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  1. 1. SAP White Paper mySAP™ ERP AND ENTERPRISE SERVICES ARCHITECTURE Delivering Operational Excellence with Adaptive Solutions
  2. 2. © Copyright 2005 SAP AG. All rights reserved. HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C®, World Wide Web Consortium, No part of this publication may be reproduced or transmitted Massachusetts Institute of Technology. in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed Java is a registered trademark of Sun Microsystems, Inc. without prior notice. JavaScript is a registered trademark of Sun Microsystems, Inc., Some software products marketed by SAP AG and its used under license for technology invented and implemented distributors contain proprietary software components of by Netscape. other software vendors. MaxDB is a trademark of MySQL AB, Sweden. Microsoft, Windows, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation. SAP, R/3, mySAP,, xApps, xApp, SAP NetWeaver, and other SAP products and services mentioned herein as well IBM, DB2, DB2 Universal Database, OS/2, Parallel Sysplex, as their respective logos are trademarks or registered trademarks MVS/ESA, AIX, S/390, AS/400, OS/390, OS/400, iSeries, pSeries, of SAP AG in Germany and in several other countries all over xSeries, zSeries, z/OS, AFP, Intelligent Miner, WebSphere, the world. All other product and service names mentioned are Netfinity, Tivoli, and Informix are trademarks or registered the trademarks of their respective companies. Data contained in trademarks of IBM Corporation in the United States and/or this document serves informational purposes only. National other countries. product specifications may vary. Oracle is a registered trademark of Oracle Corporation. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies UNIX, X/Open, OSF/1, and Motif are registered trademarks (“SAP Group”) for informational purposes only, without of the Open Group. representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, The only warranties for SAP Group products and services are VideoFrame, and MultiWin are trademarks or registered those that are set forth in the express warranty statements trademarks of Citrix Systems, Inc. accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. 2
  3. 3. CONTENTS Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Trends and Strategies in ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Islands of Automation and Complexity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Multiple, Hardwired Integrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Redundant Systems and Nonreusable Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Poor User Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Fragmented Structured and Unstructured Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 The Journey to Becoming an Adaptive Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Unlocking the Potential of an ESA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 mySAP ERP and ESA: Embracing Innovation and Achieving Operational Excellence . . . 12 Scenario 1: Contract Manufacturing (Business Process Extension). . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Scenario 2: Consolidating HCM as Shared Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Scenario 3: Outsourcing Logistics Operations (Business Process Outsourcing). . . . . . . . . . . . . . . . . 14 – With Enterprise Services Architecture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Scenario 4: Employee Onboarding Process (Composite Applications) . . . . . . . . . . . . . . . . . . . . . . . . 17 Scenario 5: Portfolio Planning with Services-Oriented mySAP ERP Financials . . . . . . . . . . . . . . . . . 18 Scenario 6: Time and Attendance with Service-Oriented mySAP ERP HCM . . . . . . . . . . . . . . . . . . 18 Scenario 7: Procure to Pay in Public Sector (Interactive Forms). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Scenario 8: Improved Business Insight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 mySAP ERP and ESA: Aligning IT and Business to Achieve Operational Excellence. . . . . 21 What’s Available Today? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 What’s Next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3
  4. 4. EXECUTIVE SUMMARY Today, islands of automation, growing IT complexity, governance This white paper is intended for account executives and sales pressures, and budget reductions are IT realities hampering engineers. It introduces business strategies and market trends in the ability of companies – small and large – to embrace new enterprise resource planning (ERP), financial management, business practices and technology innovation. As companies operations management, and human capital management seek better ways to achieve competitive differentiation, market (HCM) that drive the consideration of Enterprise Services responsiveness, and operational excellence, they later find Architecture. It discusses the importance of Enterprise Services that their existing IT landscapes are too complex, inflexible, and Architecture and the role it has on guiding organizations to costly to adapt to evolving business conditions. Even if compa- create the next generation of ERP of any size, for any industry. nies can afford the resources, the time and effort it takes to change Lastly, this paper illustrates, compares, and contrasts the different and enable new practices may be too extensive to justify the deployment scenarios in ERP and clarifies why businesses value of the investment. IT, often regarded as a monolithic, are adopting an enterprise services approach to compete in rigid, slow-moving, or foreign entity to many business people, a marketplace that is continuously changing. must align with business needs and evolve with changing market demands to enable future innovation, agility, and efficiency. The growing importance of IT architectures has led many IT executives to rethink their traditional approaches and to look for better, smarter, and more efficient ways to serve their orga- nization’s needs. Central to becoming more responsive and agile is the adoption of Enterprise Services Architecture, also known as a services-oriented architecture (SOA). It not only focuses on short-term needs – such as lowering IT costs, improv- ing quality of service, and enhancing existing IT systems – but also, and more importantly, an SOA establishes a flexible, adap- tive, and open IT foundation for changing business practices, market dynamics, and competitive challenges. 4
  5. 5. TRENDS AND STRATEGIES IN ERP Over the past few decades, companies deployed ERP software to Applying this concept to ERP, a company could differentiate gain internal efficiency in back-office operations, such as manu- through new techniques or next practices in the areas that facturing, accounting, human capital management, financial drive their top line. Companies may also consider outsourcing management, purchasing, and other operations. Such technology standard or commodity processes to free up resources for investments helped management reduce costs. But today, strategic and differentiating endeavors. companies can’t rely on back-office process automation to achieve top-line growth and bottom-line improvements. Some examples to describe business practices to spur on differentiation or productivity include: This model is best described in the book Living on the Fault Line • Implementing mass customization with geographically by Geoffrey Moore. In it, Moore frames the challenges of con- dispersed contract manufacturers and suppliers to reduce tinuous business innovation between an organization’s core – cycle times, rework, and inventory costs in the automotive that is, those business processes that differentiate businesses in or high-tech industry the eyes of their customers – and context, which is everything • Extending an existing quotation management process to else. An enterprise’s core aims to drive business innovation and external suppliers to drive more efficiency and responsiveness competitive differentiation to stimulate growth. Context’s pri- into the contract manufacturing process mary goal, according to Moore, is to operate as efficiently and • Improving the new hire, employee transfer, termination, productively as possible. The catch is that core only remains and other workforce management events to automate the core as long as it differentiates the enterprise from the competi- exchange of information to third parties according to local tion. Once it has been copied, it becomes context and is no policies longer an innovation. It must then refocus on improving its • Centralizing common operations as a shared service to efficiency and productivity. enforce global policies and leverage economics of scale • Outsourcing payroll and HR to third-party agencies and many more Core Context Focus on Differentiation Focus on Productivity Innovation Standardization Mission- Consolidate Critical Activities Compose Out-Task Insource Scale Enabling Retire Activities Invent Invention Commoditization Courtesy of Geoffrey Moore’s Living on the Fault Line Figure 1: Business Process Innovation: Core and Context 5
  6. 6. These operational strategies are difficult to implement given the To summarize, for most organizations, when developing a nature of IT in many enterprises. Traditionally, organizations new approach to fundamental practices, the uncertainties far develop custom applications from scratch using various platforms, outweigh the certainties – but this much we know: but then find it inflexible and change resistant. Moving from • What is differentiating now may be copied by the competition core to context to consolidate common practices, for example, and become a standard or best practice, for which efficiency is difficult and expensive. For it to work, enterprises must ratio- and productivity then become its primary purpose. nalize on varying platforms and applications, acquire new skills, • Organizations need to reduce costs continuously in supporting and build new integrations. Similarly, innovating processes from these business activities. context to core is equally challenging and expensive because IT • Consolidating common business and IT functions as must determine the best way to leverage existing investments. shared services is a way to reduce costs and redundancy while enforcing global policies. • Out-tasking of nonstrategic business processes or process Core Context Core Context steps is a viable alternative as they do not differentiate the enterprise; this enables staff to focus on strategic or core competencies. Consolidation Innovation is extremely difficult cannot easily and expensive leverage existing • New platform investments • New skills • New integration . . . Figure 2: Business Process Innovation Hampered by IT 6
  7. 7. THE ISSUES Companies that invent new business strategies or next practices workings of systems on both sides to create tightly coupled often find it difficult to embrace innovation. Those that create integrations, which must be maintained over the useful life differentiating strategies later realize that their plans are held of the applications. The upfront development and ongoing back by the current state of their IT. Rather than being an enabler maintenance costs of these integrations can be avoided. of innovation and efficiency, IT has become an inhibitor to business changes given the growing complexity, inconsistency, Redundant Systems and Nonreusable Functionality and maintenance requirements. In many organizations, the IT portfolio grows arbitrarily either through divisional purchases or mergers and consolidations. Islands of Automation and Complexity This generally results in redundant or customized systems that In many enterprises, applications are independently implemented are not easily used by other organizations. to address specific needs at any given point in time. This approach has created islands of automation with different technologies Consider the example of an enterprise that has grown through and proprietary code – far too complex to integrate, too costly acquisitions and now consists of a few independently operated to adapt, and difficult to share critical business information. human resources, procurement, and IT organizations – each With evolving business conditions – such as mergers and acqui- with its own system to support local needs. Any policy changes sitions, company spin-offs, and reorganizations – the IT landscape required at the global level – such as IT security policies, privacy is further complicated by fragmented information, limited laws, or contractual pricing – need to be enforced separately at insight into comprehensive analytics, inconsistent user inter- the local level. faces, and more pockets of automation. Heterogeneous IT environments are a reality, and companies need to find a better The question is: “How can companies do this effectively to way to reduce the costs and complexity, while leveraging existing comply with global and local regulations?” The answer is: “Not technologies. well.” Many companies seek better ways to centralize common functions as shared services, to rid themselves of redundancy, Multiple, Hardwired Integrations increase their operating efficiency, and allow for the reuse of their Traditionally, companies used enterprise application integration existing investments. Unfortunately, these laudable goals are (EAI) tools to integrate independent applications. This approach often hampered by the growing complexity in their IT landscapes. used proprietary interfaces for hardwiring different applications. While EAI tools have successfully linked different applications, they require staff with specialized skills to understand the inner 7
  8. 8. Poor User Experience Consider a federal project to build a new bridge or to repave a In a heterogeneous IT environment, employees often act as highway. To identify the best contractors, the agency will need human integrators to bridge manually the flow of information to assemble an RFP using structured data, including material between independent systems, each having a separate look and descriptions, quality, and delivery dates from ERP, as well as feel. Consider the scenario of bringing a new hire on board in unstructured information, such as statement of work, evalua- the United States. The new hire provides data for the respective tion criteria, standard provisions, and contractual clauses from systems: Microsoft Word documents and third-party content providers. • Medical and dental benefits (HCM and third-party systems) • W4 and payroll (HCM) Prospective contractors can submit their proposals by fax, • Beneficiary names and information mail, or e-mail. The final contract award will contain pricing (HCM and third-party systems) and schedule information from the awarded proposal, and • Credit card applications (credit agency) contractual terms and conditions from the original RFP. • Travel profile (travel agency) • 401(k) (retirement financial services provider) The blend of structured and unstructured data generated from • Payroll deposits (bank) this end-to-end process is a lot to manage, yet it must be done • Business cards (third-party printing system) effectively to comply with federal regulations. As a result, the • Office supplies (procurement) agency will need to invest in IT staff to develop the custom integrations, a team of contract administrators to govern the and so on. end-to-end process, or both. Not only does the new hire need to learn how to navigate through To summarize, when organizations look to growth, improve- various internal and external systems with different user inter- ment, and new opportunities, many find that that their IT faces, but employees are also burdened by not knowing which systems are holding them back. These might be the reasons tasks to complete when, and what the status of those activities why: are. The inconsistency and lack of process transparency compli- • A complex, inflexible IT environment impedes an organization’s cates the mission at hand and compromises the overall user ability to respond to the evolving business dynamics in a experience. competitive marketplace. • Islands of automation and pockets of technology require Fragmented Structured and Unstructured Data additional investments to bring together the information In many organizations, the need to reference structured or online scattered or hidden in various systems. data and unstructured or offline data is not only desired for • IT organizations need to do more with fewer resources and increased efficiency, but also mandatory to comply with regula- a complex IT environment increases the costs to build and tory needs. This is especially true in the public sector. Yet maintain integrations. traditional systems do not fully address the end-to-end process, • Closed, proprietary systems often require custom integrations so organizations create a wealth of offline data from administra- to be done by people with highly specialized and expensive tive paperwork, e-mail, faxes, mail, and other methods of offline skills. communication. Employees must then spend non-value-added • Business processes that span across existing boundaries often time sorting the offline information, and tying it back or reen- require users to work with multiple systems, each having a tering the data into the appropriate systems for compliance separate look and feel; the user experience is not consistent purposes. and integrations are not transparent. 8
  9. 9. THE JOURNEY TO BECOMING AN ADAPTIVE ENTERPRISE The need to respond faster to business demands, embrace new Unlocking the Potential of an ESA business strategies, leverage existing IT investments, provide SAP NetWeaver®, the open platform that powers the mySAP™ better service levels, and improve user experience is driving ERP solution, the mySAP Business Suite family of business solu- IT organizations to search for a better way to run the business, tions, and many partner solutions, enables customers, partners, while reducing operating costs. and SAP to unlock the potential of an ESA. SAP NetWeaver, which is based on open standards, such as Web services, Java, SAP believes that IT organizations can overcome these challenges and XML, brings together information and functionality from by adopting a services-oriented architecture (SOA). Enterprise SAP’s applications and offers them as enterprise services for Service Architecture (ESA), coined by SAP, is a business-driven communication with SAP® software, third-party, and legacy approach to SOA for delivering adaptive solutions in the systems. customer’s IT landscape. It is important to understand the relationship between SAP However, SOA and SAP’s ESA are not one and the same. Gener- NetWeaver and ESA, particularly because SAP NetWeaver is ally speaking, SOA is a technical framework for building software currently transforming from an integration platform and a applications that use services available from a network, such composition platform into a business process platform to enable as the Web. Applications in SOA are built as services, to meet a ESA. First of all, SAP NetWeaver is a tangible product suite; well-defined business need, and made available to clients for use Enterprise Services Architecture is a concept. Meaning that the in an array of applications and business processes. ESA is SAP’s primary difference between them is that you can buy and sell rendition of an SOA that expands the concept of Web services SAP NetWeaver. into an architecture that supports enterprise-wide, service-enabled business architecture. Second, the platform has undergone various iterations in the life of SAP NetWeaver since its launch in 2003. Early on, it was The difference between an SOA and ESA comes from service an integration and application platform on which various appli- enabling the most common business processes, such as procure cations could run and integrate. The next version will make to pay, order to cash, and hire to retire. While SOA can be seen SAP NetWeaver a composition platform, where partners and as a more technical concept, ESA can be thought of as the blue- customers could efficiently compose applications on top of the print that enables flexibility, openness, and speed, which are existing platform and have all pieces work well together. Now critical elements for success in an adaptive enterprise. Simply SAP is embarking on the next generation as SAP NetWeaver put, ESA is SAP’s blueprint for a business-oriented approach evolves to a business process platform, where fundamental and to SOA. reusable, end-to-end service-enabled processes become part of SAP NetWeaver. 9
  10. 10. SAP NetWeaver Visual Composer, a model-driven tool, allows IT and business professionals to compose applications with SOA, rather than conflating proprietary programming to work together Generation 4 Business as if they were made to. Traditionally, teams of business analysts Process and application developers must translate business requirements Productivity Platform Generation 3 Composition into detailed, procedural logic. With a service-oriented architec- Platform ture the language of business becomes the language of IT. Enter- Generation 2 Integration prise services within mySAP ERP are defined with simplicity Platform at a granularity that they can be easily understood by business Generation 1 Application analysts. Thus, business analysts can leverage the appropriate Platform enterprise services for composite applications supporting new Business Innovation business scenarios. SAP NetWeaver® Evolves into a Business Process Platform • enriches the SAP NetWeaver composition platform with ready-to-run business processes SAP NetWeaver also enables the delivery of role-based user • accessible through Enterprise Services interfaces through an enterprise portal that enables organizations Figure 3: Evolution of SAP NetWeaver® to Adopt Enterprise Services to structure business processes and deliver relevant financials, Architecture operations, human capital management (HCM), and other business information tailored to a specific role. This IT practice Traditionally, there were two options: build or buy. Now, improves user productivity and provides a more consistent user Enterprise Services Architecture adds a third: compose. This experience. SAP NetWeaver also allows users to access diverse will allow IT and business professionals to leverage enterprise types of enterprise information, including SAP applications, services to develop applications faster and with less effort for third-party applications, databases, data warehouses, desktop next or evolving business practices. documents, Web content, and so on. It is also possible to access both structured and unstructured information scattered throughout an enterprise. 10
  11. 11. SAP NetWeaver will evolve into a business process platform or “applistructure” that merges enterprise applications with infra- structure technology. Rather than developing, managing, and customer partner employee maintaining a myriad of IT systems, organizations can cut costs and reduce IT complexity by consolidating their infrastructure. SAP NetWeaver will allow business analysts to compose applica- Analytics tions by assembling enterprise services from the enterprise services repository, a central repository for modeling enterprise Composite Applications services and storing their metadata as defined by customers, SAP, and partners. This repository will be an integral part of SAP NetWeaver and mySAP ERP as they embrace Enterprise Enterprise SAP NetWeaver® Services Architecture. Services Business Process Platform Repository Figure 4 illustrates the different components enabling the mySAP™ ERP migration of mySAP ERP and mySAP Business Suite to a services-oriented architecture. Partner Legacy Third Party Figure 4: mySAP™ ERP on Enterprise Services Architecture 11
  12. 12. mySAP ERP AND ESA: EMBRACING INNOVATION AND ACHIEVING OPERATIONAL EXCELLENCE SAP’s enterprise resource planning solution, mySAP ERP, Scenario 1: Contract Manufacturing embraces the philosophy surrounding Enterprise Services (Business Process Extension) Architecture and is well ahead of the game by providing a large A contract manufacturer needs to extend the quotation man- repository of enterprise services for ERP, HCM, financial man- agement process to external suppliers to improve efficiency and agement, and operations management. Because mySAP ERP responsiveness. Today, the process spans the line of organizational will be services oriented, companies can achieve differentiation silos – from the end customer to the internal team to external by implementing the following practices: suppliers. Several internal and external systems are in place, like • Business process extension to integrate multiple internal ERP, CRM, SRM, HR, SCM, financials, home-grown, legacy, and external business processes to provide flexibility and drive third-party solutions, and so on. further efficiency beyond existing enterprise boundaries • Business and IT consolidation or shared services to reduce The process starts with the receipt of a request for quotation redundancy, increase cost savings, and enforce global policies (RFQ) from the end customer. The account manager enters • Business process out-tasking of context activities, enabling the information into the CRM system and then assesses the staff to focus on the next differentiating practice opportunity. The internal team is notified of the opportunity • Composite applications that leverage existing systems to and assembles pricing and material information from multiple increase operating efficiency in highly fragmented or unique internal and external sources. Depending on the sourcing business processes needs, the internal team may produce an RFQ to source more • Improved productivity and user experience by delivering competitive quotations from suppliers; this can happen when a consistent look and feel, as well as simplifying task manage- insufficient manufacturing capacity exists or where more ment by delivering relevant content, exceptions, and user competitive prices can be obtained. alerts • Comprehensive analytics to gain better insight into Before Enterprise Services Architecture (ESA), the contract comprehensive operational information, enabling staff to manufacturer relied on its internal team as human integrators identify future opportunities for increased profitability, cost to bridge manually the flow of information between multiple savings, responsiveness, and efficiency systems and parties. Before ESA, the extended quotation man- agement process required extensive offline communication, The following section contains several scenarios describing paperwork processing, data reentry, and other administrative value of mySAP ERP with enterprise services architecture. tasks. These can result in poor process governance and frag- mented data. This practice is clearly ineffective, reactive, unreli- able, time consuming, and difficult to manage for all parties involved. Any changes to the original RFQ will require a wave of updates to the existing applications, thus compromising the data accuracy and competitive responsiveness. The contract 12
  13. 13. manufacturer can automate through hardwired integrations In a centralized HR scenario, a self-service portal for employees between its internal ERP systems and the supplier’s systems, but is introduced globally to allow employees to perform simple HR this is complex and difficult – especially considering the vast tasks, use an online employee handbook and other knowledge number of suppliers and proprietary systems out there. And tools. This is an automated first line of support. The HR depart- worse, it increases the total cost of ownership by making the IT ment is readily accessible if the task at hand exceeds the user’s landscape more and more complex. There is a better way. need or the portal’s capabilities. In this new approach the local HR representative is liberated from a significant number of Using enterprise services, mySAP ERP can exchange business- well-worn administrative tasks and freed to focus on more critical information between very different systems: ERP, SRM, strategic initiatives to further improve employee satisfaction and third-party CRM systems. Some examples of mySAP ERP and reduce operating costs. enterprise services include purchase order and contract status tracking, costing updates, sourcing, vendor quotes status Before Enterprise Services Architecture, deployment of the tracking, and PO creation. employee self-service portal would require extensive proprietary integration with back-end systems. For example, to update an This new approach enables different systems to communicate employee home address, this change will need to be reflected using a common language and reduces the need for data reentry across multiple systems: and offline communication. For example, the document con- • Employee master information (mySAP ERP HCM) troller receives supplier quotation information through enter- • Travel profile (third-party travels) prise service vendors developed for a third-party CRM solution. • 401(k) bank (third-party financial services system) • Employee stock purchase plan (third-party investment system) Scenario 2: Consolidating HCM as Shared Services • American Express credit card bank (third-party credit and Consider the scenario of centralizing HR functions by rolling banking system) out a self-service portal for employees. In a distributed HR • Payroll (SAP ERP HCM and third-party payroll processing) scenario, local HR teams are on-site to address specific issues • Tax services (third-party tax services) and administrative tasks. These tasks may be as simple as an address change, enrolling in a 401(k), or direct payroll deposits to To integrate mySAP ERP HCM without Enterprise Services a task as complex as benefits planning with different providers Architecture, a total of 30 or more custom proprietary interfaces using different systems on different continents. need to be designed, tested, deployed, and documented. Any changes to a given interface would result in another wave of development, testing, and documentation. In time, this task becomes insupportable – overly complex, cost prohibitive, and highly inefficient. 13
  14. 14. The solution is mySAP ERP HCM, which can use enterprise Scenario 3: Outsourcing Logistics Operations services to exchange employee data securely and reliably with (Business Process Outsourcing) multiple systems. For example, when an employee submits a Consider the outsourcing of logistics management for a global change to update the home address through the self-service high-tech OEM manufacturer. This company has manufacturing employee portal, the appropriate change home address service plants, logistics centers, and third-party warehouses located is invoked to communicate real-time information to the third- across EMEA, Asia Pacific, and North America. Each location party systems. Since enterprise services are developed on open has varying inventory levels of finished goods, from 0 to over standards-based interfaces, they can be used by several systems. 120 days of supply, to meet service levels agreements (SLA) with This flexibility reduces the time, effort, and cost to build and its OEM customers. maintain tightly coupled integrations. Flexible Packaged Business Application Procure to Pay Order to Cash Manufacture to Inventory Enterprise Services Enterprise SAP NetWeaver® Services Repository ERP CRM PLM SRM SCM Custom Figure 5: IT Landscape Before Logistics Outsourcing 14
  15. 15. A key objective for the company is to reduce the finished goods between ERP and all third parties in order to exchange product, inventory across its distribution centers and warehouses. However, bill of material, order, inventory availability, pricing, and customer the staff is consumed by the day-to-day, tactical activities in information. Such interfaces ensure that the third-party provider global shipments, working with logistics carriers, custom agents, can share real-time information on shipments, including those third-party warehouse providers, and other tasks in logistics in transit and held up at customs, expected delivery dates, and warehouse management. damaged shipments, inventory at distribution centers, and more, at any time. As a result, the company decides to outsource its logistics and warehouse operation to a third-party provider with specialized Now, suppose the company decides to establish a new process expertise in multimodal transportation and planning, contract to monitor and enforce service-level agreements with the third- negotiation, competitive pricing, insurance management, import party logistics provider. Because of the existing IT complexity and export, taxation, warehouse management, and so on. These and the inflexibility of the tightly coupled systems (like ERP, activities are clearly mission critical for the business, but the HR, CRM, and so on), the companies will face difficulty in company recognizes that it does not have the core competency decomposing existing functionality and composing a new in-house to specialize the activities for differentiation. application that can span across business and IT boundaries. The company uses an ERP system for sales and distribution and With Enterprise Services Architecture materials management, legacy systems for HR and CRM, and In Enterprise Services Architecture, mySAP ERP, HCM, third-party solutions for warehouse management. The IT envi- financials, and operations software can use enterprise services to ronment is complicated by a myriad of customization of unique communicate and exchange information with the external business processes and proprietary, tightly coupled integrations. systems of the third-party logistics provider. Both parties will be able to leverage their existing IT systems and publish enterprise The outsourcing initiative requires that the company’s internal services that can be discovered and invoked over a network. Some ERP and legacy systems be interoperable with the home-grown, services may include product details, pricing, inventory avail- sophisticated transportation and warehouse management tools ability checks, delivery status checks, purchase order details, of the third party. Without a proper SOA, the company will be purchase order changes, partial shipments, and bill of lading forced to build and maintain custom, proprietary interfaces details. 15
  16. 16. Compose Differentiating Processes . . . by Leveraging Packaged Solutions Procure to Pay Source Procure Order to Cash Order Ship Order to Cash (with Logistics Outsourcing) Manufacture to Inventory Manufac- Order Source Inventory Ship Plan Manufacture Inventory ture Enterprise Services Enterprise SAP NetWeaver® Services Repository Third-Party Third-Party Warehouse ERP CRM PLM SRM SCM Custom Transportation Tracking Management Figure 6: IT Landscape Enabling Logistics Outsourcing What’s more, mySAP ERP enterprise services enable companies the manufacturer will be able to monitor the actual service to compose and fine-tune business processes more easily. In the levels of deliveries from order receipt (in mySAP ERP) to case of building a process that governs SLA across company shipment in transit (in third-party system) to shipment boundaries, enterprise services can be used to ensure that delivered (in third-party system), even though this process business-critical information is exchanged in real time between spans across different systems. the third-party provider and the manufacturer. For example, 16
  17. 17. Scenario 4: Employee Onboarding Process 6. Raise purchase request to acquire new laptop and other (Composite Applications) supplies (automated) Consider again the employee onboarding process spanning across 7. Initiate facilities request to get office, phone, furniture, several internal and external organizations: hiring manager, TCP/IP wiring (automated) human resources, facilities, IT, and more. With Enterprise Ser- 8. Provisions services, which include facilities, IT procurement, vices Architecture, SAP customers can compose new business office space, and so on (automated) processes using SAP NetWeaver and SAP NetWeaver Visual Com- 9. Schedule new hire orientation (hiring manager) poser. The tool enables business analysts to pull together and 10. Enroll in benefits, W4, and so on (employee through rearrange existing enterprise services of mySAP ERP HCM into a third party) composite application automating a new hire process as follows: 1. Initiate new hire request (hiring manager) With SAP NetWeaver and enterprise services from mySAP ERP 2. Approve request (approver) HCM, activities can be automated and information can be 3. Generate offer letter and employee contract (automated) exchanged in real time. Furthermore, the composite application 4. Approve or reject offer letter (candidate) will provide a consistent look and feel as it is built with SAP 5. Raise service request to provision users on IT systems NetWeaver calling the different enterprise services of SAP and (automated) other systems. Rigid Value Chains Evolve into Adaptive Business Networks Modularization Employee Onboarding Specialization Composition and Collaboration Figure 7: Employee Onboarding with Enterprise Services Architecture 17
  18. 18. Scenario 5: Portfolio Planning with Services- For example, SAP and Microsoft are leveraging Enterprise Oriented mySAP ERP Financials Services Architecture in their integration of mySAP ERP and IT portfolios that support multiple divisions and departments Microsoft Office systems to close the gap between desktop often rely upon business analysts to retrieve financial, asset, productivity tools and enterprise business applications. Figure 9 employee, and project data from across disparate systems. With illustrates how employees can gain productivity while ensuring this raw data in hand, they then must import, reformat, consoli- corporate compliance by exchanging real-time information date, and analyze it all on comprehensible spreadsheets. As you between Microsoft Outlook and mySAP ERP Financials in the might imagine, the process is resource intensive and error prone. context of managing appointments with Microsoft Outlook. With Enterprise Services Architecture, companies can create enterprise services that pass planning information from mySAP Time Management (Isolated Project Management Process) ERP HCM, financials, and projects using a third-party tool, such as Microsoft Excel. After Excel processes the third-party data, the results are fully communicated back to SAP systems, using Time Recording Plan Execute Control enterprise services. Scenario 6: Time and Attendance with Service- Oriented mySAP ERP HCM Accurate Data? Project Time and attendance management is a great example of the Manager need for a services-oriented approach. It requires employees to record their activities in mySAP ERP HCM and mySAP ERP Isolated and Complex Data Reentry Financials, as well as maintain the same information on desktop tools such as Microsoft Outlook and Microsoft Project. The Desktop Tools process is complicated by an abundance of information that, for (Calendar, Projects, ERP and so on) (HR, Accounting) compliance and control purposes, is scattered throughout the universe of available systems, and unnecessarily difficult to track. Fragmented Information See Figure 8. How Do You Govern Time Management if It Spans Using enterprise services, time and attendance information Across Isolated Systems? is automatically exchanged from third-party desktop tools and into mySAP ERP HCM and mySAP ERP Financials, saving Figure 8: Time Management Before Enterprise Services Architecture employees time and effort, and greatly improving the accuracy of the reporting. 18
  19. 19. Scenario 7: Procure to Pay in Public Sector (Interactive Forms) Time Consider the example of an agency acquiring goods and services Plan Execute Control Recording with the United States public sector. Today, the agencies are mandated to use standard forms as regulated by federal acquisi- tions regulations. Depending on certain criteria like acquisition Schedule Assign Submit/ Appointment Project Charge Time value and type, specific contractual and provisional clauses must be presented on any forms that get published to suppliers and contractors for bidding. (Agencies still use standard paper forms to accommodate suppliers and contractors without online access with which to submit bids.) Enterprise Services Architecture Integration • Real-Time Access and Updates from Desktop Tools to ERP • Data Integrity • Corporate Governance Figure 9: Time Management with Enterprise Services Architecture Figure 10: Sample RFQ in PDF for Agency and Prospective Suppliers to Complete 19
  20. 20. With Enterprise Services Architecture, agencies can submit Since the new order-to-cash process spans beyond existing standard forms as PDFs to suppliers and contractors. Suppliers boundaries and relies on both internal and external enterprise and contractors can print the form and fill it out offline, or applications, it creates a significant challenge for both companies enter the information directly onto the PDF and submit it. to gather, consolidate, and analyze operational data. Separations of duties, security policies, and fragmented or hidden information Using enterprise services, the unstructured data on the PDF are will complicate the ability to measure and control provider easily transported to mySAP ERP systems and stored as struc- performance. tured data. The benefit of this approach is that agencies can reuse existing online and offline forms to comply with federal Operating with Enterprise Services Architecture, the manufac- requirements. At the same time, the competitive bidding turer can develop services that gather key operational data from process is simplified for contractors and suppliers. various systems (such as ERP, CRM, warehouse management systems, third-party logistics carrier systems, and so on). Using Scenario 8: Improved Business Insight SAP NetWeaver, the results are easily presented in an intuitive, Consider the logistics outsourcing scenario again. It is imperative user-friendly way, and delivered to the desktop of the designated for the manufacturer to evaluate the overall performance of party (role) or department (work group). a third-party logistics provider and govern the service levels, pricing, and other terms and conditions as agreed on the service level agreement. 20
  21. 21. mySAP ERP AND ESA: ALIGNING IT AND BUSINESS TO ACHIEVE OPERATIONAL EXCELLENCE Business Strategy ERP Examples Traditional Enterprise Services Architecture Consolidate common ERP and legacy to Accounting Difficult and complex as different Enterprise services can be used by multiple provide shared services and reduce TCO • Time and expense management applications may have different technology applications so consolidation will be more • Credit and debt analysis platforms and proprietary interfaces efficient and effective • Collections • Invoicing • Accounts payable • Billing dispute resolution Self-service • Employee interaction center for centralized management of IT and HR Compose applications to support unique HCM Custom-built applications with proprietary Enterprise services are modular and can business needs • Employee onboarding code that are not designed for reuse by be easily rearranged to support composite other systems applications Extend existing applications to drive Supply management and procurement Higher costs and effort to integrate Enterprise services are modular and can be further operating efficiency beyond • Procurement multiple systems as this would require orchestrated in such a way to enable other existing boundaries • Logistics management special skills and proprietary interfaces. business processes by other systems • Warehouse management Also changes would drive TCO higher as of result of additional coding, testing, documentation, training Outsourcing core business processes and Human resources Difficult to outsource core business Business process outsourcing simplified their IT systems • Payroll processes because the underlying IT because enterprise services are modular • Benefits enrollment systems are tightly integrated and loosely coupled and can be more • Benefits management easily out-tasked without impacting the • Training rest of the IT landscape Supply management and procurement • Procurement • Logistics management • Warehouse management Demand management • Call center operations • Analytics 21
  22. 22. WHAT’S AVAILABLE TODAY? WHAT’S NEXT? In April 2005, SAP announced its Enterprise Services Architecture To demonstrate its continued leadership in helping customers (ESA) preview system with more than 500 live enterprise services move toward services-oriented architectures and building on on the latest version of mySAP ERP. This announcement offered its commitment to provide the partner community with the partners, developers, and customers the opportunity to test the development platform, SAP’s road map for Enterprise Services enterprise services, and more importantly, to influence the Architecture includes the following: definition and development of service-enabled solutions to enable enterprises to run business-critical processes more efficiently. This year SAP will publish an inventory of its enterprise services and make it available for planning purposes for customers and Below are just a few examples: partners. This list of enterprise services can be leveraged in • A third-party provider of tendering software uses enterprise customers’ and partners’ composite applications and for longer- services to extend the purchasing functionality in mySAP ERP term planning. Additional service-enabled scenarios will be made to address the public sector’s unique regulatory requirements. available, focusing on business process flexibility and anticipating It uses enterprise services from mySAP ERP to verify budget the needs of new composite applications. In 2005, SAP will also availability before the release and publication of RFQs. Once begin customer ramp-up with mySAP ERP 2005, leveraging the award is determined and the tendering process between the SOA blueprint to provide significant new enhancements the customer and supplier complete, enterprise services are in business analytics, user productivity, and reductions in total used to generate purchase order information and passed to cost of ownership. mySAP ERP for invoicing and payment processing. • Using enterprise services, another third-party software and In 2006 an enterprise services repository will be available, based services company in the United Kingdom integrated its time on the next release of SAP NetWeaver. All relevant enterprise and attendance tracking application with mySAP ERP HCM services will be actively available from the repository for use by 90% faster than it could have using traditional methods. selected partners and customers. Enterprise service enablement of mySAP ERP allowed the vendor to provide its customers with comprehensive and real-time insight into time and attendance status in a fraction of the time it would have taken without an ESA. • A large infrastructure management software company is working with SAP to extend its asset management and infrastructure monitoring systems into an SAP purchasing system. Traditionally these systems are independently imple- mented with no integrations to SAP. An ESA will enable the company to use enterprise services from SAP to exchange asset details, pricing and contract T&C from the SAP pur- chasing system to their asset management systems. They also plan to build an event from their infrastructure manage- ment tool to trigger the procurement process in the SAP purchasing system. 22
  23. 23. CONCLUSION Today, enterprises are burdened by complex IT landscapes, With an ESA, mySAP ERP enables organizations to increase driving up the cost of innovation and slowing down the pace efficiency and growth by: of change. With rapidly shifting business conditions – such as • Extending existing processes into new boundaries mergers and acquisitions, business consolidations, new business • Consolidating business and IT to leverage economies of scale ventures, new partnerships, and changing market dynamics – and eliminate redundancy enterprises must find a better way to effect change and employ • Developing composite applications for next practices more innovation. efficiently and cost-effectively • Replacing custom programming with model-driven There is a better way. The industry is recognizing the value and application composition potential of a services-oriented architecture, a new approach to • Delivering flexible and highly productive user interfaces help organizations make their IT operations leaner, more respon- • Simplifying integration effort and reducing integration costs sive, and more easily adaptive to enterprise solutions. SAP is with external applications among the first to recognize this vision and is leading the market with an Enterprise Services Architecture road map to create the Organizations of all sizes around the world now have the choice, next generation of mySAP ERP innovation. flexibility, and freedom to evolve into adaptive enterprises using an enterprise services approach that keeps them open to mySAP ERP, powered by SAP NetWeaver, is migrating to an SOA innovation and responsive to change. with a new repository of enterprise services developed on open standards for exchanging information with a variety of systems, such as ERP, HCM, SRM, CRM, SCM, and so on. This journey will enable customers and its trading partners to seek greater efficiency and differentiation as they are empowered by IT to enable new business strategies with less IT complexity, lower TCO, and increased agility to change. 23
  24. 24. /contactsap 50 075 705 (05/08)