SAP is one of the world’s preeminent producers of enterprise application software for centralizing data management and improving business processes.
SAP set the global standard for enterprise resources planning (ERP) software. The SAP ERP is a modular business management and automation solution that is used to maximize efficiency and accelerate workflows. Where businesses might have traditionally decentralized their operational data and stored materials and sales information in separate databases, SAP ERP allows a wide variety of companies to standardize their data management across the board.
SAP solutions can be installed at a business’ primary location on-premises, in the cloud, or as part of a hybrid cloud model. The SAP ERP was among the first to fully embrace a modular design and allowed users to choose the software components that best suited their business.
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The the German company SAP SE released its first products, SAP R/1, in 1972. It featured a single tier of architecture along with a financial accounting module. The company then released its two-tier architecture system, SAP R/2, in 1979. Through the 1980s, SAP SE continued to release add-ons for its software, including an HR management module.
In 1992, it rolled out its three-tiered R/3 software—a major release that introduced a uniform graphical interface along with a client-server architecture that allowed for greater scalability and better performance. SAP R/3 also featured extensive customization options and support for multiple languages and currencies, which made it a phenomenally popular choice in the emerging world of ERPs. At the same time, the company announced its partner strategy, which has grown in subsequent years to include a large ecosystem of vendors, developers and other businesses.
SAP introduced ERP Central Component (ECC) in 2004. This would be the predecessor to the company's current core offering, SAP S/4HANA. ECC provided enterprise performance management and was further customizable through a series of task- or industry-specific modules, which made it a popular tool for businesses looking to manage complex processes and analyze performance across channels.
In 2010, SAP introduced SAP HANA, a multi-modal database. Two years later, SAP moved into cloud computing with the SAP HANA Cloud PaaS (platform-as-a-service). In 2015, SAP launched SAP S/4HANA, a modular business solution utilizing HANA’s in-memory database for faster processing and advanced functions like machine learning and artificial intelligence (AI).
In the 40 years since SAP’s first product was developed, the company has grown to offer more than 100 solutions customized to address specific business functions.
A network of SAP partner vendors and consultants augment the company’s core business practices, which provide additional products and services to the large platform. SAP's ERP software is the most popular in the world and the company has been used by over 437,000 businesses in 190 countries.1 The company offers a variety of training courses to help customers best utilize the software. Likewise, many universities offer SAP certificate programs as part of their business training programs.
As SAP has grown, its developers have introduced a variety of accompanying pieces of software, including:
SAP Ariba and SAP Fieldglass for procurement.
SAP Business Technology Platform for cross-functional data and analytics.
SAP SuccessFactors for payroll, talent management, and human resources.
SAP S/4HANA, the latest version of SAP, was released in 2015. It is optimized for HANA, SAP’s in-memory database built to support machine learning and AI. In recent years, SAP SE has begun to invest heavily in leading-edge technologies like cloud computing and artificial intelligence to provide advanced business analytics.
As the company has developed over the decades, it’s made significant contributions to the following business intelligence areas:
In the early 2010s, SAP entered the cloud market and began offering software-as-a-service (SaaS) products to best support its customers. In 2021, the company unified a set of previous functions2 and introduced its cloud-based Business Technology Platform (SAP BTP) (link resides outside ibm.com), a tool for customers looking to automate complex systems or create solutions from scratch. With BTP, businesses can develop applications that are customized to their specific goals, extend integrations for existing SAP products and infuse advanced analytics and AI into their processes.
SAP released its first standalone customer relationship management (CRM) software in the early 2000s. Since then, it has integrated those functions tightly with its ERP suite. With real-time insights into customer interactions and comprehensive views of purchase histories and preferences, advanced SAP CRM solutions offer more effective support for clients. In recent years, SAP CRM has featured options to automate processes like interaction tracking and generate personalized communications using AI.
SAP’s solutions for ERP have encouraged clients to embrace digital transformation, leveraging data analytics and automating select operations. By introducing modules to apply to hundreds of specific use cases, the company has encouraged seamless integration across departments, unifying all business operations into a single database using a single user interface.
SAP’s partner ecosystem has grown to represent a vast number of third-party applications and extensions to enhance its core functionality. In recent years, the company has released features to support environmental, social and governance reporting (ESG) to help customers reach their sustainability goals.
SAP integrates financial management with other functions of a business, which allowed finance teams to collaborate more effectively with other departments. Its development of real-time payments solutions and advanced reporting capabilities helped businesses make informed decisions and comply with regulatory requirements. Recently, SAP has introduced cloud-based financial solutions that reduced the need for extensive on-premises infrastructure. Using machine learning and AI, SAP’s latest generation of tools can automate routine financial processes and detect anomalies as well as provide more accurate forecasting.
SAP HR was a key module in the original SAP ERP software that supports talent acquisition and management. In 2012, SAP rolled that functionality into the SAP SuccessFactors Suite XM, a cloud-based software series that cover every aspect of HCM, from core HR functions to workforce analytics and employee engagement metrics. It also includes solutions for recruiting and payroll. The tool offers more advanced AI functions like performance management analytics and scenario modeling. The software was built to integrate seamlessly with SAP’s finance and payroll solutions to reduce errors.
SAP’s integrated solutions for spend management have evolved to span the entire procure-to-pay process, from supplier relationship management to invoice processing. Its analytics tools allow customers to visualize spending patterns. Its supplier relationship management tools optimize procurement by analyzing and forecasting purchasing behavior as well as facilitating work with business partners in real-time.
SAP’s impact on supply chain management has grown far beyond materials management and inventory control. The software enables customers to track goods and materials on the company’s unified platform and rely on advanced analytics to identify potential disruptions and forecast potential changes in demand. Internet of Things (IoT) integration and a heavy focus in recent years on Industry 4.0 means organizations can monitor production and logistics in real-time.
Organizations of all kinds, from small businesses to large corporations, use SAP modules for cohesion and clarity across their data streams. The software suite is particularly useful for companies with complex processes.
For example, by migrating to SAP’s S/4HANA cloud solution, a large consortium of hospitals in India3 centralized inventory management and vendor payments while communicating in real-time with its secure Hospital Information System, which contains sensitive health-related data such as medical records.
In the Norwegian airline industry, SAP’s Ariba tech has been used to reduce carbon emissions4 by managing a brand’s contracts, sourcing and risk.
In America, a large insurance company5 deployed a variety of SAP solutions in its offices in New York to gain deeper insights from its financial data, process that data faster and strategize for the future.
SAP’s management software ecosystem is customized to suit a wide range of business applications. Among its most popular use cases are:
SAP’s financial management software can integrate invoicing, billing and cashflow analysis to improve efficiency and simplify compliance. Spend management modules like SAP Ariba and SAP Fieldglass have increasingly been utilizing generative AI and market data to increase the accuracy of cost estimates and identify errors.
Companies use the SAP Supply Chain Management (SAP SCM) module to plan logistics and manufacturing as well as predict the lifecycles of various pieces of equipment.
SAP’s customer experience modules allow companies to unify their sales, marketing and service data to improve customer relationships. For example, an e-commerce company might use SAP to deliver a unique engagement model based on existing customer data or improve the user experience of its business based on customer feedback.
Tools such as SAP SuccessFactors are used to plan and manage workforce tasks and discover new talent. Companies deploy the software to better understand what motivates employees and how to improve their efficiency. Using this suite, companies can leverage payroll and recruiting data and strategically plan for future growth or changing workforce needs.
Using SAP software, businesses can streamline the procurement process through a single mechanism, which facilitates collaboration between suppliers and buyers in a centralized hub.
SAP customers have a range of options when it comes to utilizing cloud computing for their operations. A company might track logistics remotely using sensors connected to the Internet of Things (IoT) or incorporate machine learning and AI for advanced predictive analysis and automation.
SAP software empowers an enterprise to continuously adapt and grow, producing real-time analysis and forecasting across departments. The technology provides cohesion and clarity for disparate business operations by centralizing database management.
Often, SAP software is utilized by organizations trying to bring their businesses online and embrace digital transformation. Here are five ways SAP benefits businesses every day:
SAP’s modular software packages are tailored to address over 100 use cases, allowing an enterprise to pick and choose which functions it needs. Businesses can deploy, for instance, tailored solutions for industries including finance, retail, healthcare and manufacturing.
When a business’s data is unified, SAP ERP reduces the cost of materials by eliminating redundancy. When applied to HR and talent management, streamlined data practices can reduce overhead costs and improve employee experiences. Machine learning and AI cut down on routine asks, increasing efficiency and reducing overhead.
SAP modules can assist in an enterprise’s strategic planning and budgeting by analyzing the entire businesses’ operation over time. Using real-time data, SAP can perform advanced statistical analysis to inform sustainable growth. Through SAP ERP, a company can accurately predict the impact of pivots or changes to the business, resulting in more accurate business intelligence.
SAP ERP cuts down on the cost of database management for multiple records and allows accurate predictions based on standardized information. This system allows for a unified view of an enterprise’s entire business, from materials management and employee relations to shipping data and customer feedback.
Using SAP, disparate teams such as finance, sales, procurement, talent management and customer experience have access to the same data in the same format, accelerating workflows and simplifying planning processes. It also makes collaboration between departments much easier. For instance, a sales team can immediately see data from their colleagues in manufacturing and avoid supply chain disruptions or other issues with more informed decision-making.
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Footnotes
1 Customer Engagement (link resides outside ibm.com), SAP
2 Explaining SAP Business Technoloy Platform (SAP BTP) (link resides outside ibm.com), SAP, July 11, 2023
3 CK Birla Hospitals Improves Financial Close Processes by Migrating SAP to the AWS Cloud (link resides outside ibm.com), Amazon Web Services, 2023
4 Norwegian: Embedding Sustainability in the Supply Chain (link resides outside ibm.com), SAP
5 New York Life Plans Bright Future for Finance, Insider Profiles Online, Spring 2016