What actually is SAP?

What do companies need SAP's software for, what is SAP S/4HANA, and what do SAP consultants do? We explain what SAP and all that is about.

SAP software enables companies to manage all business processes in real time and exchange information across the enterprise - from accounting to purchasing and logistics to production. SAP SE is one of the world's leading providers of ERP software. The company is headquartered in Walldorf in Baden-Württemberg.

SAP SE has risen from start-up in the early 1970s to become one of the world's largest software companies - and is now used worldwide by almost all large corporations and countless small and medium-sized companies.

With SAP software, these companies can better control their processes company-wide and in real time, work more productively and faster, and serve their customers better - increasingly also via cloud-based solutions.

What is SAP software?

SAP software helps companies manage their business processes and ensure the entire flow of information within the company - from purchasing to logistics, from procurement and accounting to production.

The software connects a company's business units so that they can be centrally monitored and controlled, and data can be exchanged across the company in real time.

So the advantage of SAP software is that it is fully integrated - and all areas are connected. This not only makes work faster and better, it also allows easier compliance with governance rules and other legislation.

The software is standardized, but can be customized to meet companies' unique needs. It can be installed on-site (on-premise) or in the cloud.

The name for such enterprise software is ERP software. ERP stands for enterprise resource planning, i.e. the overall control and planning of all resources of a company. For a long time, SAP's main product was therefore also called "SAP ERP".

Before SAP developed and launched its software in the early 1970s, there was no standard for ERP software. The individual business units usually stored their data in their own databases. As a result, information flows were often interrupted, and the exchange of data and overall planning was difficult, time-consuming and error-prone.

Over the years, SAP has continued to expand its product portfolio. In areas such as cloud solutions, databases and analysis software, SAP is now one of the world's market leaders.

What is SAP (Company)?

SAP SE was founded in 1972 in Weinheim near Heidelberg. Originally, the company was called "System Analysis Program Development". Later the name was abbreviated to SAP. SAP stands for systems, applications, products in data processing.

Today, the Group is one of the world's market leaders for business software, with over 100,000 employees and more than 440,000 customers worldwide. SAP is currently - by revenue - the largest European software company and the third largest software company in the world.

The Group has been an SE, a stock corporation under EU law, since 2014. The company is headquartered in Walldorf, Baden-Württemberg.

SAP's software is used by small, medium-sized and most large companies and corporations. Of its more than 440,000 customers, around 80 percent are small and medium-sized enterprises.

History: SAP R/1, SAP R/2 and SAP R/3

SAP has launched several ERP systems over the past 50 years or so. The latest solution is called SAP S/4HANA.

In the beginning, SAP's products always had an R for "real-time" and a number in the product name, starting with

  • SAP R/1 (in the early 1970s as the successor to SAP's first financial accounting software RF) to
  • SAP R/2 (from 1979) to
  • SAP R/3 (from 1992).

Initially, SAP's ERP software was only suitable for use on mainframe computers, especially those from IBM.

Then, in the early 1990s, SAP introduced SAP R/3, an ERP system that once again fundamentally changed the market.

The solution was tailored to the personal computer - with a client-server model, new graphical interfaces, and the ability to run the software on different manufacturers' computers.

Accordingly, the various "R solutions" differ fundamentally in their architecture, also identified by the number in the product name.

  • SAP R/1 is an application for a single-tier architecture - a so-called 1-tier architecture. The components of presentation (data input and user interface), logic or application (mechanisms for processing) and database or data storage (storage and loading of data) are therefore all installed on a single server.
  • SAP R/2, on the other hand, is a 2-tier architecture in which the components are separated into two layers: the presentation layer and the layer containing the database and logic.
  • The client-server model in SAP R/3, on the other hand, consists of three tiers or components, each running on its own server: the presentation tier, the application tier, and the data storage tier.

What is SAP used for?

With the help of SAP ERP software, companies manage their data in a central database.

This gives companies a unified view of their data in real time, enabling them to better control their processes, work more productively and efficiently, and reduce the number of data errors.

The software covers all core areas of a company and helps to control and optimize the entire value chain: from procurement, marketing and sales to production, finance and human resources.

In addition, SAP offers, for example, special industry solutions that are tailored to the requirements of specific industries.

Who uses SAP software in companies?

Once the software has been implemented, it is used by the so-called end users in the company. They enter data into the system via the software's interface or retrieve data - in other words, they use it on a day-to-day basis in their respective areas of expertise.

In financial accounting, for example, invoices are processed in the SAP system. In materials procurement, users ensure that there is always enough material on hand and place orders with the help of the software.

Depending on the activity, users have different authorizations and access to certain areas of the system.

If problems occur with the software, the users turn to the so-called key users in the company. These specialists have specialized in a particular area of the software and know it well.

If even they cannot solve a problem, programmers and external SAP consultants are available.

How do you learn to work with SAP?

Working with SAP software requires certain knowledge and experience. SAP and other providers therefore offer appropriate user training and continuing education.

SAP user certification is also possible - and proof that users have qualified training and the relevant expertise.

Those who not only want to use the software, but also implement it - as SAP consultants - or advise companies, need much more in-depth knowledge and experience of how the software works, of business processes and IT architectures.

SAP consultants have therefore often studied computer science or business informatics and have undergone in-depth training, including SAP certification. Many years of practical experience from SAP projects round off their profile.

What is SAP ERP?

SAP ERP is the product name of an ERP software system from SAP. Officially, the product is called SAP ERP Central Component 6.0 (SAP ECC).

The solution is currently still in use at many companies, but is gradually being replaced by its successor, SAP S/4HANA. SAP S/4HANA has been on the market since 2015.

Mainstream maintenance of SAP ERP (and Business Suite 7) is still guaranteed until 2027 at no additional cost.

What is SAP NetWeaver?

The SAP NetWeaver is a development and integration platform of SAP for business applications. The basis is the SAP NetWeaver Application Server, on which all applications run and which consists of an ABAP and a Java part.

The product combines several solutions: the Business Suite, the Business Intelligence theme, a portal or even the SAP NetWeaver Business Warehouse. A wide variety of systems (SAP or non-SAP systems) can be connected and interconnected.

What does SAP HANA mean, what is SAP S/4HANA?

SAP S/4HANA is the latest ERP software suite from SAP and has been the successor to SAP ERP (SAP ECC) since 2015. The solution can be deployed on-premise (i.e., on-site at the company) or in the cloud.

SAP S/4HANA is based on the HANA database - an in-memory database that allows data to be processed much faster than before.

What SAP modules and applications are there?

In the SAP ERP world, the individual applications for the various departments (such as finance, purchasing, production) are called modules. These modules in their entirety represent the usual structure of companies and are closely interconnected.

Under SAP ERP there are modules for

  • SAP FI (Financial Accounting) and
  • SAP CO (Controlling),

each also with further subdivisions, for example in

  • SAP FI-GL (General Ledger Accounting) or
  • SAP FI-AA (asset accounting).

Further modules in SAP ERP are

  • SAP SD (Sales and Distribution),
  • SAP PP (production planning),
  • SAP MM (Materials Management),
  • SAP QM (quality management) or
  • SAP HCM (human resources management).

Since the introduction of SAP S/4HANA, SAP no longer refers to modules.

Rather, SAP now breaks down its offering into nine so-called Lines of Business (LoB): sales and marketing, finance, manufacturing, supply chain, service, asset management, R+D/engineering, sourcing + procurement and HR.

Some content of the central functions is already included in the digital core of SAP S/4HANA and preconfigured in the standard. Other components must be additionally installed and licensed and - depending on the solution - can be operated on the system or used as a cloud solution (such as SAP Concur or SAP Ariba).

In addition, various industry solutions are available - as under SAP ERP - which are marked with "IS": for example, SAP IS-U (Utilities), IA-A (Automotive) or IS-R (Retail).

What are SAP Best Practices?

The Best Practices are preconfigured and standardized, immediately available processes, functions and associated technical objects - basically turnkey solutions.

They help to meet the basic requirements of companies faster and better or to implement a system such as SAP S/4HANA more quickly.

SAP provides the best practices in the form of so-called scope items. These are individual units of the best practices that can be activated.

What are in-house developments and what happens during the changeover?

Most companies have repeatedly extended their SAP system over many years and adapted it to their requirements with individually programmed applications. These in-house developments are also referred to as Y or Z developments.

However, IT landscapes built up in this way and supplemented again and again are generally too complex today. They are difficult to maintain and, due to their heterogeneity, are not suitable for new business requirements that demand speed and flexibility.

A contemporary architecture under SAP S/4HANA is therefore structured differently: it consists of the digital core, which contains all central functions in the best-practice standard, and separate solutions that are connected via modern interfaces:

  • SAP-released extensions via the SAP Extensibility Framework,
  • Business Cloud Apps from SAP or third-party providers, or
  • Side-by-side extensions (non-public or cloud).

When migrating, it is important to check whether the functions of the existing in-house developments are already covered by the best-practice standard. If this is not the case, it is possible, for example, to map the functions with the help of (existing or newly programmed) apps.

What is licensing all about?

Anyone who wants to use a solution from SAP must purchase a license. Because SAP's licensing model was difficult to understand, SAP introduced a new pricing model some time ago.

This new model was developed in collaboration with user groups, customers and partners, and is intended to be more transparent and make it easier to deal with licenses.

Basically, SAP now distinguishes between direct access (human access) and indirect access (digital access).

Direct access means that a user directly accesses the digital core of the SAP S/4HANA system. Indirect access means that an automated system (such as a bot) accesses the core or that access is not direct but, for example, via a third-party vendor's application.

Importantly, companies have a choice when making the switch and converting their existing contract: They can use the new pricing model (contract conversion), or they can stay with the old, user-based model (product conversion).

SAP for new customers: How does the implementation process work?

There are many questions to be answered at the beginning. These include, above all, the questions of what is to be achieved at all with an introduction of an SAP system such as SAP S/4HANA, what options are available, or even what a suitable operating model for the company might look like.

A detailed preliminary study for a roadmap - which can be carried out by an experienced consulting firm - provides important insights into whether and how exactly an introduction can be implemented and takes a look at central questions that often do not receive enough attention.

It is not only about the technical feasibility of an introduction, but above all about the effort and costs, the risks and the exact operational and strategic goals of the company. The answers help to find the right path and to be able to carry out a secure implementation.

If the company decides in favor of SAP, a thorough inventory of the current state of the existing IT systems must also be carried out. This analysis clarifies, for example, which systems and applications a company has been working with up to now and what interfaces and special features exist.

What do SAP consultants do?

SAP consultants support companies in all questions relating to SAP - in the design of IT architectures, the introduction of new solutions or in the selection of the appropriate licensing model.

They also prepare feasibility studies, take care of data migration, or take over the care and maintenance of systems after implementation.

To be able to perform these tasks, they not only have a very high level of technical knowledge in IT, but are also familiar with business management and strategic issues.

What do SAP user groups do?

SAP customers join together in SAP user groups such as the German DSAG (Deutschsprachige SAP-Anwendergruppe e. V.). The independent user groups represent the interests of their members vis-à-vis SAP.

The aim is to improve the products in the interests of the companies, to help users in practice with guides, to draw attention to problems in events or communications, or even to provide information about possible gaps in SAP's portfolio.

DSAG, for example, has over 60,000 members from more than 3,700 companies in Germany, Austria and Switzerland. They are organized in 200 working groups.

There are similar associations and organizations in other countries, for example the ASUG (Americas SAP Users' Group) in the USA with 100,000 members.