What Is the SAP Software System?
What Is SAP ERP?
SAP is a German multinational software company known for making enterprise resource planning (ERP) software. ERP software allows organizations to manage business operations, and usually refers to suite of modular applications that collect and integrate data from different aspects of the business. While it is the sole focus of this article, SAP is just one provider of ERP software. Others include: Oracle, Microsoft, Infor Orbis, and Epicor.
Below is a general overview of SAP's modules for enterprise management, implementation methods, and where it stands amongst its competitors.
History of SAP
The product of five ex-IBM employees, SAP started in 1972 as a small software company in Germany with just one customer. The company's name stands for Systems, Applications & Products. Its founders had a vision of producing software that could process data when a user wanted it, rather than in overnight batches as earlier software did. Their first product was a modification of IBM's punch-card data storage, which stored data mechanically and required overnight processing. For their client, the German branch of Imperial Chemical Industries, SAP developed a real-time payroll and punch-card system in 1972.
SAP's ERP started as R/2, named for its real-time architecture and two servers. In later years it was called R/3, for three servers: the application server, production server, and database server. In 2006, SAP released the latest version, ECC 6.0, and in 2013 an Enhancement Package (EHP7) was released.
SAP's Enterprise Resource Planning Modules
SAP's Enterprise Resource Planning Modules
SAP is a leader when it comes to neatly integrated ERP software; its various departmental applications work symphonically. Beyond its basic models, SAP provides industry-specific add-on solutions. The SAP ERP suite contains an enormous number of modules, and the main categories are:
- Finance (FI)
- Investment Management (IM)
- Project Systems (PS)
- Controlling (CO)
- Enterprise Controlling (EC)
- Financial Supply Chain Management (FSCM)
- Material Management (MM)
- Sales and Distribution (SD)
- Logistics Execution (LO)
- Warehouse Management (WM)
- Plant Maintenance (PM)
- Customer Service (CS)
- Fleet Management (FM)
- Quality Management (QM)
- Production planning (PP)
- Environment, Health, and Safety (EH&S)
- Organization Management (HR-OM)
- Personnel Management (HR-PM)
- Personnel Administration (HR-PA)
- Personnel Development (HR-PD)
- Personal Time Management (HR-PT)
- Payroll (HR-PY)
- Training and Event Management (HR-TE)
- Learning Solutions (HR-LSO)
- Compensation (HR-CM)
- Enterprise Compensation (HR-ECM)
- Benefits (HR-BN)
- Recruitment (HR-PB)
- Loan (HR-LN)
- Advance Business Application Programming (HR-ABAP)
- Cross-Application (CA), includes classification systems and workflow
- Basic Components (BC or BASIS)
- Programming (ABAP)
- Security and Authorizations
Other Modules (requiring separate installation):
- Business Warehouse (BW)
- Business Intelligence (BI)
- Knowledge Warehouse (KW)
- International Demonstration and Education System (IDES)
- Customer Relationship Management (CRM)
- Master Data Management (MDM)
- Supplier Relationship Management (SRM)
- Exchange Infrastructure (XI)
- Process Integration (PI)
- Global Trade Services (GTS)
- Strategic Enterprise Management (SEM)
- Business Consolidation and Sourcing (BCS)
- Business Planning and Consolidation (BPC)
- Corporate Finance Management (CFM)
Some of these modules, particularly those in Finance and Investment Management, can be broken down into sub-categories of modules, such as Accounts Payable or Receivable, Investment Orders, or Investment Support. Specific business operations and industry requirements will determine which modules are needed.
Finance, Controlling, Sales and Distribution, Material Management, and Human Resources are some of the most important sub-modules in SAP. Depending upon the organization needs, a client can buy whatever modules needed. For example, a client can buy FI, SD and MM modules only without buying CO and HR modules.
As I mentioned earlier, SAP is an ERP system that handles almost all department of an organizations. SAP handles an organizations's Finance , Controlling, Human Resource, Sales, Distribution, Material management, Warehouse, Production, Security, Research and many other departments. Not just that but SAP has a special industry specific solutions for almost all industries such as manufacturing, Pharmaceuticals, Insurance, Security, Finance, Treasury etc.
SAP FICO, SD and HR are most important modules. FI and CO modules controls finance and controlling respectively. SD controls sales and HR controls Human Resource departments. FICO is a base module which gets highly connected to SD, MM, HR and PS modules.
Let's just talk about some basic SAP modules those are useful for all domains.
Finance (FI), Controlling (CO), Sales & Distribution (SD), Material Management (MM) and Human resources (HR) are some of the most important sub modules in SAP. Depending upon the organization needs, a client can buy whatever modules needed. For example, a client can buy FI, SD and MM modules only without buying CO and HR modules.
What is the most important module in SAP according to you?
Key ERP Modules in Detail
Finance is the base module. The vital areas it covers includes:
- General Ledger (GL):
- Accounts Payable (AP)
- Accounts Receivable (AR)
- Asset Accounting (AA)
Taken together, SAP FI and CO are known as FICO and are the most important and popular of the SAP modules.
Controlling is a kind of sister module for FI, used for internal reporting, documenting actual events, and informing management decisions by coordinating events with actual and plan data. It includes:
- Cost Center Accounting (CCA)
- Profit Center Accounting (PCA)
- Product Costing (PC)
- Profitability Analysis (PA)
- Internal Order (IO)
SD: Sales and Distribution
Sales and Distribution tracks sales and it is also heavily tied up with Material Management. Components of SD include:
- Customer Master Data
- Sales Inquiry
- Delivery and Goods
- Sales Organizations
- Sales Conditions
- Sales Order Processing
Billing is also handled in the FI module.
HR: Human Resources
Human Resource modules handle all personnel information, such as hiring, salary, employee benefits, and so forth. It is highly integrated with FI and CO modules. Its components are:
- Organization Management (OM)
- Personnel Management (PM)
- Personnel Administration (PA)
- Personnel Development (PD)
- Personal Time Management (PT)
- Payroll (PY)
- Training and Event Management (THE)
- Learning Solutions (LSO)
- Compensation (CM)
- Enterprise Compensation (ECM)
- Benefits (BN)
- Recruitment (PB)
- Loan (LN)
PS: Project System
The Project System module assists with both large- and small-scale projects, such as a product launch, building a manufacturing facility, or holding a conference. PS comprises:
- Work Breakdown Structure (WBS)
- Breaking down processes into individual activities (work packages)
- Distinguishing between externally and internally financed projects
Like HR, the PS module is highly integrated with the FICO modules.
SAP modules in details
Here I try to explain some of the top modules in more details.
SAP FI (Finance) : Finance module consider to be the base module. It covers vital areas such as General Ledger (GL), Account payable (AP), Account Receivable (AR) and Asset Accounting (AA). SAP FI and CO together known as FICO and it is consider as King of SAP modules.
Controlling (CO): Controlling is kind of sister module for FI. Controlling mostly use for internal controlling and internal reporting. It includes cost center accounting, (CCA), Profit center accounting (PCA) Product costing (PC), Profitability Analysis (COPA) and Internal Order (IO).
Sales & Distribution (SD): SD is predominantly controls sales and it is also heavily tied up with MM. It controls customer master data, sales, plants, sales organizations and sales conditions.
Human Resource (HR) : HR modules handles all human resource activities such as resource hiring, salary, employee benefits etc. It is highly integrated with FI and CO modules.
Project System (PS) : Project system module is a special for project related activities. It comprise budgeting, planning, forecasting, work breakdown structure for projects. PS module is again highly integrated with FICO modules.
What Is ASAP Methodology?
ASAP Methodology is a standardized road map forefficiently and completely implementing an SAP system. Generally, it consists of the following phases:
- Project Preparation: Initial planning, setting of goals and timelines, and identifying team members.
- Scope Validation: Achieve an understanding of how the organization intends to use SAP for their business goals, including the identification of business process delta requirements and how SAP can provide solutions for current processes. Consists of extensive process documentation.
- Realization: Once the business delta requirements have been defined, this phase moves forward with the implementation of those requirements. Also includes testing in time-boxed iterations before going live.
- Final Preparation: Completion of cutover activities, such as rehearsal and end-user training. Prepare to go live.
- Go-Live Support: SAP modules go live with sustained support.
- Operate: Fine tune applications and interactions with applications.
There are a few variations on the standard methodology, such as an Agile method which replaces the Scope Validation phase with a Lean Blueprint phase. The required method will depend on your organization's specific needs.
Market Share and Competition
ERP Market Share
SAP Market Share and Revenue
SAP is a leader in ERP industry. As recently as 2013, SAP controlled the largest single share of the worldwide ERP software market at 24 percent. Its closest rival was Oracle, with its 12 percent market share. The company's full-year revenue for 2014 was €17.56 billion, up 4% from 2013. According to Forbes, the growth could be attributed to a surge in cloud subscriptions as the company shifts its focus to cloud-based software.
Although Oracle is a leader in data storage, SAP is the best in integration among modules. Moreover, SAP's HANA product poses a strong challenge to Oracle's dominance in data storage. SAP ERP is most adaptable to different business models and needs. SAP is a reliable ERP system for both large multinational companies and small organisations.
Further Reading on SAP
This has been a general overview of SAP ERP software, including the available modules, implementation methodology, and its market share. The following articles go more in-depth into specific SAP issues:
- SAP Order To Cash Cycle: FI-SD Integration and Configuration
- ASAP Methodology: SAP Implementation Phases
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