Oracle and SAP are working on new architectures that are
more responsive to business change, but there will be costs, and
benefits will not be immediate.
The leading enterprise resource planning applications are set
for a fundamental change over the next few years. Suppliers Oracle
and SAP are changing the underlying architecture of their software
to create a platform for running business processes using a service
oriented architecture.
Over time, this should result in ERP systems that are far more
flexible and able to accommodate business change than is possible
today. However, experts have warned that users should brace
themselves to pay as much as three times the original cost of their
ERP system to migrate onto the next-generation Oracle Fusion and
SAP Netweaver architectures.
Existing packaged applications enable process efficiency, but
businesses that implement a package often find the processes they
have modelled have become very rigid and inflexible, according to
analyst firm Gartner.
Both Oracle and SAP are working on next-generation ERP systems
to replace their existing monolithic applications with a
component-based approach. This will see business processes run as
services within a service oriented architecture. Such an approach
should simplify future upgrades but analysts have warned of a
complex and costly reimplementation of existing ERP systems.
Oracle's strategy is based on Project Fusion and the Fusion
middleware platform. These provide Oracle's service oriented
architecture for next-generation ERP and bring together its
PeopleSoft and JD Edwards acquisitions with its own eBusiness
Suite.
SAP is developing the next version of its MySAP suite around
Enterprise Service Architecture - the company's version of a
service oriented architecture - which will integrate with the its
Netweaver application server.
Addressing delegates at the Gartner Symposium in Cannes earlier
this month, Gartner research vice-president Andy Kyte warned that
such software may not add immediate business benefit, but it could
cost two to three times the original implementation cost.
Industry analysts expect a large proportion of users to remain
on their existing platform.
David Mitchell, software practice leader at Ovum, recommended
users stick with existing ERP systems for the maximum time
possible. "Get an upgrade path from your supplier on what they will
support and look at different suppliers. The cost of
reimplementation could be high," he said.
In a presentation at the Gartner Symposium, Gartner research
vice-president Yvonne Genovese said, "Although SAP has said that
MySAP ERP will replace R/3 Enterprise, by 2007 more than 50% of
enterprises will not have upgraded because of a lack of details to
build a business case for the upgrade."
But users who do choose to build next-generation ERP with SAP
Netweaver will face an integration challenge. It is unlikely that
all of the processes needed to run an enterprise are contained in a
single package or suite, Genovese warned. "Linking processes from
multiple sources exposes conflicts in definitions and overlapping
implementation - challenges that must be overcome as part of
application integration," she said.
Presenting on the migration to Oracle's Fusion strategy, Gartner
analysts Simon Hayward and Lee Geishecker said, "Up until 2011
the upgrade from any of Oracle's current application products
delivered from Project Fusion will be at least as substantial as
that from eBusiness Suite v.10 to v.11i, or from PeopleSoft v.7 to
v.8."
Even if users win approval for a migration, many questions
remain on how the next generation of ERP will work in practice.
Unlike existing applications, the next generation of ERP will be
based on a service architecture where software components
communicate asynchronously, making it hard to determine the time a
business process will take to complete. AMR Research analyst Derek
Prior said, "No supplier has proved they can handle end-to-end
performance management."
Another area of concern when migrating onto these new platforms
is how much existing applications have been customised. Experts
agree that the less customisation in the application, the easier
the migration will be.
Debra Lilley, deputy chair at the UK Oracle User Group, speaking
at the user group's annual conference last month, said, "Do not go
anywhere near changing the underlying structure. Many people on
Oracle 11.0.3 did a lot of customisation and cannot move."
The situation is worse where the underlying architecture has
been completely redesigned, as in the underpinning of the SAP and
Oracle next-generation platform. Teresa Jones, an analyst at Butler
Group, said, "Users may have to test or even rewrite [the
customisation] for the new ERP platform." This will further push up
implementation costs.
Neither Oracle nor SAP would be drawn on the potential cost and
complexity of moving to next-generation ERP systems based on their
respective architectures.
Fred Studer, vice-president of applications and industries
marketing at Oracle, said, "A key tenet of Project Fusion is what
we refer to as the 'superior ownership experience', which aims to
significantly reduce the downtime, disruption and costs typically
associated with upgrades."
SAP said, "We have a very large installed base of customers and
the importance of the SAP applications to our customers is core to
their operations. We have already greatly optimised and simplified
the upgrade processes over the years and any move to Enterprise
Service Architecture will be evolutionary."
The company said that until the MySAP business suite release on
Enterprise Service Architecture comes out in 2007 and has been
substantially deployed, it will have no real data on which to base
any assumptions on the costs required.
SAP/Netweaver roadmap
- 2005 Netweaver becomes much more integrated into the SAP
product
- 2006 Netweaver components become more central to MySAP
software
- 2007 The integration of Netweaver and SAP's Enterprise Service
Architecture is expected to be complete
- 2009 End of mainstream support for SAP R/3.
Source: Gartner
Planning for Oracle Fusion
- Businesses on older versions of applications will find the
Fusion upgrade more costly and disruptive
- Users focused on administrative applications (Financials and
HR) will find upgrading easier than those with a broader range of
modules
- Users not wishing to use Oracle database will probably have to
reconsider
- Implementations with extensive customisation in technologies
such as People Tools will be harder and more costly to upgrade than
those with little or no customisation
- Organisations already committed to Oracle middleware will most
readily adopt
- Users running a heterogeneous application portfolio should use
the upgrade to Fusion applications to rationalise - into the Oracle
portfolio or out of it
- Early releases of Fusion applications may be less suited to
small and medium-sized operations with single-site
operations.
Source: Gartner