Whether you’re hard at work at getting your startup off the ground or you’re looking to expand your small or medium-sized business into an enterprise, you may have heard about SAP before and how it’s been praised as a business solution that is devastatingly effective in getting you the growth you need. But what is SAP, really, and how does it work? What’s its history, and how did it influence IT or Information Technology as a whole?
We’ll answer these questions for you and more in this article, and fill you in on why finding a reliable SAP partner is essential for any business to succeed in this modern and hyper-competitive world of e-commerce.
SAP and How It Works
SAP stands for Systems, Applications, and Products in Data Processing. Created by the company with the same name, SAP is currently the most popular and best-selling brand of ERP or Enterprise Resource Planning software. ERP software, in turn, allows businesses of all sizes—not just enterprises—to speed up and smoothen out the various key processes involved in their day-to-day operations.
How does ERP software do this? It does so by providing a centralized system of information dissemination and data management to all the significant departments of the business. This allows all parties involved to access the critical data they need whenever they need it. The fact that the information is centralized also means that it is updated in real time, thus avoiding any disastrous errors in the work pipeline that can be caused by outdated information.
Essentially, SAP makes strategy planning, resource management, logistics scheduling, and tracking much easier to deal with, as opposed to relying on traditional and analog methods (personal assistants, manual bookkeeping, information being stored in filing cabinets, and more). This is why businesses should strongly consider SAP as a viable business solution.
Here’s a common scenario where ERP software like SAP is essential. Imagine that a textile company is queried by a customer about the availability of one of their signature fabrics, in the hopes of purchasing a large order. The company’s sales team picks up this query, but cannot answer the client right away because they have no access to the store inventory. As such, they have to take the time to contact the inventory department and ask whether or not the client’s desired fabric is available. Unfortunately, the inventory department finds that the product is out of stock. The manufacturing department was supposed to be notified about bumping up the production of that product, but wasn’t, simply due to a filing mistake by the inventory department.
The entire chain of events listed above, which results not only in zero sales and a potential loss of a client to a competitor but also a loss of man-hours, could have been easily avoided if a SAP system was implemented early on in the business’ lifetime.
By having all information related to business process in a centralized system, all departments can easily and quickly share information with each other. In turn, specific departments would also be able to access data produced by other departments. In this case, with a SAP system, the sales staff would be able to check the inventory department’s database to see whether or not the fabric was in stock with just a few clicks, cutting down the time and effort that they would have normally expended doing so. Beyond that, however, the client’s desired product would have been in stock in the first place, with the inventory team department able to quickly rectify their filing mistake and share the corrected information with the manufacturing department.
Do note that this is just one example on how SAP works and how it can benefit a business no matter the size. All the functions and processes of a business, from employee and resource management, to logistics and business strategy planning, is streamlined and made more efficient with the implementation of SAP.
The History of SAP
Now that we know what SAP is and what it does, let’s look at its history, and how it came to be the enterprise powerhouse that’s poised to help SMBs all over the world today.
The SAP company was first founded in 1972 as Systemanalyse und Programmentwicklung (System, Analysis and Program Development) by five IBM ex-engineers, namely Dietmar Hopp, Hasso Plattner, Claus Wellenreuther, Klaus Tschira and Hans-Werner Hector. This acronym, which would serve to be the name of their most famous ERP system solution, would be changed to Systeme, Anwendungen und Produkte in der Datenverarbeitung soon after.
The company would soon garner enormous success thanks to their brainchild, becoming the largest business software provider in the world. Currently, it owns most of the market share of many large companies and industries all over the globe, including (but not limited to) the following:
- Aerospace and Defense
- Consumer Products
- Defense & Security
- Higher Education
- Industrial Machinery
- Life Sciences
- Logistics Service Production
Since its inception, SAP has turned out many different versions and iterations of the SAP ERP system.
- SAP R/1: This is the first version of the SAP software. Launched in 1972, the R stood for “Real-Time Data Processing”. It sported a one tier architecture in which the Presentation, Application and Database layers are installed in just one system or server.
- SAP R/2: Launched in 1979, this second version of SAP software was released as a database and dialogue-based business solution. SAP R/2 was specifically coded to handle different languages and currencies as well. In terms of architecture, it is a two-tier architecture software, with the three layers were installed in two different servers: Presentation usually confined to one server while Application and Database installed in the other.
- SAP R/3: The latest and most current version of SAP, where other succeeding versions are also based off of. It features all the powerful capabilities that allow a business to work more smoothly by centralizing all information and data into one source. This allows the different teams and departments in a business to perform their duties quickly and more efficiently. SAP R/3 is a three-tier system, with each of the three layers installed in separate servers.
While SAP has mostly catered to the Enterprise market, they have begun to break into the SMB sector as early as 2002. This can be seen in the creation of SAP Business One, an easy-to-use software suite designed to meet the needs of small-to-medium sized businesses with little or no IT resources.
SAP Business One arose from the acquisition of TopManage, a software company whose main offering was essentially SAP for SMBs, in that it provided smaller businesses a unified suite of financials, sales, customer relationship management, inventory, and operations capabilities as well as embedded basic reporting. This was all wrapped in a lean and integrated solution package that had simplicity as its main design ethos.
SAP’s acquisition allowed TopManage to refine their product further and sell it to SMBs underneath the prestigious and reliable SAP brand, sporting not just its UI and looks but also its inherent quality and efficiency.
How SAP changed IT
SAP, both as a company and its product, has irrevocably changed information technology and how it’s used today. We need only to look at how its ambition and scope was during its first iteration: using IT to better support the various operations in big businesses no matter the industry by facilitating efficient information transference. Through its many iterations, it has not only done that but also revolutionized the way enterprises do business now, allowing for faster growth and bigger returns, which in turn spurs the global economy ever onward. This has given rise to IT becoming an even bigger integral part of business, not just in information networking and logistics but also in the management of employees and resources. IT has also become part of the product/service creation as well.
Besides this, we can see the success of SAP in many current IT trends, both in the business and private sector. Software suites are still popular nowadays, with many utility software developers opting to sell their products in suites rather than in piecemeal. Software coming in multiple languages or having multilingual options is also commonplace in the current IT landscape, something that SAP was one of the first pioneers in.
Finally, and arguably the biggest change among the many that SAP helped bring about is the superiority of real-time information processing. This has given rise to IT as a whole, tailoring itself to a more time-conscious audience, where efficiency is money and delays, if any, are unacceptable and costly.
SAP is an indispensable tool for business growth. Its ability to facilitate quick and efficient information transfer between the disparate teams and departments in a business can easily translate to lower turnaround time, maximized resource efficiency, and higher customer satisfaction. With SAP Business One, small and medium-sized business can also enjoy the huge operations-growing benefits that had only been initially available to enterprises.