsizing" of the application (to fit within the SMB space) illustrates the original application was over-blown in features, etc
• Non-working and hard-to-use features (metrics derived from help desk tickets) or features seldom used are typically eliminated from the SMB version
• Initial staffing requirements (for implementation and sustainment) were usually excessive
• Subject Matter Experts (SME) were in short supply (if they even existed) and were expensive - today, an SMB has a wide choice of SMEs to select - from individuals trained at larger competing firms (they know the technology and your line of business) to the typical uber consultant - however, as the market matured and became saturated with SMEs, their fees typically declined
• Initial, vendor supplied end user training was discovered to be more technical then functional - also, clients may perform better then the vendor (using client data, train-the-trainer, super-user training, etc)

The list goes on...

Therefore, an SMB should have a greater feeling of confidence when beginning down the path of implementing a mature application, such as SAP. However, it is prudent to carefully examine what changes are about to occur within the organization and ensure those Best Practices are employed.

Of course, there as those SMB organizations that are also on the early-adopter list - I know of several who implemented SAP, struggled to implement it and are still struggling to support it (one small utility I can think of has less than 200 employees - and has only two people to support its entire SAP HR module). However, these are the exceptions. Most SMBs prudently wait and see what emerges - not just a re-packaging of the original or a watered-down version, but a true SMB-focused version. Microsoft has taken this approach with its server operating systems and Office suite of applications - that is one reason there are several flavors of each on the market (Microsoft Vista™ has 5 versions).

The following is from the EU web site showing their 1966-revised breakout:

In 2005, Germany began using the above EU definitions; SAP still diverges from the EU in their definition of what constitutes an SMB/SME – their number of employees for the medium-sized firm is < 500 and the Turnover is ≤ €150 million.  It is also important to remember, SAP’s typical customer averages over 10,000 users.

SAP has internally divided its targeted client audience into two distinct segments:

SAP Business Suite™ (includes all enterprise-sized applications, i.e., mySAP ERP 2005™, ECC 6.0™, mySAP PLM™, mySAP CRM™, mySAP SRM™, etc)
SAP Smart Business Solutions™ – this is the SME/SMB Arena

Notes: The Smart Business Solutions encompass mySAP All-in-One™ and SAP Business One™. What is an SME?  Small, Mid-sized Enterprise
However, SMB is becoming the preferred term, although SME is still widely used within EU countries. Finally, the term SME is also commonly applied to divisions of a larger entity – such as the plastics or the oil & gas divisions of a large petro-chemical company.

When R/3 debuted 1992, SAP target audience was its existing customer base - those smaller divisions and subsidiaries of its customers already using its mainframe-based version, R/2. The initial marketplace was in Europe, the ROW was to follow.

SAP R/3 was to be targeted to midsize companies (those divisions and subsidiaries), with revenues of $100 million and below - entities that were beginning to invest in the newest IT craze - 3-tier processing (what we have today with our PCs and databases at work). In Europe, this constituted almost 2/3rds of SAP's customers - but in what became their largest geographical market, North America, this was not to be the case.

However, to everyone's surprise, SAP R/3 (and its later offspring) quickly became the best-selling enterprise application on the planet.

Achieving success at the top of the ERP food chain did not make SAP forget about the mid-size market however - especially when 90% of all EU firms fit into the mid-market size arena.

SAP's early attempts to "align" their products toward these smaller firms largely entailed the focused-marketing of their pre-configured offerings, i.e., SAP R/3 Ready-to-Run™ and SAP Pre-Configured Client Solutions™, as well as various hosted versions of the SAP R/3.

These initial forays into the SMB area had little success - especially in North America. This was partially due to some high-profile missteps with early (and very large) R/3 implementations. Lawsuits were filed and the business press covered the various affairs in detail.

Recognizing they had to make a serious attempt, SAP made a decision. Rather than develop an SMB offering in-house, they took the unusual tactic to purchase an already established SMB application.

Therefore, prior to the 13 March 2002 announcement of its Smart Business Solutions™, SAP taken the steps necessary to make the transformation from an enterprise only application firm into a full-service, broad spectrum ERP application firm.

As part of this transformation, SAP selected a multi-tier approach to its SMB and enterprise customer base - one based upon the level of IT sophistication a customer requires (with regard to industry and customer-specific application functionality).

This segmentation entailed how the application is viewed (and leveraged) by the customer: this equated to "sophisticated" companies (which require industry-specific support and customization) and "advanced" SMB companies - and so their tiered application solution followed this path. SAP brought to the marketplace two applications specifically for the SMB space: SAP All-in-One™ (formerly known as SAP.readytowork™) and SAP Business One™. These SMB applications fall under the SAP Business Suite™ of applications, such as mySAP ERP 2005™, ECC 6.0™, mySAP PLM™, mySAP CRM™, mySAP SRM™, etc.

You may know them better by their newer names:

TopManage™ is now SAP Business One™	TopTier™ is now SAP Portals™

In two success years, 2001 and 2002, SAP successfully acquired the assets from the Israeli-based firm TopManage Financial Solutions LTD. This acquisition included TopManage™ and TopTier™.

The TopManage™ solution had experienced success outside of Israel as an easy-to-use application, with its proprietary Drag&Relate capabilities - along with strong integration with other desktop applications. With over 800 customers using its applications, the TopManage™ acquisition was an interesting choice for SAP - as many industry pundits regarded it as a 2nd-tier player.

Its Drag&Relate capabilities allow users to drag information between different data sources and link them via the users' graphical interface (residing on the desktop). The advent of Microsoft's SQL Server and the product's support of the Windows OS allowed it to be positioned to take advantage of an SMB's leaning toward Microsoft products. It used an open architecture designed to integrate with the then mySAP.com e-business platform.

Using their global partner program, SAP established a new Channel Partner program and recruited partners with geographical and industry-specific experience - with the expectation they would focus 100% on the SMB marketplace, while making the client feel at ease - with SAP assisting them in the development of various vertical solutions, focusing on product consistency and scope.

After its acquisition, one of TopManage's owners, Shai Agassi, moved to SAP and became head of the SAP Portals division (being based upon his TopTier™ application) and is now president of SAP's product and technology group.

At the upper end of the spectrum, SAP will continues to offer its mySAP™ enterprise suite of applications.

At the middle tier resides SAP All-in-One™ - the "sophisticated" client area.

The lower end is occupied by SAP Business One™ - designed for the "advanced" client.

SAP All-in-One™ consists of software, hardware (the SAP One Server™) and consulting services. The specialization of each customer's configuration of the solution is apparent when reviewing SAP's Partner Channel (aka SME Solution Centers) - where selection of implementation partners is predicated on their industry expertise. This reflects SAP's appreciation of the nuances of diversity within their customer base - such as; the requirements of a chemical house are naturally different from those of a pharmaceutical company. For example, a bottling plant might start with the consumer goods solution and add further functionality by "micro-vertical" enhancement - perhaps by adding warehouse management. Furthermore, via its channel of certified partners SAP's diversity approach permits its customers to experience a heightened feeling of confidence (the SMB application being a tailored solution). Many of these channel partners have developed pre-configured industry solution (IS) packages based on Best Practices for mySAP™ - there are approximately 20 IS packages as of this writing - over 80 are planned for release by years' end.

Included within every package are some of SAP's most powerful applications, such as CRM. As SAP All-in-One™ is based upon mySAP technology, customers implementing this solution also have the opportunity to upgrade directly to the mySAP Business Suite - a useful feature if the SMB solution actually makes their business grow! "Expansion and migration paths" have been designed to accelerate building upon and leveraging the customer's current SAP investment - meaning upgrading to mySAP ERP 2005 is built into the application.

Another strong selling point is an accelerated implementation schedule - literally within a few weeks.

That being said, its reporting structure is essentially identical to standard R/3. However, the inclusion of exporting data into Adobe allows an additional option; along with formatted list exports and Excel. However, as with SAP R/3 (now mySAP 2005) reporting is essentially restricted to the SAP environment. Unless a dedicated and highly sophisticated third-party enterprise reporting application is also employed (such as Business Objects' Crystal Reports™) reporting outside of SAP or combining SAP data with non-SAP data typically requires either the additional investment of a data warehouse or data mart approach.

Being built on the NetWeaver technology - the user interface has been made PC-like, with common tasks (based upon the user's role) front and center on one screen; minimizing navigation. As SAP moves forward with its own version of SOA (known as ESA); bringing commonality to the GUI will become more and more important.

Typical customer profiles include retail-based operations and service providers - however, AP's initial thrust was to encourage subsidiaries and divisions of larger firms (who already own SAP R/3).

SAP Business One™ is based upon Microsoft's .Net architecture - something the other SAP offerings are not. Therefore, the path to upgrading to the more robust SAP applications is not straightforward.

Typical SAP Business One™ screen

That said; the embedded application programming interfaces (APIs) enable customers to leverage the base system with industry-specific functions - as well as adapt existing functions to their unique requirements. The base system is equipped with a API hooks based on COM technology. As mentioned, the customizing of the API permits enhancement of the functional scope of the overall solution or customers may adapt it to a particular business requirement.

The available Microsoft-compatible COM objects are open for editing via a variety of programming languages, such as Visual Basic, C/C++ and Java. Two different APIs are available: one for data interface editing and one for editing the graphical user interface (GUI).

Embedded features include:

• Sales, support and customer facing processes
  • sales force automation system (for pipeline tracking)
  • opportunity tracking management system (OMS)
  • strategic selling and contact management
• comprehensive financial management (with multi-currency, budgeting, and bank reconciliation)
• inventory management system (IMS) with kitting and multi-level price lists
• workflow-based alerts
• available twelve countries and fourteen languages

Pre-SAP Business One™


Post-SAP Business One™

Note: A key point to remember: Due to its lineage from TopManage™, SAP Business One™ is retail and service-sector oriented - therefore, dedicated manufacturing support features are largely absent. It does support some manufacturing essentials such as MRP, BOMs, back flushing, work orders, etc. Nevertheless, it is essentially designed for light and discrete manufacturing. Therefore, if manufacturing support is a requirement of your ERP application, SAP All-in-One™ may be the better choice for an SMB customer. 

Reporting for SAP Business One™ is via XL Reporter™. As with most reporting tools SAP uses, this one is also Excel-based. Simple "click and drag" features permit basic reports to be developed by non-technical personnel - however, standard Excel features are also present for Super Users.

XL Report Composer

XL Report Organizer (Scheduler)

That being said, a third party enterprise reporting application will still be the best choice for the 80% of SAP Business One™ users who do not require analytical reporting. Secure access to enterprise data stores (outside of SAP and across the enterprise) is always of paramount importance to all users. Besides, Excel, as good as it is, is not a reporting application - it is an analytical application.

SAP Business One™ also provides direct access to the parent company's mySAP Business Suite™ of applications (for reporting-up the food chain) as well as extraction into SAP's Business Warehouse™ (BW). However, reporting from BW should be from BEx - or a third-party tool.

Leveraging SAP Portal's iViews™ means non-centralized application access and data sharing between other Business One™ locations and users with a 'need to know' (i.e., corporate offices, field personnel and suppliers) is possible via the web.

The SAP Business One™ application resides on a single server (using a Win32-based, 2-tier, client-server architecture) - designed for integration with a Microsoft Windows network.

Standard database backup procedures and transferring of the database to another machine is permitted; as well as support for Microsoft SQL Server™ and IBM DB2 Universal Database Express Edition™.

Finally, SAP will be using the 'enhancement package' model (currently being used mySAP ERP) for its SMB customers.

SAP recently announced its intention to affect upgrades to its mySAP ERP™ via regular updates. This model intends to reflect the 'support package' or 'hot pack' model of R/3 - with the new name of enhancement packages. However, unlike hot packs and support packages, users may choose to use these packages or not (these are enhancements) - allowing customers to delay major upgrades.

Access is via standard maintenance and downloading occurs from the SAP customer Marketplace. Several packages will be released each year - with the first Business One™ enhancement package scheduled for the second quarter of 2007. SAP reports it will include control accounts, general ledger reporting, document printing and other financials improvements.

According to a recent SAP press release, the contents of future Business One™ enhancement packages will be influenced primarily by "the needs and priorities of SAP Business One customers, as monitored by SAP and its channel partners."

However, smaller organizations (with less than 300 employees or divisions of corporations) using mySAP at the corporate level requiring core ERP functionality (without strong manufacturing features) may benefit from the 'advanced' SMB offering (aka SAP Business One™).

Identify Your ERP and Business Strategies
Just having an ERP system isn';t enough - a thorough internal examination of your business process and procedures is always required before implementation. Few customers benefit from an 'out of the box' deployment. With SAP Business One™, the API permits extensive customization (without the usual SAP R/3 customization headaches) - however, SAP All-in-One™ brings you back to the world of R/3. Using the 80/20 rule always applies and should be revisited on a bi-annual schedule.

The BPR/BPM process (Business Process Review/Management) should be a never-ending endeavour. How your business performs in the marketplace today should not be the same in five years - and your business processes must reflect these changes.

What an ERP system buys you is the ability to have a 360º view of your data - this does not mean via the ERP systems list displays; but via reports. Reports you can share across the enterprise as well as outside the enterprise (true drill down and across reporting). However, not all your data upon which you make critical decisions resides within the ERP system.

Looking out 10 years from now (2017), organizations will still have need of some sort of data repository: data warehouses, data marts, best of breed applications, external vendor applications, etc.

ERP-Lite and even dedicated ERP applications, be they Lawson, SAP, Oracle (including PeopleSoft) or Microsoft Dynamics (formerly Great Plains) are not business intelligence applications. They make allowances for reporting; but they are essentially data collection and collating centers - designed to manage your transactional and master data with either pre-configured or customized business rules. Output to the real world (in report form) is always secondary or even tertiary.

In my almost 15 years' in the ERP arena, there is only one third-party application I consistently feel confident recommending to my ERP clients: Business Objects' Crystal Reports™ and Web Intelligence™.

After all these years, Crystal Reports™ is still the leading BI application and world-recognized benchmark for enterprise reporting - and it is still the only application with direct access to the SAP data dictionary (for R/3) and seamless integration with SAP BW (via BAPIs).

This is critical, without this type of secure and data integrity access you are bypassing SAP security and your business rules (it is these business rules that separate your ERP implementation from any other).

As I mentioned, reporting must go beyond the ERP box - data lies throughout your organization. The Business Objects XI™ platform is an ERP environment tested (since 1998) and a state-of-the-art BI application. There are other BI applications and they all have their particular strengths, and for some other applications, such as Oracle, perhaps another BI tool may be appropriate. However, for SAP reporting, if the built-in reporting applications (or the reports themselves) do not suffice, Best Practice requires a supplemental reporting tool be employed - not to replace SAP reports, but as an adjunct tool.

Finally, do not wait until after the implementation to begin the reporting process. Remember, the purpose of an ERP system is reports. The reporting process should start no later than 1/3 of the way through your implementation. With SAP Business One™, it should obviously begin weeks prior to the implementation. You live with reports and the success of the ERP application you choose, regardless of the size of your organization, will be judged upon the decisions you make with the information at hand.

Following the 80/20 rule:

• For SAP R/3, SAP All-in-One™ and SAP Business One™:
• 80% of your end users should use standard SAP reports
• there will be 20% of your end users who will require another way to access and use the data (via Crystal Reports™ and Business Objects' XI™) or need to combine SAP and non-SAP data into one report
• For SAP BW:
• 80% of your end users should use Web Intelligence™ (or Crystal Reports™) for the same reasons stated above
• the 20% who truly require analytical reports, should use BEx™.

So, the SMB space is finally going to get what it always wanted - attention and respect from the big enterprise software vendors. With SMB-centered offerings coming onto the market almost monthly, the heady days for SMB players is just beginning.

However, as with anything in life, be careful what you wish for...

Written by Geoff Houze