The word "upgrade" has long been a virtual bogeyman for SAP customers, given the historical pain, time and cost of moving to a new version of the vendor's ERP (enterprise resource planning) software. For some time, SAP has been trying to entice users onto the modern ECC 6.0 through its "enhancement pack" program, which promises to let users add new features without the pain of a full technical upgrade. Customers can't take advantage of the packs until they move to 6.0.
Meanwhile, a good percentage of SAP customers need to confront upgrade decisions this year, as they remain on platforms such as R/3 4.6c, for which extended maintenance ends this December, and 4.7, for which mainstream maintenance lapsed in March 2009. For legacy customers who don't yet wish to upgrade, this means an increase in cost for vendor support, a jump to a third party maintenance provider, which has its own uncertainties, given ongoing high-profile lawsuits, or a decision to go with no paid support at all.
The pack strategy is therefore crucial for SAP, which needs to preserve lucrative maintenance revenue while making life easier on customers and stemming defections to other options, particularly SaaS (software as a service) applications, where upgrades are handled by the vendor. Some customers who are using the enhancement packs say the system works pretty much as promised, and their ranks are growing rapidly.
About half of the 13,000 SAP customers on ECC 6.0 have downloaded the enhancement packs, according to a spokesman. This represents a doubling in just several months, as the figure stood at more than 3,000 in late 2009, now co-CEO Jim Hagemann Snabe said in an interview at the time. SAP could not provide the number of customers remaining on R/3 by press time for this article.
SAP's strategy with the packs "makes a lot of sense," said Tim Ferguson, CIO at Northern Kentucky University. "Relatively speaking, compared to previous ways that SAP did this, they're very easy to install."
NKU has served as a beta tester for the packs, which helped the school influence SAP to add key features it desired, he said. While NKU's core SAP functions for billing, payroll and other areas are fairly stable, the systems that touch students each day must evolve regularly, Ferguson said. One of the packs provided a new web service that allows students to register for classes through their iPhones, for example, he said.
"The students that are coming out, this generation, they expect different types of services. We have to change to meet those needs," he said.
SAP's pack strategy is apparently pleasing some customers. But it still involves some work for customers.
"I've mostly heard good things," said Jon Reed, an independent analyst who closely tracks SAP. "[But] they're not quite as painless as SAP's marketing sometimes presented it." System testing remains a crucial factor, Reed said. "Things break during an on-premise [implementation] and there's a preferred method of handling that, including sandboxing and testing, so when you pull that lever there are no problems. Customers still need to anticipate how it might break their system."
But SourceGas, a US natural gas utility, had only one issue when installing the enhancement packs, specifically a problem with the "flexible real estate" functionality in SAP, said Michael Catterall, director of enterprise solutions. The company uses that module to manage information regarding the many property easements and right-of-ways it maintains for its infrastructure around the country.
"When we brought up enhancement pack 4, because of how we had it configured, we kind of broke it a little bit," he said. SourceGas plans to "keep watching the enhancement packs as they are coming out," Catterall said. "First, we're looking at where we can improve and get more out of modules we put in."
Meanwhile, there is the substantial task of getting to ECC 6.0 in the first place. Upgrade expenses can amount to 50 percent to 85 percent of the original implementation costs, with the price tag varying depending on factors like the number of integration points and customisations, according to analyst Ray Wang, partner with Altimeter Group.
Some vendors are in the business of making SAP upgrades easier. Manufacturer Newell Rubbermaid recently performed an upgrade from version 5.0 to 6.0 under a tight deadline. For an assist it used a tool from Panaya, said Glenn Griffin, director of application development in the global IT division.
Panaya's software can scan a customer's current SAP system and determine what changes need to be made to avoid problems once the upgrade occurs. The tool did not spot every issue, but after the upgrade Rubbermaid came up with far fewer TPRs (testing problem reports) than in a previous upgrade, Griffin said.
Ultimately, upgrading makes sense for R/3 customers who are still committed to SAP and want new functionality provided in the packs, Wang said. But those customers potentially have other options these days, in the form of third-party maintenance from companies such as Rimini Street, as well as SaaS applications.
Rimini Street promises SAP customers will save at least 50 percent on their vendor support bills. But the company's future, as well as that of third party maintenance in general, is uncertain, as it was recently sued by Oracle for alleged intellectual property violations. Oracle has filed a similar suit against SAP and its former subsidiary TomorrowNow, which was co-founded by Rimini Street's CEO.
Meanwhile, on-demand products from vendors such as Workday, which makes human resources software, and CRM (customer relationship management) specialist Salesforce.com are being used by some legacy SAP customers, who are finding that integrating them back to the core ERP system isn't overly difficult, Wang said.
The enhancement pack strategy "was designed to buy [SAP] some time, but some customers have already moved on," he said.