SAP ERP for SME Not Just for the SME 126938

8/13/2019 SAP ERP for SME Not Just for the SME 126938

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2009 Aberdeen Group. Telephone: 617 854 520

August 2009

SAP ERP for SME:Not Just For the SME

AXIS Benchmark: SAP

Market ReadinessScore: 36Average Score: 30

Value Delivered

Score: 58Average Score: 50

AXIS Analyst Insight

This Analyst Insight providesanalysis of a vendor featured inan upcoming Aberdeen AXISvendor ranking report.

The Aberdeen AXIS is anobjective, fact-based vendor

assessment methodologydesigned to assist organizationsin making technologypurchasing decisions.

2,200 organizations wereanalyzed for this report,including 66 companies utilizingone or more of the threeproducts which fall into thecategory of SAP SME products.These include SAP Business All-in-One, SAP Business ByDesignand SAP Business One.

In a recent Aberdeen AXIS SAP was ranked at the top of the"Contender" category right on the cusp of "Champion" as a provider ofEnterprise Resource Planning (ERP) solutions. The assessment is based oncustomer success in using ERP technology as extracted from end-usersurvey based responses (i.e. Value Delivered) and theMarket Readinessof theorganization as determined by over 250 evaluation criteria.

This Axis Analyst Insight presents vendor-specific highlights from the ERP in

Manufacturing Aberdeen AXISpublished in June 2009 and focusesspecifically on SAP Small to Medium-size Enterprise (SME) offerings. With itsdominant market share, it was not surprising to find SAP to be "marketready," but it is a bit surprising to see where its SME products are landing.

Vendor Snapshot

SAP, headquartered in Newtown Square, PA and Walldorf, Germany, iseasily the largest ERP solution provider in the world. With 2008 annualrevenue in excess of $16 billion, almost 50,000 employees and 86,000customers, SAP is widely recognized as an ERP market leader.

SAP achieved higher than average scores in bothMarket Readinessand Value

Delivered.Market Readinessis a critical assessment of the technologyvendors current ability to serve the market based on over 250 objectiveassessment criteria. The Value Deliveredis determined by the percentage ofsurvey respondents using the vendor's solution that achieves Best-in-Classperformance.

While sheer size never guaranteesMarket Readiness, the massive resourcesSAP can bring to bear bolsters its ability to support its installed base, tobring new products to market and to serve the global community. In servingthe SME market, SAP also relies on a strong network of channel partnersthat are attracted by its strength and stature.

Confusion in the market arises from the misconception that SAP only sells

one product solution. In fact, SAP has a diverse ERP product portfolio.Currently SAPs declared go forward product platform for the enterpriselevel (more than 2,500 employees) is based on a single product, SAP ERPwhich is part and parcel of its most recently announced SAP Business Suite7. Yet SAP does not target the SME market with SAP ERP or the BusinessSuite per se, but instead with its SAP Business One and SAP Business All-in-One product lines, and more recently SAP Business ByDesign, not yetshipping in volume, delivered exclusively in a SaaS deployment model.However, if you look under the covers of SAP Business All-in-One you find

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SAP ERP for SME: Not Just For the SMEPage 2


SAP ERP 6.0, bringing an extremely feature-rich set of functions to the "M"of SME. The difference lies in the fact that SAP Business All-in-One ispackaged with industry specific templates and best practices that accelerateimplementation, and more importantly, mask the complexity of theunderlying product.

SAP's SME Products:

SAP Business All-in-One(500 - 2,500 employees)

SAP Business ByDesign (100- 500 employees)

Analyst Insights SAP Business One (less than100 employees)ERP provides a necessary infrastructure, along with the transactional detail

and system of record that any manufacturer needs to run its business.While ERP has become this necessary infrastructure, it is also a strategicweapon in streamlining and accelerating business processes whileproviding visibility to those processes throughout the enterprise. As such,the breadth and depth of functionality offered contributes significantly to theValue Delivered, yet that same depth and breadth can also add complexitythat has the potential of turning more into less if a small to mid-size

enterprise is not well-equipped to manage it.

Driven largely by pressures to reduce cost, improve customer service andsupport growth objectives, the top strategies for ERP implementations areall about improving efficiency (Figure 1).

Figure 1: "Top Two" Strategies for ERP

Best-in-Class Criteria

16%

32%

28%

44%

61%

61%

21%

24%

29%

44%

53%

60%

0% 10% 20% 30% 40% 50% 60% 70%

Centralize selected functionsusing shared services

Optimize the use of current capacity

Modernize technology infrastructureand applications

Provide visibility across

functions & departments

Standardize business processes

Streamline & accelerate

business processes

Percentage of Respondents, n = 435

Best-in-Class

All Others16%

32%

28%

44%

61%

61%

21%

24%

29%

44%

53%

60%

0% 10% 20% 30% 40% 50% 60% 70%

Centralize selected functionsusing shared services

Optimize the use of current capacity

Modernize technology infrastructureand applications

Provide visibility across

functions & departments

Standardize business processes

Streamline & accelerate

business processes

Percentage of Respondents, n = 435

Best-in-Class

All Others

Aberdeen used the followingmetrics to define Best-in-ClassERP implementations:

Reduction in inventory Inventory accuracy Number of days to close a

month

Percent of orders shippedcomplete and on time

Percent of orders incompliance with internalschedules

Source: Aberdeen Group, June 2009

Best-in-Class are the top 20%

of aggregate performanceAll companies appear to recognize the key role ERP can play in streamliningand accelerating business processes and indeed many now look to their ERPsolution to provide a vehicle to standardize business processes around well-defined best practices. More and more ERP customers expect solutionproviders to pre-define work flows and best practices as implementationtemplates, accelerating implementation and providing a framework fordefining and tailoring business processes. This is exactly the issue SAP's bestpractices, tailored by industry and included with SAP Business All-in-One,are intended to address.



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The Efficiency Factor

While efficiency seems a top priority behind ERP strategies, other factorsbeyond solution complexity influence a company's efficiency. Operating

environments are becoming more and more distributed, particularly in mid-size companies where Aberdeen observed the average number of operatinglocations increased from four in 2008 to 5.6 in 2009. This is exactly whereSAP SME products play.

Distributed Environments Introduce Complexity

We have seen complexity grow, particularly in the mid-market, year overyear, as evidenced by the increasing number of operating locationssupported by ERP (Figure 2).

Figure 2: Number of Operating Locations Supported by ERP

Company Size9.8

5.6

2.5

7.0

9.4

4

1.4

6.4

0.0

2.0

4.0

6.0

8.0

10.0

Large Mid-Size Small SAP SME

Customers

NumberofOperatingLocations

2009 2008

Aberdeen defines company sizein terms of annual revenues:

Small: less than $50 million Mid-Size between $50

million and $1 billion

Large: companies in excessof $1 billion


Because generally the number of operating locations tends to scale with thesize of the company, one might expect that the number of operatinglocations supported by enterprises where SAP SME products are installedmight be similar. However, we find if we average results from both 2008and 2009, the number of operating locations supported in companies wherean SAP SME product is installed is actually 6.6, which is much higher thanaverage across all small to mid-size companies. And this number is growing.In 2008, the average was 6.4 while in 2009 it grew to 7.0. Digging a littledeeper to understand this anomaly, we find that while SAP might target thesmall to mid-size companies, these products actually get installed and

implemented in larger companies as well (see sidebar) and therefore mustcontend with even more complexity than might be expected.

Demographics of SAP SME

The companies using SAP SMEproducts vary in size (measuredby annual revenue):

23% Small: less than $50million

37% Mid-Size between $50million and $1 billion

42% Large: companies inexcess of $1 billionIndeed, 42% of the companies running one (or more) of these products areover $1 billion in annual revenues. In these cases, these products aretypically installed in a division of a much larger company and in one out ofthree, an SAP Enterprise product is in use as well, often at the corporatelevel.



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In these types of distributed environments, it is not at all unusual formultiple ERP applications to be implemented (Figure 3). While it appearsthat across our entire survey population large companies are consolidatingERP solutions, SAP SME products comfortably co-exist with other, perhapsenterprise level solutions, increased validation of the value being delivered.

Figure 3: Number of ERP Solutions Implemented

3.3

2.11.3

4.33.9

1.91.3

3.1

0

1

2

3

4

5

Large Mid-Size Small SAP SME

Customers

#ofERP

Solutions

2009 2008


Standardization Addresses Complexity

While the introduction of multiple ERP solutions adds further complexity toan already complex environment, it need not be a roadblock to success.Our top two strategic actions, standardizing as well as streamlining andaccelerating business processes, go hand-in-hand. The more standard theprocess, the more easily it is automated, adding speed and efficiency.

Figure 4: Standardization is Key

63%

59%

52%

70%

71%

67%

70%

72%

69%

0% 20% 40% 60% 80%

Standardized procedures for

procurement, cash collection, and

financial reconciliation

Standardized order management

and delivery / fulfillment across

similar businesses

Standardized implementation of

ERP across the enterprise

Percentage of Respondents, n=435

Best-in-Class

SAP SME, n=66

All Others63%

59%

52%

70%

71%

67%

70%

72%

69%

0% 20% 40% 60% 80%

Standardized procedures for

procurement, cash collection, and

financial reconciliation

Standardized order management

and delivery / fulfillment across

similar businesses

Standardized implementation of

ERP across the enterprise

Percentage of Respondents, n=435

Best-in-Class

SAP SME, n=66

All Others


While a strategic action of all respondents, SAP SME and Best-in-Class ERPimplementations alike are more successful in defining and executing againstdefined standards than the remaining 80% of companies surveyed (Figure 4).



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Case in Point

Milestone AV Technologies is a Duchossois Group Company which designs,markets and distributes branded audio visual mounting equipment and

display solutions for flat panel displays, projectors, AV furniture, andspeakers to consumer and commercial markets. Its products are soldthrough Pro-AV dealers, regional home theater dealers, consumerelectronics retailers, mass merchants, and original equipment manufacturers.The company currently serves a base of over 9,000 customers in the UnitedStates and Canada and a growing international business.

In the past five years, Milestone has tripled in sales, while adding facilities inChina and expanding its target market to Asia, Europe, and South America.In its Minneapolis facilities, in addition to its ready-made solutions, Milestonemanufactures around 750 make-to-order mounting solutions per day, andships 95% of its product within 24 hours.

During its expansion, Milestone encountered significant capabilityconstraints with its existing ERP solution, which could not scale to handlebusiness operations conducted simultaneously in four different currenciesacross a wide range of languages and locations.

"I sincerely believe that the SAPBusiness All-in-One solutiondecreased our overallimplementation time by threeto five months. Having a pre-configured solution meantbeing able to show ourBusiness Owners standard SAPbusiness processes in thesystem much earlier in theimplementation and allowingthem to comment on what

they liked and didnt like. Sothe localized configurationwe had in place by the fifthmonth of the project reflectingMilestone business needs wasprobably a 95% completesolution at that point in time."

"Today we are using SAPs Business All-in-One solution based on a solutionprovided and pre-configured by itelligence [an SAP partner]. We areprobably getting pretty close to getting outside of the typical SME definitionof under $250 million [in annual revenue]. When we started the project andsoftware selection back in 2007, our sales were around $235 million, puttingus under that typical threshold. This year we may be closer to $270 millionto $290 million, pushing us over that $250 million measuring stick. But I

guess thats also a reason to implement a more comprehensive ERP packagewhile being an SME. It allows us to grow beyond that SME realm into alarger company much easier," said Keith Hogie, Director of IT.

The new ERP system also incorporates support for Asian languages,including Chinese, thus improving training and usage adoption resulting in amore consistent use of the application between Milestones Minneapolis andChina facilities.

~ Keith Hogie, Director of IT,Milestone AV TechnologiesMilestones antiquated ERP system had been unable to handle its rapid

growth over the last five years, causing month-to-close times to sometimesswell to seven to 10 days in extreme circumstances; after implementing itsnew ERP solution, Milestone recently closed its books in only two days.

Accruals have become more efficient to manage, consolidations andintercompany eliminations have become easier to process, and reportinghas become more efficient to execute resulting in a more streamlined closeprocess.

Milestones new SAP Business All-in-One solution also features a built-inBusiness Intelligence (BI) component, which enables C-level executives tohave a greater degree of visibility into day-to-day operations. "We havegained a lot in the reporting area. The integration of ERP and BI in oursolution has been a large step forward for our executive team, because of



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the improved level of business reporting and easily retrievable KPIs. We hadsome reporting before that could take a manager two to four hours a weekproducing reports for his (or her) director, where now many of thosereports can be generated in five to 10 minutes. We are continuouslyworking with the business owners to determine what reports we canprovide to make their daily jobs more efficient.

Key Insights

The needs of SMEs will vary quite significantly depending on industry,structure, and leadership.

In these uncertain economic times, even small companies that aregrowing may be reluctant to take that next step beyond desktopaccounting software, manual processes, and spreadsheets. SAP'sgoal of reducing complexity attempts to address these concerns, but

of course each prospect or customer must draw their ownconclusions about the level of complexity that is both required andis acceptable.

For companies that have already made the jump to an ERP solutionand have found they are not able to make full use of their extendedsolution due to complexities beyond their current needs, and arewilling and able to walk away from the time, expense, and effortalready invested in another solution, SAP Business ByDesign mayprovide an alternative and is certainly worth taking a "test drive."

Large multi-billion dollar companies that might have smaller businessunits or subsidiaries or may be expanding into new emerging

markets will fall into one of two broad categories, those who areSAP customers and those who are not. For existing SAP enterprisecustomers, implementing one of SAP's SME products may be analternative to expanding its enterprise application implementationinto what will initially be a start-up operation. For those that are notyet SAP customers and may find the prospect of implementing anSAP solution intimidating, the SME products may provide aninteresting option to consider. However, regardless of approach,enterprises are cautioned to take a standardized approach toimplementation.

Aberdeens analysis reveals that overall SAP scores higher than the averageattained by all ERP application providers in the space, both in terms of

Market Readinessand Value Deliveredto the customer. SAP serves anenormously large and varied market, both in terms of industry and in termsof company size. Yet itsMarket Readinessscore is reflective of a portfolio ofproduct lines that is diverse enough to serve different markets, but not sodiverse that it stretches its development, support and marketing effortsbeyond the natural capacity of a company of its size.


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Aberdeen AXIS Methodology

Aberdeen AXIS provides an objective, fact based, vendor assessmentlooking at the providers history of Value Delivered(Y-AXIS) and itsMarket

Readiness(X-AXIS). The results are based on relevant survey responsesfrom hundreds of enterprise end-users, responding to questions relating totheir experiences with the respective solution or services. Vendorsrepresented on the AXIS are illustrated by their performance against thevarious axes as well as the visibility they received from the market as part ofthe research.

Aberdeens research is predicated on primary survey responses with follow-on telephone interviews. All responses are blinded and follow Aberdeenspublished methodology. The data collected is reviewed and interpreted bythe respective Aberdeen research team and draws upon informationtypically collected over the prior 12-month period.

For more information on this or other research topics, please visithttp://AXIS.aberdeen.com/.

Related ResearchERP in Manufacturing 2009: ExpandingBeyond Traditional Boundaries; June2009

Beyond the Total Cost of ERP Ownership;June 2009

The ROI of ERP in SMB; March 2009

The ERP / BI Connection; Adding Valuethrough Actionable Intelligence; July 2009

Author: Cindy Jutras, Vice President & Research Fellow, EnterpriseApplications, ([email protected])

Since 1988, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Havingbenchmarked the performance of more than 644,000 companies, Aberdeen is uniquely pos itioned to provideorganizations with the facts that matter the facts that enable companies to get ahead and drive results. That's whyour research is relied on by more than 2.2 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% ofthe Technology 500.

As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targetedmarketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte-Hanks (Information Opportunity Insight Engagement Interaction) extends the client value and accentuates thestrategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.comor call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com.

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologiesprovide for objective fact-based research and represent the best analysis available at the time of publication. Unlessotherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not bereproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by

Aberdeen Group, Inc.
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SAP ERP for SME Not Just for the SME 126938