How to calculate the

Business Case for a global

ERP 2005 upgrade
31. October 2006
 Why Are We Here Today?

Your
Your IT situation business demand

 Multiple R/3 systems  Enable business

?
(and non-SAP) in and innovation while
across several reducing IT costs
regions/countries Is the time  Improve workforce
 Outdated architecture right to invest in an productivity
 Running and stable system Upgrade to mySAP  Ensure compliance,
(probably with heavy ERP 2005? controls and proper
modifications) governance
 High maintenance cost and  Need greater visibility,
limited ability to innovate predictability and control

 How to develop a global business case

 How to decide on the right upgrade scenario
 What are exemplary business case results

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 2

6
Snapshot on mySAP ERP 2005

Long-term Foundation Upgrade Drivers* (in %)

 Newly announced 5-year release cycle Additional functionality 23
with enhancement packages 23
Continuous compliance
 Major cornerstone in your overall IT 19
strategy Technical infrastructure
9
 ERP upgrade decision Process re-design 6
is important Lower system cost

* ASUG survey: 163 companies

Most Popular Processes* Upgrade Value*

 New G/L  87% met or exceeded ROI objectives*
 Employee Self Services  Performance impact company-specific
 Manager Self Services  Main drivers: DSO reduction, staff
 Administering Employee HR data productivity increase, TCO reduction
 Credit Management  Strategic value mainly perceived on
flexibility and compliance
* Ramp-up feedback from >200 projects * ASUG survey: 55 companies

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 3

Agenda

 Building a business case for an upgrade

 Identifying your upgrade scenarios

 Calculating your business case

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 4

 Why a business case? Evolution of Value within SAP ERP
Systems

R/2 to ERP Evolution Consequence

xApps
Business
Prcess Partner apps (Duet)
Capture the entire
Innovation Financials potential from
Corporate Services
mySAP ERP 2005

HCM

FI/CO HR Operations
Without business case:
mySAP ERP 2005 9%
MM/PP SD

Accounting Projects
Manufacturing SAP R/3 on-time and
HR on-budget*
SAP R/2
Mainframe Client Server Enterprise Services
architecture architecture architecture
With business case:
New 91%
 Real-Time  Scalability  Flexibility/Platform
Dimension
Benefit
 Concentrated  Concentrated  Distributed
Concentration

Benefit size
* ASUG survey: 68 companies

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 5

Truth about Business Cases

A good business case is valuable for…

 Alignment between IT and business perspectives within your
organization
 Showcase for value that IT brings to the business and corporate
strategy
 Results are quantified and owned by line executives
 Creation of ownership/adoption in the organization for systems
decision
 Opportunity to review your overall IT strategy
 Comparison IT investment and upgrade options with each other
and against other investment options
 Implementation plan is actionable and measurable

…but only 17%* of companies have a formal business

case for their IT Projects

* Source: Meta Group Worldwide IT Trends and Benchmark Report 2002, Gartner Total Value of Opportunity Study 2003
Forrester IT Measurement is still immature 2003

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 6

 Approach to Develop an Upgrade Business Case

Objective Identify value potential from an upgrade to mySAP ERP 2005

I II IIIa Benefit IV

Analysis Consolidation &

As-Is
Project Setup Calculation
Assessment Cost of the results
IIIb Analysis
 Get commitment from  Identify current  Identify most valuable  Quantify results with
senior mgmt. to solution footprint functions included in Controlling
business case  Identify business new release  Calculate benefits of
 Determine project scenarios with  Map delta/existing system for next 3-5
scope (systems, org. insufficient system functionality to years for scenarios
units, regions) support (whitespots) whitespots and  Consolidate tangible
 Set up a project or where existing business targets and intangible
organization (IT, LoB, system capabilities  Determine and benefits per area
advisors) are not leveraged prioritize improvement  Validate results with
 Decide on upgrade  Identify prioritized potential with business owners
scenarios to be business targets of business owners
 Calculate NPV for
investigated all LoBs and key  Analyze implemen-
value drivers go/no-go decision
 Set up project plan tation cost (IT &
 Get senior mgmt
advisors)
decision

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 7

 Case Study A: Approach for Global High-Tech Customer

Background Approach
 Industry: Focus on building business justification for upgrade to mySAP
High-Tech ERP 2005
 Global Business case took six weeks to analyze business benefits.
 Employees: Around 50 people involved from Lines of Business (25+), IT (10),
>30,000 other advisors (5+)
 Revenues: In functional scope for this upgrade: Financials, Corporate
$8-12 billion Services, Analytics, End-User Service Delivery, Sales & Service
Geographic focus: Europe and shared services location centers,
Cross-check in different regions where necessary
Methodology:
– Identify business goals of each Line of Business
– Identify which major new capabilities are most relevant
– Benefits assessment with key users of each business process affected
(correlation capabilities-goals, prioritization)
Lines of Business responsible for realizing quantified benefits

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 8

 Case Study B: Approach for Global Financials Upgrade
Case

Background Approach
 Industry:  Focus on comparing upgrade options
Telecom  Business case took four weeks to analyze business benefits
 Global  Around 60 people involved from Lines of Business (30) mainly
 Employees: through workshops/video-conferencing, IT (20). Case prepared
<5,000 through external consultants.
 Revenues:  In Scope for this upgrade: Financials Systems and supporting
$1-2 billion applications
 Geographic focus: All geographies
 Methodology:
– Identify business goals of each Line of Business
– Identify which major new capabilities and which existing capabilities
that are currently unused are most relevant
– Benefits assessment with key users of each business process
affected
 Lines of Business responsible for realizing quantified benefits

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 9

Agenda

 Building a business case for an upgrade

 Identifying your upgrade scenarios

 Calculating your business case

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 10

 Objective and Scope: mySAP ERP 2005 Upgrade Scenarios

Value
Possible Upgrade Scenarios Potential

3 Strategic Business Improvement

 Focus on functionality extension and
functionalities

improvement
3
New

 Enablement of new and optimized business

processes and scenarios based on new ERP
core functionality
SAP Standardization

environment of modifications functionalities

Standard

2
2 Functional Upgrade
 Focus on reduction of system complexity
Highly modified Limited number

.
 Maximization of SAP standard functionality by
replacing custom modifications

1 Technical Upgrade
1
Target
 Focus on pure technology upgrade
Starting Point
 No changes to used standard functionality
R/3 4.6c R/3 mySAP mySAP  No changes to system modifications
Enterprise ERP 2004 ERP 2005

SAP Releases

Sweet spot for business case

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 11

 Path: Typical Roadmap Options for SAP R/3 Customers

“GROW” Upgrade mySAP

(Consolidated R/3 R/3
customers) ERP 2005

mySAP
“INNOVATE” mySAP ERP 2005
(Consolidated R/3 ERP 2005
customers) side-by-side
R/3 R/3

R/3
“CONSOLI-
DATE” Upgrade & mySAP
R/3 Merge
(Distributed R/3 ERP 2005
customers)
R/3

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 12

 Case Study C: Decision Approach for Roadmap Option
Decision matrix of a global SAP R/3 customer with a distributed system landscape
choosing an adoption path for mySAP ERP 2005
Upgrade all instances first
 Earlier access to features and
benefits of new SAP release
 Downtime during upgrade always
effects only one system
 Earlier back in SAP mainstream
Pro
maintenance (avoiding additional
maintenance fees)
 Retrofit of enhancements to SAP
standard is possible earlier
 Processes are less complex
 Optimization of support
organization possible at later
stage (after merge)
 More systems to be upgraded
Con
 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 13
Merge all instances first
 Fewer system to be upgraded
 Streamline of support organization
possible earlier
 Process harmonization before
upgrade (but on potentially old
processes)
 Later access to features and
benefits of new SAP release
 Down time during upgrade is
relevant for all companies in the
merged system
 Processes are more complex
 Potential overlap with SAP
extended mainstream
maintenance
 Retrofit of enhancements is only
possible at a later stage
Decision per SAP instance
 Systems wise earlier access to
benefits of new SAP releases
 Optimized learning curve
 Most flexible alternative
Downtime effects could be taken

into consideration and from a risk
perspective be optimized
 Optimized sequence based on
benefit realization
 Potential overlap with SAP
extended mainstream
maintenance
 More systems to be
 Globalization: Upgrade Options for Unicode Conversion

Combined
Yes Upgrade & R/3 ERP 2005
Unicode 4.6c Upgrade, directly followed by unicode
Conversion Unicode Conversion
R/3 4.6c or
higher?

Direct R/3 Upgrade ERP 2005

No ERP 2005
Yes upgrade to 4.6b non-
Convert unicode
ERP 2005 or lower unicode

Do you Twin Upgrade R/3

currently & Unicode ERP 2005
4.6b or
use MDMP? Conversion Upgrade, directly followed by unicode
lower
Unicode Conversion
>90%
of customers

No Unicode R/3
Yes R/3 Convert Upgrade
conversion 4.7 or ERP 2005
4.7 or
before Higher unicode
higher
upgrade (unicode)
See
schedule for R/3 4.7 or
ERP2004?
more information:
SAP Offerings Direct R/3 ERP 2005
for Unicode No Upgrade Convert ERP 2005
upgrade to 4.6b or non-
unicode
Conversions ERP 2005 lower unicode

 SAP
Temporary “Go-Live” with ERP 2005
AG 2006 and
/ SAP MDMP,Symposium
Globalization Disclaimer
2006needs toand
/ T. Dosch beJ.signed
Hopf / 14
Agenda

 Building a business case for an upgrade

 Identifying your upgrade scenarios

 Calculating your business case

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 15

 What is the Business Case for an Upgrade to mySAP ERP
2005?
Ability to
Core ERP 2005
Type of Value Source of Value Capability Quantify

 Compliance, governance and control

 Adoption of standard processes Analytics,
Strategic 

Improved visibility and transparency
Enablement of innovation and flexibility
ESOA,
GRC, SEM, UI
 Improved base for decisions

“Hard” 

Reduction days sales outstanding
Reduction of bad debt
Business 

Decrease in travel cost
Improved real estate utilization

Value of an Benefits  …
FSCM, Travel Mgmt,

Upgrade to Real Estate Mgmt

ESS, MSS,

ERP2005 “Soft”  Employee productivity

HR, New G/L

 Improved HR staff productivity

Business  Faster financial close
Benefits  …

 Reduction of maintenance cost

– Remove unused modifications
TCO – Replace modifications w standard functionality
– Avoidance of additional maintenance cost
Reduction – Instance Consolidation
 Reduced development cost for improvement projects
 Reduced operations cost

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 16

 Case Study A: Business Case Results (1/2)

Background Key Value Drivers Benefits

 Strategic  Financials Positive impact on the
Upgrade – Financial Supply Chain Mgmt business due to
 Industry: – New General Ledger
 reduced days sales
High-Tech – Corporate Governance
outstanding (in some
 Global  Corporate Services subsidiaries)
 Employees: – Real Estate Management  increased employee
>30,000 – Travel Management productivity due to
 Revenues:  Operations higher usability of
– Procurement system
$10-12
billion – Sales and Service  enhanced SOX
 Analytics compliance due to
– Analytics increased
– Strategic Enterprise Management
transparency and
higher data
 Technical consistency
– ERP Technical Features
– Other Technical Enhancements

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 17

 Case Study A: Examples for Detailed Business Case
Results (2/2)

Major delta Helps achieve Business Potential Business Benefits

function Targets
Credit  Minimize default risk factors  Reduces risk, reduce need for general provision for doubtful debts
Management  Increase quality assurance  Supports compliance with SOX, Basel II
(FSCM) and SOX compliance  Avoids high manual effort for credit information research
 Standardization and  Helps establish one unique credit policy
automization of processes
 Combine internal data on customer credibility with external rating information

Collections  Increase efficiency by cost  Improve days sales outstanding

Management savings  Reduce high manual effort for collections by telephone
(FSCM)  Live best class processes

Travel Planning  Increase travel policy  ESS User Interface for all travel processes => Higher satisfaction and adoption by travelers
(Travel Mgmt.) compliance  Online booking for hotel, air, car => Enables volume bundling, reduce extra cost (e.g. shuttle)
 Reduce cost  Hotelbooker.org integration in process & automatic policy checks => Direct savings, less
data entry for travelers by straight through processing, higher adoption of hotelbooker
 Potential savings by connecting low cost carriers to standard booking interface
 Show cost information about reservations for approvers prior to trip, Travel-related budget
reports in MSS => Avoid travels, Increase cost awareness and transparency

Real Estate  New room booking system  Room reservation * => higher efficiency and process standardization in room
Management  Better reporting and analysis booking/administration, increase room utilization
functions  RE Analytics, Master Data Management => Remove existing Excel spreadshets / decrease
 Space Management within one effort of manual maintenance / increase automization
location  Space Management => Increase utilization of existing rooms

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 18

 Case Study B: Business Case Results for Financials
Upgrade

Business case results show 2-3x value from upgrade to

Background mySAP ERP2005 in comparison to upgrade to 4.7
 Functional Cumulative Incremental 5 Year Benefits (2006-2010)  Likely Scenario ($ M)
upgrade $70-90
 Industry:
Telecom $40-50 M
 Global Additional benefits
from mySAP~$50-65 M $35-40
 Employees:
$10-15 M $10-15 M
<5,000 $20-25
 Revenues: Upgrade to Version 4.7 $10-15
$1-2 billion can deliver ~$20-25 M $20-25 M $20-25 M $20-25 M
in benefits $10-15 M

Consolidate and Upgrade to Upgrade to mySAP Expanded Scope

leverage Version Version 4.7 Financials (incl. HR)
4.6 B Financials

Benefit in 2006 $1.7 M $3.0 M $4.2 M $7.4 M

Annual Benefits after ramp-up $2.7 M $4.8 M $7.4 M $19.1 M
Project Cost $8.1 M $9.9 M $10.7 M $15.2 M
Start Year for full Savings 2007 2007 2007 2008

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 19

Further Information

MySAP ERP and SAP NetWeaver:

 Homepage mySAP ERP: http://service.sap.com/erp
 mySAP ERP Solution Browser: http://solutionbrowser.erp.sap.fmpmedia.com
 Homepage: SAP NetWeaver: http://service.sap.com/netweaver
 Development News: http://service.sap.com/developmentnews
 Releasenotes: http://service.sap.com/releasenotes
 Release Strategy: http://service.sap.com/releasestrategy
 Maintenance Strategy: http://service.sap.com/maintenance
 Online Knowledge Product: http://service.sap.com/okp

SAP Upgrade Info Center:

 Homepage: http://service.sap.com/upgrade
 mySAP ERP Upgrade: http://service.sap.com/upgrade-erp
 SAP Upgrade Road Map: http://service.sap.com/upgraderoadmap
 SAP Upgrade Newsletter: http://service.sap.com/upgradenewsletter

SAP Upgrade Tools and Services:

 SAP Upgrade Tools: http://service.sap.com/upgradetools
 System Switch Technology: http://service.sap.com/upgradetech
 SAP Solution Manager: http://service.sap.com/solutionmanager
 Overview and order information: http://service.sap.com/upgradeservices
 Upgrade Services of SAP Consulting: http://service.sap.com/ufg
 Safeguarding: http://service.sap.com/safeguarding

 SAP AG 2006 / SAP Globalization Symposium 2006 / T. Dosch and J. Hopf / 20