SAP or Systems Applications And Products (German - Systeme, Anwendungen, Produkte) is software developed by a company with the same name started by former employees of IBM in Mannheim, Germany. The company, originally called Systems Analysis Program Development (SAPD) and later renamed as SAP, was founded in 1972. According to Dietmar Hopp one of the five co-founders of the software, they had worked together in IBM at Mannheim and created an atmosphere of team work. The concept of integrated information system was adopted and it evolved into the software called SAP. — the software facilitates management of all aspects of a business including finance, production, HR, and purchase. It contains software for inventory, accounting, and payroll among others.
SAP provides a comprehensive solution for all functionalities of business. It is an integrated software which offers a unified management information system. It is popular all over the world as an Enterprise Information and Management System. Real-time information is available to the management on all aspects of the business and makes decision making and strategizing easier and more effective. The software is available in ready packages or may be tailored to the needs of the organization.
Need for real-time data
Real-time data is data about events as they occur. For example as soon as a sale is completed, data about it is available in the system. In a real-time system, up to the minute, or even up to the second reports can be obtained. Business decisions are based not only on the expectations of the consumer but also on the events of the past which indicate changing trends. For example if the sales of a particular product are seen to be falling, real-time data can prevent losses and help the management revise their strategy to improve sales or modify the product. If the supply of raw material for a product is consistently delayed, real-time data can help the management to pinpoint the problem and find ways to resolve it. The importance and value of real-time data to a business cannot be understated. It can help keep business afloat even in times of difficulty and save them from huge losses and even bankruptcy.
SAP – Real-time data and core areas
All customers of IBM faced problems in one or more areas of business namely accounting, materials, and logistics. The problems were similar or even identical. Every client had to reinvent the wheel in developing software to address these problems. The founders of SAP developed programs to address all these problems in all areas and used them for all their clients. The programs were developed at the processing centers of the customers. These programs were later integrated to provide a comprehensive solution. This comprehensive system was the first version of SAP developed in 1972. Within ten years, the software had brought in revenue of $10 million. The first version of the Enterprise software was the accounting system which was then called R/1 or NTR. This was followed by R/2 and R/3 which included mainframe computing and client server computing respectively. R/2 became popular with European multinational companies which required a solution for processing multiple currencies and having employees who spoke different languages. R/3 was a distributed client-server system. This was a three tier system (Real-time three tiers – R/3) with multiple operating systems and software platforms. This software attracted a new customer base.
Today SAP is the leading vendor of business applications. The Enterprise software developed by SAP became popular worldwide. SAP has evolved since the R/3 introducing many more features in the system. Currently the company markets the following products –
- Customer Relationship Management (CRM)
- Enterprise Resource Planning (ERP)
- Product Lifecycle Management (PLM)
- Supply Chain Management (SCM)
- Supplier Relationship Management (SRM)
These products are marketed separately as well as a comprehensive system solution for the entire organization. SAP uses system wide software to integrate the various products and provide customized, scalable software which suits the needs of the customer. Transactions are updated real-time and reports can be generated up to the minute. The key functional areas of the comprehensive package are –
Let us understand the features of SAP in some detail –
Customizing – Customizing the software to the needs of the user essentially means configuring the system to represent the hierarchical structure of the organization and incorporating a system of reporting so that the hierarchy is maintained. Both internal reporting within the organization and external reporting to government agencies like IRS and SEC are incorporated.
Financial Elements – The customer is an independent organization and legal entity in its own right. This is the highest level in the SAP software. Within this level, different business areas are created and maintained, which finally merge to yield the profit and loss statement and balance sheets (the final accounts which may be audited by an external auditor). These areas include purchase, marketing and sales, HR and Accounting. Within this classification, there may be other areas. For example, purchase may be separated into purchase of raw material and the purchase of office stationery, furniture etc. This classification is a part of the customization process.
Materials Management – This is the third most important component of SAP. This includes the purchase of raw materials, property, and other products like stationery etc. for internal use. This component of SAP keeps track of all purchases and payments made for these purchases. It also keeps track of accounts payable.
The Nuts and Bolts
The R/3 system of SAP has a Windows interface which uses features similar to Windows OS. This makes using SAP simple for the ordinary user. The screen shows a menu bar at the top. The first menu contains the following –
- Mail system – consisting of an Inbox and an Outbox. This is for the internal mailing system that is for passing messages and information within the organization as well as for reporting.
- Materials management System – used to keep track of the purchase and stock of materials as well as accounts payable.
- Sales and Marketing – To keep track of the sales made and the accounts receivable. This includes commission for agents, discounts, offers, sales schemes and the like.
- Production – to keep track of the process of production and stock of finished goods.
- Maintenance – this includes maintenance of office buildings, plants and machinery.
- Quality Management – this ensures that the finished product meets the required standard in quality. Reports of damaged or faulty goods, suggestions for improvement are included in this component.
- Management – this is essentially the management information system which assimilates data from the various components and generates reports for the management.
- Accounting – This takes reports from all components and maintains the financial accounts of the organization. This may include final accounting (generation of profit and loss and balance sheet) or it may be a separate system. Treasury, cash flow, petty cash and other components of the accounting system may also be included here.
- Project Management – the various ongoing projects within the organization may be included here with submenus for each project.
- Human Resource Management – this includes the hiring of employees, payroll, retirement and resignation dues, in short all the functions of the HR department. (Butola, 2005-2013)
The menu components mentioned above may vary depending on the nomenclature and distribution within the organization. This is SAP SCM which is the customized solution provided by SAP. This is recognized by analysts as the leading software solution in the industry. The system is tailored to the needs of the organization. It helps the organization synchronize the various departments and devise strategy for marketing. It includes all components of the supply chain transportation, inventory and distribution. The system helps manage the entire supply chain hence the name Supply Chain Management (SCM). .
This is the materials management module. It is an automation of the process of procurement, inventory, valuation and accounts payable. It includes a system of invoice which keeps track of the amount paid for goods. This system is popular both as a part of the integrated module as well as a separate software. Certification courses for SAP MM are popular among freelancers who then take on the Materials management work from organizations on an outsourcing contract. .
SAP and the CLOUD
Within a short time after the advent of cloud computing, SAP became the largest companies to use it. In an interview, Murray quotes Jim Hagemann, the co-CEO of SAP as saying, “In record time, we went from being a startup in the cloud to being one of the largest companies in the cloud,”. Cloud computing programs for SAP are cost efficient and improve productivity. Organizations have many benefits of implementing SAP-ERP on the cloud. The move to cloud technology gives the company a boost and helps SAP meet the ever increasing demands of the business world. Real-time data processing on the cloud coupled with mobile applications has put information at the fingertips of the managers. The company has spent 7.7 billion dollars to acquire two major cloud solution companies – Arabia and SuccessFactors. These acquisitions will help SAP improve their capabilities and thus become more influential. Cloud computing allows the clients to get rid of servers and large IT departments. This makes it more cost effective and hence, a perfect business solution. It also speeds up the decision making process..
SAP is the perfect business solution software. It provides a comprehensive yet flexible solution for all business solutions. SAP may be likened to a machinery or piece of furniture which can be assembled or dissembled at will and all or any of the parts may be used. This flexibility coupled with cloud computing promises a bright future for the software as well as the company in the years to come.
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