"Enterprises Reap Rewards of Modernizing Their ERP Systems"

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"With SAP Business Suite, your company can improve the strategic alignment and efficiencies of financial, human capital, and operational processes. With enhanced enterprise productivity and insight from the SAP ERP application, you have the power needed to adapt quickly and cost effectively to changing business, market, and industry requirements with ERP solutions."
Source: SAP

Resources Related to Enterprises Reap Rewards of Modernizing Their ERP Systems:

• Enterprise Resource Planning (ERP) (Wikipedia)

Enterprises Reap Rewards of Modernizing Their ERP Systems

IDC Opinion

The rewards of enterprise resource planning (ERP) optimization and modernization are becoming increasingly evident as users search for long-term solutions to sustain and exploit business growth, while circumventing unnecessary risks.

With the advent of standards-based Web services technologies and service oriented architectures (SOAs), companies are advised to standardize on the most current ERP platform as a stepping stone to embrace the delivery of next-generation enterprise services. This in turn will facilitate greater employee productivity and enhanced collaboration with business partners and customers.

As ERP upgrade options become more flexible and affordable, users need to balance innovation with the preservation of existing IT investments to ensure extensibility, business continuity, and predictable outcomes.

In This White Paper

This white paper outlines strategies for organizations considering upgrading or replacing their enterprise resource planning systems in order to handle business growth, streamline internal processes, and leverage technology innovation. It also includes a case study that examines how the University of Mississippi have successfully upgraded its SAP ERP systems to generate maximum business benefits.

Situation Overview

After years of underinvesting- or in some cases not investing - in enterprise applications technologies, organizations are turning to the latest software technologies to thwart competition, boost productivity, and improve visibility into all aspects of their operations. This change of heart is indicative of underlying market forces, which require companies - especially those that have global reach - to use the latest enterprise applications to reduce operating expenses, facilitate corporatewide collaboration, and ultimately realign their business processes to better meet present and future enterprise data and workload requirements.

The reasons companies are investing in new enterprise applications can be summed up in five key objectives, as indicated through recent IDC research (see Table 1):

• By choosing to upgrade or replace their ERP systems in order to reduce IT overhead and eliminate manual processes, organizations can leverage the latest tools to save time and resources for all stakeholders.
• The human factor has risen to be one of the top business challenges as globalization and demographics changes are pressuring companies to create a better system to hire, retain, and reward talented professionals, while continuously extending their knowledge and skill sets.
• As companies are seeking to profit from a confluence of market forces, customers are taking advantage of inexpensive labor and production capacity by leveraging shared services and/or outsourcing. Their business processes need to scale and adapt to the velocity of information born out of growing organizational complexity, but also corporate governance, environmental, and other multidisciplinary business and policy requirements from product safety to privacy rights that are increasingly commonplace in a global setting.
• With the help of the latest software technologies, companies aim to boost revenue through compressed decision making, shortened product cycles, and collective intelligence into market demands and pricing fluctuations.
• As the global economic outlook brightens, the need to identify and develop new customers and market opportunities has intensified, and many companies are eager to use new applications to build and strengthen sales channels as well as customer relationships.

Table 1

n = 1,051
Note: Multiple responses were allowed.
Source: IDC's Vertical Views Survey, 2006

As a result, companies are reinventing themselves by investing in new ERP systems to improve their chances of surviving and succeeding in an era when corporate strengths are often measured by the value of their information assets: intellectual property rights, design ideas, and customer insights.

In doing so, they first need to examine their existing systems to determine whether they should proceed with making minor or substantial changes by relying on the following guiding principles:

• Fully assessing the risks and rewards of ERP modernization
• Standardizing on Web services and SOA to meet real-time data needs
• Balancing change with innovation to emphasize business process simplicity

In theory, ERP modernization and optimization projects stem from user desires to lower operating costs, improve productivity, and instill business process excellence into their corporate DNA. In practice, such reengineering efforts do not happen overnight, and having an upgrade strategy in place that complements the corporate overhaul and executing on it are critical to driving business values incrementally.

The following sections detail the pros and cons of ERP modernization in relation to how companies should position themselves to maximize technology benefits by factoring the guiding principles into their corporate agenda.

Reward s o f E R P Modernization

If the business-as-usual approach is no longer the sure way to harness the proliferation of information assets in the current environment, can a company continue to rely on its existing system to compete in the 21st century-

Moreover, the ubiquity of the Internet is pressuring companies to ask themselves whether their existing systems are capable of handling both event-driven and routine tasks. These tasks include online order management instead of batch processing, demand-driven selling in conjunction with mass customization instead of reactive fulfillment, and collaborative project management with incentive-based milestones instead of lax control, cost overruns, and slipping deadlines.

While across-the-board progress may not be easily quantifiable, companies that have invested in the latest enterprise applications technologies are reporting streamlined decision-making processes, improved financial metrics through better forecasting and planning, and compressed cycle times for building and delivering new products and services that meet and exceed customer expectations.

Consequently, the rewards of ERP modernization should become more attainable if companies zero in on quantifiable factors such as cost reductions, enhanced productivity, and business process improvement.

The Art of Saving Money

With major economies firming up their interest rates, the cost of doing business is expected to rise and companies are under considerable pressure to save money and evaluate available options to reduce overhead.

The objective is clear. A growing number of companies have chosen to standardize on a common platform to eliminate process duplication, human errors, and data inconsistencies that often lead to waste, inefficiency, and expensive corrections, hurting many of their business functions from finance to customer service.

For example, Air France operates in a fiercely competitive market, with record oil prices, high labor costs, and intense pressures from discount carriers. Recently, it completed an SAP ERP upgrade project specifically to create a common scalable platform for both Air France and KLM, which it acquired in 2004. The elimination of nearly 100 customized programs means that the IT department now has more time and resources to pursue strategic initiatives, rather than writing its own code to maintain its operations, which translates into lower maintenance costs and higher productivity gains. In addition, Air France has built a repository of more than 1,600 test cases through the upgrade process. That means Air France is strengthening a portfolio of configuration templates so that future system upgrades and expansion will be done with much less headache and greater certainty of success.

Significant benefits from Air France's ERP upgrade project include:

• Greater usability and satisfaction for more than 2,200 corporate users at Air France with regard to employee and manager self-service, Web features such as bookmarking frequently used intranet pages, and system menus
• Enhanced reporting and reduced time to generate Business Warehouse reports
• Easier account information access by Air France business analysts, buyers, and other users, compared with the difficult data extraction tools used previously
• A foundation for tight business process integration between the Air France MRO system and the one at its sister company, KLM
• Reduced programming and maintenance costs with the elimination of nearly 100 customized programs
• A repository of more than 1,600 test cases and process best practices for future reuse and system improvement

In other examples, an ERP upgrade project is often the precursor to reducing operating expenses by eliminating manual processes and manual interventions including invoice faxing, data mishandling, and off-contract buying. For example, the use of Web-based sourcing tools such as eRFX, available in the latest versions of many supplier relationship management applications, could help a company save significant dollars annually by curbing maverick buying. Similarly, the adoption of the latest eprocurement software could result in the reduction of the processing cost of a purchase order from as high as $29 to $2, according to data compiled by IDC.

The case study highlighted in this white paper illustrates how organizations are taking a proactive approach to reduce their operating expenses through ERP upgrade and replacement activities, which should provide them with quality tools, processes, and insights to accommodate the varying needs of their employees, business partners, and customers in search of accurate and reliable data.

Human Capital Management as a Competitive Advantage

While many companies have focused on building strong customer relationships or signing up new partners to pursue new business opportunities, less attention is being paid to boosting employee morale and anticipating future workforce requirements.

Boosting employee productivity - specifically the human factor - is expected to become one of the top agenda items for companies because of the growing number of baby boomers nearing retirement age as well as a worsening shortage of talented professionals and managers.

As a result, strategic human capital management (HCM) components such as erecruiting, onboarding, 360-degree performance review, incentive management, and workforce optimization will become indispensable tools for organizations to manage, motivate, and deploy an increasingly diverse talent base. This functionality could come either standard or as enhancement features in an upgraded ERP system. Furthermore:

• Companies can demonstrate they are giving employees a bigger say in their career paths, while allowing for maximum process transparency for management as well as the rank and file. For example, a multidimensional benefits administration system with embedded analytics can allow companies to better monitor and track vendor performance.
• The same holds true when a new HCM system is capable of delivering an expanded view of workforce talents and goals by defining, recruiting, measuring, developing, advancing, and rewarding employee skill sets.
• Launching a global HR solution enables business units in different geographies to uniformly roll out employee self-service and manager self-service capabilities. This allows streamlined personnel policies, employee development initiatives, and administrative functions without fears of functionality gaps and technology limitations in terms of localization requirements and regulatory updates.

Indeed, the future of business is going to require a more data-driven, fact-based method to hire, pay, and reward top performers with job functions that are either task oriented or project specific. In either case, managing the human factor means greater accountability and transparency on the parts of the managers, employees, and contingent labor. Contractors and subcontractors may play only a limited role in an integrated business process. Still, their contributions need to be meticulously documented and evaluated for any chance to improve systemwide productivity and efficiency in the future.

The Renewal of Best-in-Class Business Processes

Sustainable business process improvement may well be one of the biggest rewards that companies can reap from implementing the latest ERP software release, but users should proceed with caution and discretion since such an undertaking does not happen in a vacuum.

In some cases, a complete corporate reengineering project - namely resource reallocation and policy revision - may be required to facilitate any systematic changes to one's business processes.

For such projects to succeed, the path is often dotted with obstacles and the process itself could be long and arduous. Nike, for example, went through an expensive business process reengineering project to overhaul its supply chain in early 2000 without much success. After a number of revisions, Nike finally decided to standardize on an ERP platform as the focal point to revamp not just its supply chain, but also manufacturing, customer relationship management, and point-of-sale integration systems in order to establish a holistic view into different facets of its global operations. So far, the results have yielded shortened lead time, reduced inventory levels, and tangible returns on its investment.

The key lesson is that organizations should position an ERP upgrade project as the new baseline needed for organizations to pursue new business strategies - whether the goal is to develop and introduce new products more quickly or revamp one's supply chain system to offload tasks such as manufacturing, logistics, and fulfillment to suppliers and other providers.

Conversely, any business process improvement could not be done easily without leveraging a standard platform for broad distribution of information and easy access to critical data among a host of stakeholders whose count might have been kept to a minimum in the past because of system inflexibility.

Now with increased emphasis on transparency in every business, a reliable and scalable ERP platform would become the single version of the truth. Both employees and managers could turn to it for clarity into their workflow, procedures, and policies ranging from order to cash or from concept to product introduction.

At a more granular level, an up-to-date ERP system often incorporates industry- specific processes such as merchandising for retailers or billing for telcos into core enterprise functions such as procurement and financials. Such integration capabilities are increasingly common in off-the-shelf applications, thus reducing the amount of IT overhead as well as internal development efforts for organizations so that they can channel their remaining resources to generate the best possible bottom-line results.

Hence, one can argue that an ERP upgrade project may not necessarily be the end- all and be-all answer to business process improvement -or even corporate reengineering for that matter, but the two are interdependent to the degree that one can't take off without the other.

The remaining question is how companies should prioritize them in the order that makes the most strategic and economic sense and that satisfies the biggest number of stakeholders, while scaling the benefits to reach customers and business partners along the way.

Risks of ERP Modernization

It would be overly optimistic to suggest that any ERP modernization initiative, or technology project, is without shortcoming. For instance, corporations may have to incur higher infrastructure expenses if they want to optimize the new ERP systems because of initial expenditures in adding applications and integration servers.

Change management could become a major issue if not enough attention is being paid to user training or key decision makers are not engaged on what it takes to secure their support and commitment. Indeed, the amount of time and resources being spent to ensure users are properly trained on the new ERP system has a direct correlation to whether it will get used extensively. And one gets better results when a system is heavily utilized. The economy of scale from mass adoption is the only way to measure the success of an IT project.

Similarly, the IT department now needs to step up to the plate to ensure that its ERP system - once upgraded - will function properly to meet the 24 x 7 requirements of today's digital marketplace by preventing any unscheduled downtime.

Historically, applications development has lagged behind infrastructure improvement in terms of system management, transaction processing, and even security services. But now with increased use of Web services and reusable components like JavaScript and .NET, applications development has finally caught up with infrastructure development in terms of throughput, data synchronization, and next to zero latency. What that also means is that infrastructure requirements are going to be more stringent than ever in order to deliver and optimize applications functionality. So when an organization starts upgrading its ERP system, it is well advised to also upgrade the infrastructure components in order to meet high availability requirements.

ERP to Exploit Extend SOA

The second coming of the Internet evolution - as exemplified by Web 2.0, the creation of virtual communities, and the velocity of information that propels the global marketplace - underscores the transformation of business transactions and interactions by leveraging Web services. To this end, service oriented architecture is fast becoming the industry standard for software design, data abstraction, and distributed business services.

While unstructured data such as email and instant messaging has found its way into mainstream business use, Web services standards such as XML for tagging, XBRL for business reporting, and different master data management techniques for data cleansing, aggregation, and syndication have seen growing adoption by companies of all sizes. Coupled with composite application techniques like mashups and location- based services, companies have created new ways to market products to and support customers. As organizations need to extend themselves to virtual office environments for their mobile workforce and coordinate multisite collaboration with suppliers and partners, Web services have become the linchpin for rapid delivery of mission-critical data and knowledge management support.

What that means is that the corporate framework will have to encompass as many Web services components as possible to reach beyond the four walls of the organization. With improved usability, ease of deployment, and relatively low IT overhead required, Web services could well transform the enterprise computing environment for years to come.

The central tenet of SOA lies in an industry standards-based approach to composing functional and informational services and delivering them to a broad audience via an attractive Web user interface. Still, the business rules, workflow protocols, and integration components need to be fully supported and followed to ensure data integrity and user satisfaction. Having an SOA-compliant ERP system will usher in a critical mechanism to help monitor the workflow while reducing integration and training costs to facilitate a consistent user experience and an agile business environment that can rapidly respond to and withstand abrupt customer demands and market changes.

As a result, companies can expect to generate sustainable benefits and mitigate technology risks if their ERP strategies are aligned with standards-based Web services.

From Web Services to Shared Services

In the future, companies should expand the service aspects of Web delivery and deployment as they begin to redefine the role of corporate IT and extract greater value from the transformation.

Increasingly, the IT function should be based on the value it creates to not only the entire enterprise, but perhaps any entity with which it interacts. Previously, the IT function for handling tasks such as installing and maintaining technology infrastructure and applications was relegated to the role of a cost center. But many organizations have decided it's time to change that to a profit center by spreading the costs of running an IT organization over a larger set of internal users, and perhaps to affiliated companies and business partners by charging them on a per-user or per- transaction basis.

Therefore, it makes perfect sense for companies to map ERP functionality, which includes core services such as accounting, human resources, and order management, to the shared service model. Greater value can be extracted and monetized by spreading the costs of running an ERP system over a larger set of users or user entities in-house or otherwise.

Examples of such shared service approaches can be found at the horizontal and vertical levels:

• Cross-industry shared services. Across many industries, companies can use shared services for different corporate functions such as HR and payroll administration, procurement, and real estate management. By doing so, they could gain greater efficiency and higher returns on their technology investments by amortizing the costs more efficiently. Such approaches could transform their cost models into profit centers. The push toward a shared service strategy stems from the growing weariness of alternatives like business process outsourcing, which may prevent organizations from retaining their IT destiny when control and oversight responsibility are ceded to the service provider for expediency's sake.
• Financial services. In banking, large financial institutions could use shared service to support smaller banks by offloading their back-office functions covering everything from cash management automation to straight-through processing so that they can spend more time focusing on their core competency of dynamic interactions with customers, suppliers, and business partners including content providers.
• Hospitality. Effective resource management strategy (with integration into project management, asset tracking, and space planning) is needed for new resorts and gaming destinations. A shared service approach can be extended to food services, marketing, and lodging management systems for multiple hotel franchises.
• Manufacturing. Virtual manufacturers are relying on a single integrated system to keep track of organizational data, suppliers, and customers. Shared services can take the load off their supply chain, production, and warehousing systems.
• Transportation. Inventory management efficiencies are in demand, especially in contract logistics, and reverse logistics back to China is becoming an issue for consumer goods for which the costs of returning the product outweigh the product costs itself. A shared service approach can allow transportation firms to better coordinate with others to manage the entire reverse logistics supply chain process.

What these examples illustrate is the fact that ERP systems - especially those that share common components with Web services standards - could be readily deployed as shared services to a larger set of users and user entities without incurring additional IT overhead. On the other hand, an outdated ERP system with legacy code and proprietary architecture, which is often expensive to maintain and restrictive to scale, may not be the right tool anymore to exploit the shared service model because of reliability and extensibility limitations.

Innovation Without Complexity

The ubiquity of the Internet has given rise to a new breed of Web services as well as plenty of opportunities for organizations to create innovative ways to serve and support their customers.

Global expansion, which previously required setting up offices around the globe, now can be managed via the Web. The same applies to ecommerce for both business-to-business and business-to-consumer transactions, which can be deployed and continuously enhanced relatively easily through third-party service providers.

However, what's missing from these Web services is the degree of control that many companies still need to retain in order to measure themselves against their peers. In addition, relying solely on Web services may not provide the right combination of business and technology competency and sophistication for companies to leverage the value of their information assets.

While some companies can be satisfied with plain vanilla reporting from the Web, others may need considerable refinement and drilldown from business intelligence and data mining perspectives. This sometimes could only be made available through in-house implementations of integrated enterprise-class applications with embedded analytics capabilities.

Therefore, a balancing act is needed for companies to turn to a vendor capable of delivering innovation and sustainable business benefits without introducing new complexity to the environment.

Such innovation is critical to the future of corporate IT departments when many of them have scaled back their internal development efforts for budgetary reasons. On the other hand, the preservation and further extension of industry requirements - which may not be readily available from Web services providers- is still regarded by many IT professionals as the key to controlling one's destiny. This includes the hard- to-replicate nature of domain-specific features - from claims processing for insurance carriers to shop-floor control for manufacturers.

Also, innovation should not come with strings attached. For instance, corporate standardization, which comes as a result of eliminating different ERP instances in an upgrade process, will enable companies to reestablish the control needed for measuring and replicating progress on a large scale, while avoiding any finger- pointing when systems fail. Similarly, complexity can be avoided when the vendor can help transform multiple legacy systems into a single instance by adhering to industry open standards and evolutionary technologies that do not render existing IT investments obsolete.

Tracking Innovation Incrementally

Indeed, one key measure of tracking innovation is the ability to distribute information to the right people at the right time. Even though it may be incremental at best, the portal metaphor to disseminate information through a role-based environment is producing tangible results.

For example, companies can use the portal to drive greater use of employee and manager self-service for procedures as simple as making address changes online. However, it could quickly evolve into open enrollment for benefits or ad hoc reporting for historical trends, paving the way for employees to change their status online from single to married or to indicate they are welcoming a newborn or adopting a child.

While all these steps may sound simple and incremental, companies could easily map them on a larger scale on which they see the total rewards and the optimization of the user experience. Sometimes, the best innovation may well be the simplest solution. It may take some convincing for companies to appreciate the full scope of such incremental benefits, but it's far better than the alternative of trying to establish unrealistic goals that few companies have any chance of ever reaching.

Upgrade Scenarios For Sap R/3 Customers

SAP, the market-share leader in ERP applications, is simplifying the way for its worldwide customers and millions of users to upgrade to mySAP ERP in order to accommodate their needs, while helping them take advantage of better product functionality, Web services components, and lower overall maintenance costs.

SAP is rolling out a number of options, including technical, functional, and strategic upgrades, all designed to minimize the impact of disruption associated with system deployment while generating tangible business value.

Technical Upgrade

A technical upgrade is a fast upgrade at constant functional perimeter without additional functionality improvement and with minor user interface changes to ensure business continuity.

Functional Upgrade

This type of upgrade provides the opportunities to implement new functionalities of mySAP ERP 2005 for business processes and usability improvements in the following areas:

• Financials
• Human capital management
• Procurement and logistics execution
• Product development and manufacturing
• Sales and service
• Other corporate services

Strategic Upgrade

This upgrade amounts to business process enhancement through the SAP NetWeaver components to standardize, adapt, and enable new business processes such as role-based financial reporting and built-in analytics for more accurate forecasting, planning, and decision support at both the global and local levels. In addition, strategic upgrade projects are designed to meet broad-based compliance requirements as well as industry-specific types through the use of SAP xApps composite applications, for example, for features such as Emissions Management for managing environmental compliance and trading of emissions quotas.

The move targets many of the first-generation SAP R/3 customers who have been using these client-server systems since the 1990s and are finding it necessary to adapt to a Web-based environment in order to improve their workflow versus their current disjointed processes, access real-time information as opposed to batch data, and finally facilitate internal and external collaboration, which cannot be easily done with different instances of financial, planning, and purchasing applications.

In addition, these SAP R/3 customers -running versions from 3.1 to 4.6B - were scheduled to face the expiration of their system maintenance from SAP by the end of 2006. Customers using SAP R3 4.6C were scheduled to receive support to the end of 2006. They can then extend it through the end of 2009 and will have to pay extra fees under extended maintenance agreements.

By moving to mySAP ERP 2005, these customers are expected to achieve the following:

• A stable foundation for the future
• Access to new functionality and a reduced need for custom programs
• New integration tools such as SAP NetWeaver
• Budgetable maintenance fees and commitments
• An array of enhancements for embedded business intelligence, master data management, and portal creation

Additionally, SAP also reaffirmed the importance of the current release mySAP ERP 2005 as the best possible migration platform for its R/3 customers because there will not be another major release between now and 2010.

SAP will be taking an incremental approach with its ERP release cycle. SAP will offer a series of optional enhancement packages - covering capabilities such as talent management and financial collaboration - that can be implemented easily as enterprise services augmenting mySAP ERP 2005. The first enhancement package was scheduled to be available in December 2006.

Examples of future enhancement packages for mySAP ERP include legacy and statutory updates to SAP's general ledger and user productivity enhancements for budgeting and forecasting.

mySAP ERP is powered by the SAP NetWeaver platform, a composition platform that can position organizations to build new business solutions more rapidly while realizing more business value from existing IT investments. SAP NetWeaver supports new cross-functional business processes and can help to lower total cost of ownership by reducing the need for custom integration and by offering complete life-cycle management for applications. It is also seen as the foundation for enterprise services architecture and should help align people, information, and business processes across organizational and technological boundaries.

Already SAP has plans for delivery of more than 1,000 Enterprise Services enhancements that allow users to fully utilize Web-based applications features such as employee self-service for human capital management and benefits administration, manager self-service for erecruiting and collaborative project management, and role- based capabilities in manufacturing.

Challenges/Opportunities

True competitiveness derives from continuous innovation to one's business processes; any advancement toward that goal may require structural changes to the organization's internal system, and some companies could experience a painful adjustment phase during their ERP upgrade process as illustrated in the Risks of ERP Modernization section above.

Although SAP has laid out different options such as technical upgrades, the additional investments in licensing NetWeaver products as well as in incremental servers and infrastructure products for storage and disaster recovery may run counter to the desire of users to simplify their IT landscape.

Legacy ERP customers will inevitably have to endure pains and costs when they migrate to the new release, but it's also critical to point out that the added benefits of running the most advanced software technology will outweigh the increased burden and the unknown costs of supporting an outdated system perpetually.

As the number of in-house SAP experts proliferates at user organizations, such upgrade projects are expected to become more feasible and economical than ever, and many of these world-class enterprises stand to benefit from the ability to harness their own IT resources to anticipate and embrace change and innovation to the degree that could produce considerable strategic impact and lasting business value.

Conclusion

With increased mergers and acquisitions at the global level, enterprises are facing the prospect of running multiple ERP systems, and many of them will need to be supported for an extended period of time. But sooner or later, they'll need to start rationalizing their ERP investments by standardizing on a robust and extensible platform that allows them to have good visibility into their far-flung operations.

Like a locomotive gathering speed, the world of business is going more global and stringent in terms of cost efficiency, high availability, and data integrity requirements. Increasingly, organizations have started recognizing the benefits of using a modern ERP platform - either through a simple technical upgrade or as a part of a corporate reengineering project - to drive down costs, raise employee productivity, and produce meaningful business process improvement.

With Web services, portals, and scalable infrastructure technologies at their disposal, these companies stand to achieve sustainable values for their employees as well as customers and partners by focusing on incremental business benefits and mitigating the associated risks with proven solutions.

CASE STUDY

my SAP E P 2005 Upgrade Helps the University  of Mississippi to Advance Its Mission

Chartered by the Mississippi Legislature in 1844, the University of Mississippi opened its doors to 80 students in 1848. Today, enrollment on the university's three campuses and its medical center is nearly 16,500 students.

An effort to reengineer its operations to make them customer focused led the university to select SAP as its ERP solutions provider in 1998. From that time forward, SAP solutions have enabled the university to provide sophisticated Web- based services that students have come to expect, including the ability to apply for admission, register for classes, check grades, and pay bills. SAP applications today manage a $355 million operating budget and a payroll of $162 million for the academic institution.

Growing Enrollment Made Upgrade to mySAP ERP 2005 a Mission  Imperative

The University of Mississippi has upgraded its SAP applications several times over the years, but its most recent upgrade to mySAP ERP 2005 for which it began planning in September 2005 was a mission imperative. With an enrollment that has grown by 21% over the last five years to 15,220 at its three campuses in 2006, excluding its medical center, the university needed its technical infrastructure to support a steadily growing student population, according to Chief Information Officer Kathy Gates. As a pilot site for SAP Campus Management, the university also wanted to continue to receive new releases of the solution that it could only gain if it upgraded to mySAP ERP 2005. Further, states Gates, "SAP has a lot of interesting work related to XML messaging, SOA, and interactive Adobe forms and we wanted to be using all of these features, and by upgrading, it meant we could."

Dividing Responsibilities Among Project Team Members

According to Associate Director for Enterprise Applications Al Ling, who acted as project manager for the 2005 upgrade, the first steps that the IT organization took toward initiating the upgrade involved their assessing the project's scope, including any major potential setbacks that could inhibit its progress. The Office of Information Technology assembled a core team for the upgrade project, consisting of its three

Basis administrators (the SAP Basis Team), its SAP Support Team, and developers responsible for each functional area. The SAP Basis Team installed the actual software from SAP, and the SAP Support Team functioned as a liaison between IT and the university's functional departments. Many academic and administrative offices were involved in the 2005 upgrade; several individuals - including one each in the bursar's office, registrar's office, human resources and payroll, budgeting, the dean's offices, admissions (three offices), and financial aid, among other departments - were held liable for "acceptance" testing an application during its upgrade, as part of their daily work. If these departmental representatives found any issues resulting from the upgrade, they were responsible for reporting them to developers for follow- on resolution.

"Sandbox" Readies University for Production Environment

To keep technical issues at a minimum, before applying the mySAP ERP 2005 upgrade to its production landscape, the project team used a "sandbox" system that represents a copy of its SAP production environment. The sandbox allowed the developers to install the initial upgrade so they could perform tests on it, independent of the actual production environment. "Once we've worked in our sandbox environment and are convinced that we have a good handle on any (technical) issues that could arise, we then schedule the [mySAP] ERP 2005 upgrade for our production SAP environment, starting with our development system, or DEV," says Gates. Training and comprehensive testing was then conducted using the Quality Assurance System, or QAS. Finally, the upgrade was applied to the production system.

"There are a lot of advantages in having an integrated ERP system, but it means that when you make changes to the systems, everyone could be affected," says Gates. This means the university has to perform upgrades to its systems during periods of the academic year when its applications infrastructure is not being taxed by heavy transaction demands such as class registration, grade viewing, or the running of payroll.

Being First in an SAP-Controlled Environment Has Its Benefits

During the weekend of Easter 2006, the university found such a window of opportunity to go live on mySAP ERP 2005. "We were somewhat fearful about the upgrade because SAP and the peer universities that we had talked with forewarned us that it was a big deal," admits Gates. "But, in reality, it was one of our easiest upgrades." Adds Ling, "We scheduled more down-time than we actually needed for this upgrade. - Our approach was to focus on the critical show-stopping issues first, and then focus on the nice-to-haves."

As Ling explains, "The biggest show stopper of the 2005 upgrade was some new functionality introduced by SAP for their third-party payroll processes." For example, when the university now runs its payroll system, it can withhold monies for garnishments and other deductions from a university employee's check. This information is transferred to the accounts payable system, which then sends a check directly to the appropriate named party. For example, using the new third-party payroll system, if a garnishment such as child support is withheld from an employee's paycheck, a check can be cut for this amount by accounts payable and sent directly to the court for distribution.

Ling, who spent a lot of time working with SAP Labs in Palo Alto, California, to resolve issues related to the third-party payroll process, says, "Quite frankly, SAP went above and beyond the call of duty to get us a [tailored] solution." As Ling explains, working together, the university's IT organization and SAP had to create a single business environment that would extend across three campuses, and this was a special challenge. "We had to build a system-wide project for a multi-campus institution," he says. Because the university was a ramp-up customer for the 2005 ERP upgrade, Gates and Ling felt they well understood the particular technical challenges of being first. "We feel like we have good experience and good staff to take something like this on," says Gates. "Not everybody would." He added, "In this environment, you agree to experience the pain, but you get great support from SAP. - It's a very controlled environment."

mySAP ERP 2005, Strictly a Technical Upgrade

Both Gates and Ling emphasized that the mySAP ERP 2005 upgrade was strictly a technical upgrade in that no new application modules were introduced. SAP applications that the university currently has deployed include the vendor's financials, HR/payroll, funds management, campus management, materials management, and plant management solutions.

The upgrade has yielded the following new features of the student management solution from SAP Campus Management:

• Enhancements to the user interface
• Enhanced functionality for event planning (the process of scheduling instructors, sections, and rooms for future academic terms)
• Several new features in the admissions process module
• Time-dependent addresses (reflects if an address is valid or not)
• The opportunity for enhanced real-time integration between SAP Campus Management and the university's financial aid partner, Sigma Systems
• Additional business warehouse extractors

Building on a Solid Foundation

In Gates' view, the mySAP ERP 2005 upgrade provides the solid, yet adaptable technical foundation that the university needs to move forward and upon which it can make continuous improvements to its business processes. "We have a lot of ideas for projects that we want to do involving using technology to enhance the mission of the university," says Gates. "We are very interested in SOA, and this was one of the key reasons that we wanted to do the upgrade," says Gates. For example, using the SOA architecture, the university can develop new Web applications more quickly.

Although the overall experience was extremely successful, Gates cautions others who are undertaking this SAP upgrade (or any others) to be very thorough in their planning and testing. Ling concurs: "Create a comprehensive test plan and execute it. You can never test enough during an upgrade."

Appendix : Key Drivers To Consider Before Upgrading

Tables 2 and 3 are designed to be used as a business prioritization tool to form the basis of a business case to support a potential upgrade. The two tables allow prioritization of key business and technology drivers that are common factors in supporting a business case across all industries.

Select the priority weighting, with 1 being the lowest priority and 5 being the highest priority/most critical for the business.

Table 2

Table 3

Source: IDC, 2007

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