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Delivering Operational Excellence with Innovation
Operational Excellence is also known as :
Operational Excellence,
OE,
Operational Excellence Compare to Process Excellence,
Operational Results,
Achieving OEP Programme ,
Respected S&OP Implementations,
Drives Operational Excellence,
Operational Excellence Metrics,
Achieving Operational Excellence,
Achieving Operational Excellence Programme ,
Achieving OEP,
Operational Excellence Section,
Successful Businesses Achieve Operational Excellence,
Operational Excellence Creating Driven Architecture,
Operational Excellence Using Lean Six Sigma,
Umbrella of Operational Excellence,
Approach to Excellence,
Operational Excellence Means Operating,
Operational Excellence through BPM,
Organization Operational Excellence Activities.
CONTENTS
- Executive Summary
- Enterprise Resource Planning: Strategies and Trends
- The Issues
- Why Consolidation Is Difficult
- Why Innovation Is Difficult
- Why Outsourcing Is Difficult
- The Solution to Becoming an Adaptive Enterprise
- Embracing Innovation and Achieving Operational Excellence
- Business and IT Consolidation
- Example: Consolidating HCM as Shared Services
- Business-Process Innovation
- Example: Extending the Quotation Process to More Suppliers
- Example: Reengineering the Employee On-Boarding Process
- Example: Reengineering the Procure-to-Pay Process
- Example: Integrating Desktop Productivity Tools with ERP Applications
- Business-Process Outsourcing
- Example: Outsourcing Logistics Operations
- Unlocking the Potential of ESA
- mySAP ERP and ESA: Aligning IT and Business to Achieve Operational Excellence
- What's Next?
- Conclusion
- For More Information
EXECUTIVE SUMMARY
Today, islands of automation, growing IT complexity, governance
pressures, and budget reductions are IT realities that hamper the
ability of small and large organizations to embrace new business
practices and technological innovation. As organizations look for
better ways to achieve competitive differentiation, market responsiveness, and operational excellence, they often find their existing
IT landscapes too complex, inflexible, and costly to adapt to
evolving business conditions. Even if organizations can afford the
resources, time, and effort it takes to change and enable new
practices, all those might prove too extensive to justify the value
of the investment. IT ' often regarded as a monolithic, rigid,
slow-moving, or foreign entity by many businesspeople ' must be
aligned with business needs and evolve with changing market
demands to enable future innovation, agility, and excellence.
The growing importance of IT architectures has led many IT
executives to rethink traditional approaches and seek better,
smarter, and more efficient ways to serve their organization's
needs. The adoption of services-oriented architecture (SOA) is
central to becoming more responsive and agile. An SOA not only
helps organizations address short-term needs ' such as lowering
IT costs, improving quality of service, and enhancing existing IT
systems ' but also, and more importantly, provides a flexible,
adaptive, and open IT foundation that can accommodate
changing business practices, market dynamics, and competitive
challenges.
This white paper is intended for IT executives and line-of-
business management. It introduces business strategies, trends,
and issues related to enterprise resource planning (ERP), financial management, operations management, and human capital
management (HCM) that drive the consideration of enterprise
services architecture (ESA). It also examines the importance of
such architecture and the role it plays in guiding organizations
to create value, improve efficiency, and respond to evolving business needs in ERP ' on any scale and for any industry. The document then illustrates and compares a number of deployment
examples with and without ESA and clarifies why businesses are
adopting an enterprise services approach to compete effectively
in a dynamic marketplace.
ENTERPRISE RESOURCE PLANNING:
STRATEGIES AND TRENDS
In the past, organizations deployed ERP software to gain internal
efficiency in back-office operations, such as manufacturing,
accounting, HCM, financial management, and purchasing.
Such technological investments helped management reduce
costs. But today's businesses can no longer rely on automating
back-office processes to achieve top-line growth and bottom-line
improvements.
This situation is well described in Living on the Fault Line by
Geoffrey Moore. In the book, Moore frames the challenges of
achieving continuous business innovation around an organization's "core," the business processes that differentiate businesses
in the eyes of their customers, and its "context," which is every-
thing else (see Figure 1). The purpose of an enterprise's core is
to drive business innovation and competitive differentiation to
stimulate growth. The context's primary goal, according to
Moore, is to operate as efficiently and productively as possible.
The catch is that core remains core only as long as it differentiates the enterprise from the competition. Once it has been
copied, it becomes context and is no longer an innovation.
At that point, the organization must refocus on improving the
efficiency and productivity of the context.
Businesses might want to leverage their ERP software for competitive differentiation by finding new ways to achieve greater
efficiency in previously untried or unsuccessful areas. They
might also want to consider outsourcing standard processes
to free up resources for strategic endeavors that lead to
differentiation.
Examples of business practices that can enhance differentiation
or improve productivity for an organization include the
following:
- Implementing mass customization with geographically
dispersed contract manufacturers and suppliers to reduce
cycle times, rework, and inventory costs in the automotive
or high-tech industry
- Extending an existing quotation management process to external suppliers to encourage more efficiency and responsiveness
within the contract manufacturing process
- Improving new hire, employee transfer, termination, and
other workforce management events to automate the
exchange of information with third parties in accordance
with local and global policies
- Centralizing common operations as a shared service to enforce
global policies and leverage economies of scale
- Outsourcing payroll and human capital management to
third-party agencies
THE ISSUES
Given the complexity and nature of IT in many enterprises, these
operational strategies are difficult to implement. Traditionally,
organizations develop custom applications from scratch and use
various platforms, but then find that they lack the flexibility to
accommodate change. Moving from core to context to consolidate common IT practices, for example, is difficult and expensive.
To make the move, enterprises must analyze their IT landscape
to determine which assets to replace, upgrade, or make obsolete;
acquire new skills; and support integration with new
applications. Similarly, developing innovative processes from the
context into the core is equally challenging and expensive,
because IT must determine the best way to leverage existing
investments. And business-process outsourcing is difficult and
expensive, because it requires organizations to manage the
performance of the third-party vendors on service-level
agreements, but monitoring and enforcing such new policies
would require new integrations with third-party systems that
reside beyond existing boundaries.
Why Consolidation Is Difficult
In many enterprises, consolidating common business and IT
functions is difficult and costly for several reasons. For instance,
applications are often implemented independently to address
specific needs at a given time. This approach creates islands of
automation that comprise different technologies and proprietary
code that are too complex to integrate, that are too costly to
adapt to changing business requirements, and that make it difficult to share critical business information. With evolving business
conditions ' such as mergers and acquisitions, company spin-
offs, and reorganizations ' fragmented information, inconsistent
user interfaces, additional pockets of automation, and redundant
systems not easily used by other business units only complicate
the IT landscape further.
Consider the example of an enterprise that has grown through
acquisitions and now consists of a few independently operated
HCM, financial, procurement, and IT groups, each with its own
system to support local needs. Any policy changes required at the
global level ' such as IT security policies, privacy laws, or
contractual pricing ' must be enforced separately at the local
level.
The question? How can organizations in such a situation act
effectively to comply with global and local regulations? The
answer? Not easily. Many organizations look for better ways to
centralize common functions as shared services, rid themselves
of redundancy, increase their operating efficiency, and enable
reuse of their existing investments. Unfortunately, the growing
complexity of the organization's IT landscape often hampers
these laudable goals.
Why Innovation Is Difficult
To achieve innovation, organizations often attempt to build
upon existing IT investments. However, a number of issues
impede their efforts. For instance, some organizations use
enterprise application integration (EAI) tools to integrate independent
applications to support new or reengineered business processes. This approach
relies upon proprietary interfaces to hardwire different applications. Although
EAI tools have been used success- fully for such linkage, they require employees
with specialized skills who understand the inner workings of the systems on both
sides to create tightly coupled integration. In addition, skilled employees are
also needed to maintain the integration over the useful life of the
applications. But the costs of up-front development and ongoing maintenance and efforts involved in integration can be avoided.
Consider a second example of the difficulty of process innovation. In many
organizations, the need to reference structured (or online) data and
unstructured (or offline) data is not only desirable to increase efficiency, but
also mandatory to satisfy regulatory requirements. This situation is especially
true in the public sector, where agencies rely on traditional paper forms to
conduct business with smaller companies that might not have online access.
Because traditional systems do not fully address the end-to-end process, the
agencies create a wealth of offline data through administrative paperwork,
e-mail, faxes, mail, and other methods of offline communication. The staff must
then spend non-value-added time sorting the offline information and tying it
back to, or reentering the data into, appropriate systems for compliance
purposes. To innovate this process and ensure compliance with federal regulations, agencies must invest in IT staff
to develop the custom integration necessary for data exchange
and in a team of contract administrators to govern the end-to-
end process.
Why Outsourcing Is Difficult
Outsourcing is often difficult, because organizational boundaries
constrain an organization's systems and applications, neither of
which was designed to be interoperable with external systems. To
accommodate outsourcing, organizations often build proprietary
integration between internal and external systems, which
increases the cost of ongoing maintenance and adds complexity
to the IT environment. In addition, changes to the internal or
external systems cause a wave of updates to development, testing,
and documentation. For example, if an organization wishes to
outsource its payroll information, it must extend its time and
attendance processes in HCM to a third party. But doing so is
difficult, because success here relies upon the ability of multiple
systems with different functionalities, underlying logic, and rules
to work well with each other.
Consider logistics outsourcing as another example. Extending an
organization's inventory management system to a third-party
warehouse inventory system requires proprietary integration and
specialized skills unless the systems are built upon open standards and communication protocols. Subsequent changes to the
tightly coupled systems drive up the costs of maintenance.
THE SOLUTION TO BECOMING
AN ADAPTIVE ENTERPRISE
The need to respond rapidly to business demands, support new
strategies, and improve the overall user experience is driving
IT organizations to search for new ways to improve IT at a lower
cost. IT organizations can overcome these challenges by adopting
SOA. In general terms, SOA is a technical framework for building
software applications that use services available from a network
like the Web. Applications in SOA are designed to use Web
services as the standard means to communicate well-defined
information with an array of other applications.
Enterprise services architecture, as defined by SAP, is a business- driven
approach to SOA that expands the concept of Web services into an architecture
that supports enterprise-wide, service- enabled business architecture. However,
SOA and ESA are not one and the same. The difference between an SOA and an ESA
comes from service enabling the most common business processes, such as procure to pay, order to cash, and hire to retire.
Although SOA can be seen as a more technical concept, ESA can
be thought of as the blueprint that enables flexibility, openness,
and agility, which are critical elements for success in an adaptive
enterprise. Simply put: ESA is a blueprint for a business-oriented
approach to SOA.
Furthermore, although Web services are suitable for promoting syntax and
protocol-level communications, they do not yet pro- vide a way to ensure
semantic interoperability. For example, the way a customer is defined in a
product from Siebel Systems differs from the way it is defined in a solution from SAP. Organizations need a way to resolve the data and process disparities
between different Web services and to translate syntax and
communications into business constructs that can be reused
across different situations. The notion of enterprise services does
exactly that through the "semantic leveling" and "right sizing"
of individual Web services. For example, an enterprise service can
encapsulate incompatible and individual Web services that span
the Siebel and SAP® systems into a common business concept
such as "retrieve customer information." Various enterprise services can then be assembled to form a composite application.
Composite applications enable the orchestration of new business
processes that leverage enterprise services from existing applications in ESA. Whether a composite application is designed for
internal or partner use, it shows how any company can address
new business needs and extend its existing processes by using
existing systems and applications based upon ESA.
EMBRACING INNOVATION AND
ACHIEVING OPERATIONAL EXCELLENCE
ERP solutions that adopt a services-oriented approach enable
organizations to achieve competitive differentiation by allowing
them to implement a variety of IT and business strategies, including business and IT consolidation, business-process innovation,
and business-process outsourcing. This section illustrates the
value of an ERP system built upon ESA for helping organizations
implement a number of processes under the following strategies:
Business and IT Consolidation
By consolidating business processes, organizations can reduce redundancy and
increase cost savings. Organizations avoid the complexity and costs of a
fragmented, heterogeneous environment by consolidating redundant applications and systems into
a single technology platform based upon ESA.
Example: Consolidating HCM as Shared Services
Consider the example of centralizing HCM functions for all
employees. In a distributed scenario, local HCM teams are on-site
to address specific issues and administrative tasks. The tasks
might be as simple as executing an address change, enrolling
in a 401(k) plan, or managing direct payroll deposits. But the
tasks might also be as complex as managing benefits planning
through different providers using different systems on several
continents.
In a centralized scenario, a self-service portal for employees is
introduced globally to allow employees to perform simple HCM
tasks or use an online employee handbook and other knowledge
tools. The portal serves as an automated first line of support. The
HCM department is readily accessible if the employee needs assistance with the task at hand or with using the portal. This new
approach liberates the local HCM representative from a significant number of routine administrative tasks to focus on more
strategic initiatives that can further improve employee satisfaction and reduce operating costs.
Existing Employee On-Boarding Process
Deployment of the employee self-service portal requires extensive
proprietary integration with back-end systems. For example, to
register an employee home address change, the update must
need to be reflected across multiple systems, as shown in the following table.
Integration of an HCM solution without ESA requires the design,
testing, deployment, and documentation of a multitude of custom proprietary interfaces. Changes to a given interface result in
yet another wave of development, testing, and documentation.
In time, this task becomes insupportable, because it is overly
complex, cost prohibitive, and highly inefficient.
Enhanced Employee On-Boarding Process
An HCM solution built upon ESA can use enterprise services
to exchange employee data securely and reliably with multiple
systems. For example, when an employee submits a home address
change through the self-service employee portal, the appropriate
change home address service is invoked to communicate real-time
information to third-party systems. Several systems can use the
enterprise services developed upon open standards'based inter-
faces in the enterprise services repository. This flexibility reduces
the time, effort, and cost required to build and maintain tightly
coupled integration.
Business-Process Innovation
By reengineering existing processes and by composing and extending new applications, organizations can enable new business
processes. Doing so is difficult without ESA, because innovation
or changing existing business processes would require the IT
organization to understand the inner workings of the underlying
applications. With ESA, IT organizations can compose applications that leverage existing IT investments and accelerate
the rate of change while eliminating the need for proprietary
integration.
Example: Extending the Quotation Process
to More Suppliers
Consider the example of a contract manufacturer that must
extend the quotation management process to external suppliers
to improve efficiency and responsiveness. Today, the process
spans the line of organizational silos ' the end customer, the
internal team, and the external suppliers. Numerous internal
and external systems ' including homegrown, third-party,
and legacy systems ' are in place to help address ERP, customer
relationship management (CRM), supplier
relationship management (SRM), HR, supply chain management (SCM), and
financials.
The process starts with the receipt of a request for quotation
(RFQ) from the end customer. The account manager enters the
information into the CRM system and then assesses the opportunity. The internal team is notified of the opportunity and assembles pricing and material information from multiple internal
and external sources. Depending upon the sourcing needs, the
internal team might produce an RFQ to source more competitive
quotations from suppliers. This situation can occur when insufficient manufacturing capacity exists or when more competitive
prices can be obtained.
Existing Quotation Management Process
The contract manufacturer relies upon its internal team as
human integrators to bridge the flow of information manually
between multiple systems and parties. The extended quotation
management process requires extensive offline communication,
paperwork processing, data reentry, and other administrative
tasks, all of which result in poor process governance and fragmented data. The process is clearly ineffective, reactive, unreliable, time-consuming, and difficult to manage for all parties
involved. Changes to the original RFQ require a wave of updates
to the existing applications, which compromises responsiveness
and data accuracy. The contract manufacturer can automate the
process through hardwired integration between its internal ERP
systems and the supplier's systems, but this approach is complex
and difficult ' especially considering the vast number of suppliers
and proprietary systems with which the manufacturer might
have to connect. And even worse, this type of integration increases the total cost of ownership by making the IT landscape more
and more complex.
Enhanced Quotation Management Process
Using enterprise services, ERP systems can exchange business-
critical information between different systems, including SRM
and third-party CRM systems, and even with other ERP systems.
Examples of enterprise services include purchase order and con-
tract status tracking, costing updates, sourcing, vendor quotes
status tracking, and PO creation.
The new approach enables different systems to communicate using a common
language and reduces the need for data reentry and offline communication. For
example, the document controller receives supplier quotation information through vendor
quotes developed specifically for a third-party CRM solution.
Information is then automatically communicated to the manufacturer's system with enterprise services.
Example: Reengineering the Employee
On-Boarding Process
Consider the employee on-boarding process that affects personnel
in a number of departments, including the hiring manager,
human resources and facilities employees, IT administrators,
and so on.
With ESA, organizations can compose new business processes by
orchestrating and rearranging existing enterprise services into a
composite application that automates the new-hire process as
follows:
- Initiate new-hire request (hiring manager)
- Approve request (approver)
- Generate offer letter and employee contract (automated)
- Accept or reject offer (candidate)
- Initiate service request to provision users on IT systems
(automated)
- Initiate purchase request to acquire new laptop and other
supplies (automated)
- Initiate facilities request for office, phone, furniture, and
wiring to support TCP/IP (automated)
- Provision services, including facilities, IT procurement,
office space, and so on (automated)
- Schedule new-hire orientation (hiring manager)
- Enroll in benefits, submit W-4 forms, and so on (employee
through third party)
With the composite application, activities can be automated and
information can be exchanged in real time. Furthermore, the
composite application provides a consistent look and feel that
makes it simpler for employees to access the enterprise services of
the ERP system and other systems.
Example: Reengineering the Procure-to-Pay Process
Consider the example of a federal agency in the United States
that acquires goods and services from suppliers. Today, federal
agencies are mandated to use standard forms to conform to
Federal Acquisitions Regulations (FAR). Depending upon certain criteria,
such as acquisition value and type, specific contractual and provisional clauses
must be presented on any forms submitted to suppliers and contractors for bidding. (Agencies still
rely upon standard forms to accommodate suppliers and
contractors who might not have online or Internet access.)
With ESA, agencies can submit standard forms as Adobe PDF
files to suppliers and contractors (see Figure 3). Suppliers and
contractors can print a form and fill it out offline, or enter
the information directly into the PDF file and submit it.
Using enterprise services, the unstructured data in the PDF
document is easily transported to ERP systems and stored as
structured data. The benefit of this approach is that agencies can
reuse existing online and offline forms to comply with federal
requirements. At the same time, the competitive bidding process
is simplified for contractors and suppliers
Example: Integrating Desktop Productivity Tools
with ERP Applications
Time and attendance management offers a prime example of the
need for a services-oriented approach. To manage time and
attendance, employees must record their activities in HCM and
financials systems and maintain the same information using
desktop tools such as Microsoft Outlook and Microsoft Project.
An abundance of information that, for compliance and control
purposes, is scattered throughout the universe of available
systems and is unnecessarily difficult to track further complicates
the process.
Using enterprise services, time and attendance information is
automatically exchanged between third-party desktop tools,
HCM systems, and financials systems, thus saving employees time
and effort and greatly improving the accuracy of reporting. Figure
4 illustrates how employees can improve productivity while
meeting corporate compliance requirements by exchanging
real-time information between a desktop tool and a financials
system in the context of managing appointments with
Microsoft Outlook.
Business-Process Outsourcing
By outsourcing context activities, organizations enable their IT and business
employees to focus on the next differentiating practice and still ensure proper
governance of service levels. Organizations can use enterprise services based
upon open standards to communicate and exchange information between internal and
third-party systems rather than building proprietary, costly integration with third-party systems. Because
multiple systems can reuse enterprise services, this approach
significantly reduces IT complexity.
Example: Outsourcing Logistics Operations
Consider the outsourcing of logistics management for a global
high-tech original equipment manufacturer. The company has
manufacturing plants, logistics centers, and third-party ware-
houses located across Europe, the Middle East, Africa, the Asia-
Pacific region, and North America. Each location has varying
inventory levels of finished goods, from 0 to over 120 days of
supply, to meet service-level agreements (SLAs)
with customers. A key objective for the company is to reduce the finished goods
inventory across its distribution centers and warehouses. How- ever, the staff
is consumed by the day-to-day activities of tactical logistics and warehouse
management related to global shipments, such as working with logistics carriers, custom agents,
and third-party warehouse providers.
As a result, the manufacturer decides to outsource its logistics and
warehouse operations to a third-party provider with specialized expertise in
multimodal transportation and planning, con- tract negotiation, competitive
pricing, insurance management, import and export, taxation, warehouse
management, and so on. These activities are clearly mission critical for the
business, but the company recognizes that it does not have the core competency in-house to differentiate itself.
Existing Logistics Outsourcing Process
The company uses an ERP system for sales and distribution and materials
management, legacy systems for HR and CRM, and third-party solutions for
warehouse management. The IT environment is complicated by a myriad of unique
business processes and proprietary, tightly coupled integrations. The
outsourcing initiative requires interoperability of the company's internal ERP and legacy systems with the homegrown,
sophisticated transportation and warehouse management tools
of the third-party provider. Without proper ESA, the company
will be forced to build and maintain custom, proprietary inter-
faces between its ERP system and all third parties to exchange
product, bill-of-material, order, inventory availability, pricing,
and customer information. The interfaces are required to ensure
that the third-party provider can share real-time information at
any time on shipments, including those in transit and held up at
customs, such as details on expected delivery dates, damaged
shipments, inventory at distribution centers, and so on.
Now, suppose the company decides to establish a new process to
monitor and enforce SLAs with the third-party logistics provider.
Because of the existing complexity of IT and the inflexibility
of the tightly coupled systems, the organizations will face challenges in decomposing existing functionality and composing
a new application that can span business and IT boundaries.
Enhanced Logistics Outsourcing Process
In ESA, ERP, HCM, financials, and operations software can use
enterprise services to communicate and exchange information
with the external systems of the third-party logistics provider.
Both parties can leverage their existing IT systems and publish
enterprise services that can be found and invoked over a network.
Some of the services might include product details, pricing,
inventory availability checks, delivery status checks, purchase
order details, purchase order changes, partial shipments, and
bill-of-lading details.
What's more, enterprise services enable organizations to compose and
fine-tune business processes more easily. In the case of building a process that governs an SLA across company boundaries,
the use of enterprise services can ensure that business-critical
information is exchanged in real time between the third-party
provider and the manufacturer. For example, the manufacturer
can monitor the actual service levels of deliveries from order
receipt (in the ERP system), to shipment in transit (in the third-
party system), and ultimately to shipment delivered (in the third-
party system), even though the process spans different systems.
UNLOCKING THE POTENTIAL OF ESA
To address the business context in communication between
applications, SAP elevates Web services to enterprise services
through its Enterprise Services Architecture Adoption Program,
which helps companies develop a blueprint for their ESA.
Through the program, organizations can expand the concept
of Web services into an architecture that supports an enterprise-
wide, service-enabled business architecture.
The mySAP&8482; ERP solution, the mySAP Business Suite family of
business solutions, and many partner solutions are powered by
the SAP NetWeaver® platform ' the open integration and application platform that provides the best way to integrate all
systems running SAP or non-SAP software. SAP NetWeaver
unifies integration technologies into a single platform and is
preintegrated with business applications, enabling change and
reducing the need for custom integration. SAP NetWeaver
enables customers, partners, and SAP to unlock the potential
of ESA. Based upon open standards like Web services, Java, and
XML, SAP NetWeaver unites information and functionality
from SAP applications and offers them as enterprise services for
communication with SAP, third-party, and legacy systems.
Traditionally, organizations have had two options when it comes
to IT infrastructure: build or buy. With ESA, organizations have
a third choice: compose. Organizations that leverage ESA can
develop applications more quickly and with less effort to support
next or evolving business practices.
Organizations with an ESA can use the SAP NetWeaver Visual
Composer tool to compose applications. In the past, teams of
business analysts and application developers have translated business requirements into detailed, procedural logic. With ESA, the
language of business becomes the language of IT. Enterprise services within mySAP ERP are defined with simplicity and at a granularity that allows business analysts to understand them easily.
Thus, business analysts can leverage the appropriate enterprise
services for composite applications that support new business
scenarios.
SAP NetWeaver also enables delivery of role-based user interfaces
through an enterprise portal that allows organizations to structure business processes and deliver relevant financial, operational,
HCM, and other business information tailored to a specific role.
This approach improves user productivity and provides a more
consistent user experience. With SAP NetWeaver, organizations
can provide their users with access to structured and unstructured information scattered throughout an enterprise, including
information stored in SAP and third-party systems, databases,
data warehouses, desktop documents, and Web content.
Rather than establishing, managing, and maintaining a myriad of
IT systems, organizations can cut costs and reduce IT complexity
by consolidating their infrastructure. SAP intends to develop SAP
NetWeaver into a business-process platform, or "applistructure,"
that helps organizations merge enterprise applications with infra-
structure technology. This approach allows business analysts to
compose applications by assembling enterprise services from the
enterprise services repository, a central repository for modeling
enterprise services and storing metadata as defined by customers,
SAP, and partners. SAP plans to make the repository an integral
part of both SAP NetWeaver and mySAP ERP as they evolve to enable an ESA. Figure
7 illustrates the different components enabling the evolution of mySAP ERP and mySAP Business Suite
to ESA.
mySAP ERP AND ESA: ALIGNING IT AND BUSINESS
TO ACHIEVE OPERATIONAL EXCELLENCE
In 2005, SAP announced its ESA preview system with more than
500 live enterprise services. Developed and deployed on the
latest version of mySAP ERP, the preview system offers partners,
developers, and customers an opportunity to test the enterprise
services, and more importantly, to influence the definition and
development of service-enabled solutions that help enterprises
run business-critical processes more efficiently.
The following are just a few examples of the ways that the enterprise services can be used:
- A third-party provider of tendering software uses enterprise
services to extend the purchasing functionality in mySAP ERP
to address the public sector's unique regulatory requirements.
Enterprise services from mySAP ERP help the company verify
budget availability before the release and publication of RFQs.
Once the award is determined and the tendering process
between the customer and supplier is complete, the company
uses enterprise services to generate purchase order information
and pass the information to mySAP ERP for invoicing and pay-
ment processing.
- Using enterprise services, another third-party software and
services company integrates its time and attendance tracking
application with the mySAP ERP Human Capital Management
solution some 90% faster than it could with traditional methods.
Enterprise services enablement of mySAP ERP allows the
vendor to provide its customers with comprehensive and
real-time insight into time and attendance status in a fraction
of the time it would have taken otherwise.
- A large infrastructure management software company is working to extend its asset management and infrastructure monitoring systems into the purchasing functions available in the
mySAP ERP Operations solution. Traditionally, these systems have been
implemented independently, without integration with SAP systems. ESA will
enable the company to use enterprise services from SAP to exchange asset details, pricing, and
contract terms and conditions from the purchasing functions
to its asset management systems. The company also plans to
trigger an event from its infrastructure management tool to
automate the procurement process in the purchasing module.
WHAT'S NEXT?
To demonstrate its continued leadership in helping customers
move toward SOA and build upon its commitment to provide
the partner community with a development platform, SAP's road
map for ESA includes the following milestones:
- SAP plans to publish an inventory of its enterprise services that
customers and partners can use for planning. Customers' and
partners' composite applications and longer-term planning can
leverage the list. Additional service-enabled functionality will
be made available, focusing on business-process flexibility and
anticipating the needs of new composite applications.
- In 2006, SAP intends to create an enterprise services repository
based upon the next release of SAP NetWeaver. The purpose is
to make all relevant enterprise services actively available from
the repository for use by selected partners and customers.
CONCLUSION
Today, enterprises are burdened by complex IT landscapes that
drive up the cost of innovation and slow down the pace of
change. With rapidly shifting business conditions ' such as
mergers and acquisitions, business consolidations, new business
ventures, new partnerships, and changing market dynamics '
enterprises must find a better way to effect change and employ
innovation.
There is a better way. The market is recognizing the value and
potential of SOA ' a new approach to help organizations make
their IT operations leaner, more responsive, and more easily
adaptive to enterprise solutions. SAP is among the first to recognize this vision and is leading the market with an ESA vision to
support the next generation of ERP innovation.
mySAP ERP, powered by SAP NetWeaver, is evolving into an ESA with a new
repository of enterprise services developed upon open standards for exchanging
information with a variety of systems, such as ERP, HCM, SRM, CRM, and SCM. The evolution
will enable customers and their trading partners to seek greater
efficiency and differentiation as they become empowered to
implement new business strategies with less IT complexity, lower
total cost of ownership, and increased agility.
With ESA, mySAP ERP enables organizations to increase efficiency and growth by doing the following:
- Extending existing processes across new business boundaries
- Consolidating business and IT to leverage economies of scale
and eliminate redundancy
- Innovating existing business processes by developing composite
applications that leverage existing investments
- Replacing custom programming with model-driven
composition of applications
- Delivering flexible and highly productive user interfaces
- Simplifying the IT landscape and reducing the costs and effort
associated with integrating internal and external applications
Organizations of all sizes around the world now have the choice,
flexibility, and freedom to evolve into adaptive enterprises
using an enterprise services approach that keeps them open to
innovation and responsive to change.
FOR MORE INFORMATION
For more information about how ESA can help your organiza-
tion deliver operational excellence and realize new levels of
innovation, please contact your account executive or visit us
on the Web at www.sap.com/erp,
www.sap.com/solutions/esa/index.epx, or
www.sap.com/contactsap.
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