What is SAP

This Post is part of the Free Step by Step SAP learning Course.
You can access the Course here

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In this lesson you will learn that SAP is a business software.

You will understand

• Significance of SAP and why more than 70% of all MNC corporations, big and small use it to run their business operations.
• Meaning of the term ERP and how it applies to business.
• Why it is a lucrative career to start in SAP as opposed to other technologies like Java and .Net. 

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Before you start reading this lesson, first watch this video which I have recorded to explain 10 Beginner Questions in SAP. This will help clear some of your doubts. Then you can continue reading further.

Link to video: https://youtu.be/Dy2YdeJdEG0

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Before we start learning about SAP, answer a simple question for me ?

Can you name one of the expensive and one cheapest products you have purchased last year?

If you ask me , then as an example, I will say the most expensive thing I bought was my iPhone 6 and the cheapest thing I bought was a can of coca-cola.

Can you tell me what is common in these two things ?

The common thing (apart from the fact that both use SAP to run their business) is that both were manufactured in a factory, both were packaged and both were shipped to a shop for sale.  Both these products were part of a their respective businesses.

You may be wondering why am I talking about business when you actually want to learn about SAP.

I will explain that in a moment but for now since we are talking about business, so lets quickly understand what a business exactly is.

Question : Can you guess what are the 2 important aspect of any business.

Answer :

1. Customers
2. Employees

And what do you think keeps a business competitive.

1. Information.

In the age of computer automation, businesses need to be able to process information about their customers very quickly and accurately. What does your customer want? How will you make what they want? When can you deliver it to them etc. High end Computer systems enable businesses to do this.

A business organization is made of different process units. Example of some of these units may be

• Accounting
• Human Resources.
• Supplier relationships.
• Production Management.
• Sales and Distribution
• Marketing

Now imagine there is a Company – ABC Corporation and every process unit/department of this company works on a separate computer system built for their own needs. So Accounting uses their own software, HR uses their own software and so on. This would mean that the same company data would be stored in different systems within the same organization. Do you see the flaw in this approach.

1. Data redundancy – Same data stored in different places not good.
2. Data integrity – Data stored in several systems may cause inconsistencies.
3. Data security – several access points to data can be a cause for data breach.

And many more drawbacks.

Now If I ask you, How would you come up with a solution to fix these flaws ? Can you think of a solution.

Well the solution to this question is quite simple. Lets ask all the departments to use only a single integrated computer system.

That means all data will be stored in a central location and various modules(computer programs) will be developed to cater to the computing needs of the different departments.

This is the exact concept of an ERP system.

 

Definition of ERP.

Enterprise Resource Planning or simply ERP is a concept and as the term suggests, means planning every resource of the enterprise/company. A company has various resources/assets like raw materials, machines, inventory, human capital/employees, vendors, customers etc. Interaction between each of these resources if planned such that there is no redundancy or duplication of effort then efficiency can be achieved. This is the core of the ERP concept and systems which enable companies to achieve this are called ERP Systems.

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The SAP software is one such ERP solution. Simply speaking it is a computer software system which has a lot of modules developed on a single platform to handle data processing requirements of several departments of an organization. All modules integrate with each other and share the common information since they are all on the same platform.

You may be wondering then why do MNC, big and small corporations like Apple, Coca-Cola, Nike, Mercedes-Benz, British Petroleum, Tata-Steel, Reliance, eBay, Doha-Qatar Bank and a large number of companies in various industries across the world rely on SAP and not on custom built softwares based on C#, Java etc. 

The answer to this lies in the power of ERP. Tell me if you want to create a one page document what would you do ? Wont you simply install Microsoft word and begin typing the document in it, rather than programing the whole word application yourself and use that to type your document in ?  Similarly companies don’t want to build complete custom software to record their business transactions.

Most of the core operations that businesses do in a particular industry are pretty much standard and hence SAP already delivers solutions for these within the software.

You might also be thinking, if SAP already has everything prepackaged then what will my role be in such a company. I will cover these topics in the separate Career section of the blog.

Also another questions to consider, are there not other ERP softwares like SAP doing the same thing ? Indeed there are but they just don’t have all the capabilities as SAP has. Look at the following chart below.

 

Source: http://whatiserp.net/

If you look at this chart, you will notice that in the ERP market, SAP has a market share of 32% which means a major chunk of the businesses use SAP for their ERP needs.

With SAP entering the cloud computing area and with its offerings of SAP Fiori, SAP HANA, SAP UI5 frameworks in addition to its core on-premise installations based on SAP ABAP Technology, SAP is bound to grow more in the future. If you are thinking of entering this field then now is the right time to do so. If you aim for global implementations and working on world-wide multinational clients then SAP can take you there.

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Summary :

So in this quick lesson on SAP introduction, we understood the importance of ERP systems and where SAP fits within the ERP model of computer systems.

Friends, this was a basic introduction to ERP, incase you want to read the textbook definitions and detailed documentation you will find it here.

In the next lesson I will take you under the hood to understand the basic architecture of this software.

Please provide your feedback on this lesson in your comments below.
Let me know what you liked and did not like about this introduction.

I am going to also upload some videos on the introduction so your feedback will be valuable.
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