Innovation Life Cycle Model for SAP

Innovation Life Cycle Model for SAP Introduction As an answer to global competition, companies have increased the preface of technologically sophisticated products as well as adopted advanced technologies and modifications in organisational structure and processes. For many firms, the development of new products and services is the crucial point of their business strategy and a decisive factor for competitive strength and survival (Stumpfe n.d.).. A firms competitive position is determined by their ability to innovate products and the time required to bring new products to the market. Firms have to launch new sophisticated products in increasingly fast cycles and their ability to ramp up to full scale production volume rapidly is crucial for success (Pisano 1997). A couple of years ago, such technologies called business intelligence (i.e., software solutions used on handling tons of information) were available only to the worlds biggest firms. However, as the cost of computing and storage has dropped and the systems have been enhanced and cost effective, the technology has moved into the majority. Firms are pulling together more information than ever before. In the past, they were stored in different systems that were unable to communicate to each other, such as finance, human resources, or customer management, but just recently, systems are being connected and companies are employing data-mining techniques to get a complete picture of their operations that let firms to manage more efficiently, analyze trends, and develop their forecasting (The Economist Newspaper Limited 2010). Innovation Lifecycle Model This lifecycle model can be understood as a three-stage model of technological development associated with a particular product technology (Williamson 1975). In the explorative stage many diverse models or designs are created, in the development stage products develop into standardized into a dominant design, and in the mature stage only small changes happens inside the dominant design (Frenken, Silverberg and Valente 2008). Although the product lifecycle model is widely accepted and often applied in empirical research, innovation scholars have failed to develop systematic theoretical models that explain the different stages of technological development along the lifecycle (same as Frenken, Silverberg and Valente 2008). In this study, an attempt is made to contribute to innovation lifecycle theory by using the SAP Database system and analyze its pattern. Dependent on the stage in product and process life cycle and on competitive strategy there can exist a complementary or a competiti ve relationship between the implementation of product and process innovations. The product-process life cycle theory of Utterback and Abernathy (Utterback, Abernathy 1975) provides a useful model helping to understand the pattern of industrial innovation processes. This model succeeds in encompassing the mutual relationships between the stages of SAPs product life cycle, the related production process` stages of development and competitive strategy elements (Stumpfe n.d.). SAP History During the 1970s,five former IBM employees made a decision to start their own company, when IBM rejected their recommendation to develop software designed to be used by several users simultaneously(Neumann and Srinivasan 2009). They launched their private corporation in 1972. It was named SAP (Systemanalyse and Programmentwickung-Systems Analysis and Program Development) (same as Neumann and Srinivasan 2009).The name was coined after the plan on which they have been developing at IBM.The company had its headquarters in Weinheim, and its main office in Mannheim Germany (Neumann and Srinivasan 2009). Characteristic Fluid Pattern Transitional Phase Specific Phase Competitive emphasis placed on.. Solution strategy for market entry. Innovation stimulated by Market requirements for advanced solutions application Predominant type of innovation Data processing system. Product Line Financial accounting software suite Production Processes Focused on running financial accounting software through mainframe. During this Phase of the life cycle, technical energy is expended, using materials and technologies generally available in the marketplace (Henderson and Clark, 1990).Within a year of being established, SAP had already completed its first solution for financial accounting. This single management system, designed as a real-time book-keeping and transaction processing program, tied ICIs (Imperial Chemical Industries; first SAP customer) information databases together (same as Neumann and Srinivasan 2009).It became known as â€Å"R1†, meaning that the data was processed immediately after being entered or real-time (Payne, Roets and Schlanderer 2009). It is important to note that during this early phase in the computer industry , business data had to be entered manually at the entry terminal and saved and stored, which basically means Batch processing. Inevitably the introduction of Innovation by SAP which is the real-time processing become very much popular and at that time was a genuine milestone (same as Neumann and Srinivasan 2009). At first SAP only uses the English Language for its first customer ICI,however it has obtained valuable insights from the latter on the business management side of international operations, as a result in 1975 SAP became multilingual (Lofthouse 2000). In the 1980s SAP experienced rapid growth and benefited from major improvements in the software industry (same as Neumann and Srinivasan 2009).Entering the market at that time were Computers with enhanced price-to-performance ratios which helped SAP to expand its customer base (Lofthouse 2000). During also this time the basic shape of a client-server architecture was developed (SAP Global n.d.).SAP continuously enhanced its already distributed program modules and has released the SAP R/2 system, with this the firm claimed market leadership for large companies and was ready to enter the international software market (same as Neumann and Srinivasan 2009). Characteristic Fluid Pattern Transitional Phase Specific Phase Competitive emphasis placed on.. Solution strategy for market entry. Product variation (SAP R/2) Innovation stimulated by Market requirements for advanced solutions application Increased demand by Multinational/Global Market . Predominant type of innovation Data processing system. Process innovation by system that can handle different languages and currencies. Product Line Financial accounting software suite SAP R2 Production Processes Focused on running financial accounting software through mainframe. Banking on systems stability and reliability has improved SAP R2 The Development of the Database Market A market consolidation has taken place since the mid-1990s, initiated in 1994 with the takeover of ASK/Ingres by computer associates, and reaching its highpoint so far in the middle of 2001 with the takeover of Informix by IBM (SAP Global n.d.). During the mid 90s, SAP ushered in a new generation of enterprise software, from the previous mainframe computing to a combination of uniform appearance of graphical interfaces which is called the SAP R/3 (same as Neumann and Srinivasan 2009). With this release, SAP tapped a whole new market among small and medium-sized enterprises due to relatively low cost and effective business process. Adapting to the Times SAP have realized that the internet is a very powerful force, that if utilized properly will result in more generation of income, with this recognition and incremental improvement on the R/3 system- which is named R/3 version 3.0 (same as Neumann and Srinivasan 2009) provided the first completely Internet-enabled business application package, which also increased its viability by making it more user-friendly (same as Neumann and Srinivasan 2009).They have also created the mySAP.com strategy, which represented a complete restructuring of the product portfolio and the beginning of a new direction for the company (same as Payne,Roets and Schlanderer 2009).Using this latest web technology, mySAP.com combined e-commerce solutions with the existing Enterprise Resource Planning (ERP) applications, it also enabled SAP to offer an integrated business platform that has the combination of both front-end and Backoffice processes (same as Neumann and Srinivasan 2009). SAP was the first software c ompany to practise the double approach of giving standard software that could easily be implemented and managed on the one hand, while at the same time watching for and integrating key global business trends into their software (same as Neumann and Srinivasan 2009). Open Source Instead of Marketing Despite the increasing breadth of functions of the SAP DB database system, SAP AG does not intend to market the database system commercially, and to enter the DBMS market as a new competitor. Consequently, SAP DB is offered license-free in connection with SAP solutions. The users of mySAP.com applications must simply pay a support and maintenance fee that is determined as a fixed percentage of an accrued license price (Anon n.d.). An advantage of using SAP as an ERP system is that SAP has a very high level of incorporation among its individual applications which ensures uniformity of information throughout the structure and the business itself (Kumar n.d.). To support processes well, we need to have information systems and integrated information system support processes in an organization (Scheer 1998). In a standard SAP project system, it is separated into three environments, Development, Quality Assurance and Production (Kumar n.d.). The development system is where most of the execution work takes place. All the final testing is conducted before moving the transports to the production environment which is where the quality assurance system kicks in. On the production system environment all daily business transactions happen, to all companies, the production system should only include transports that have passed all the tests (same as Kumar n.d.) SAP is a table drive customisation software. It provides businesses to make fast changes in their enterprise needs with a uniform set of programs. User-exits are provided for business to add in additional source code. Tools such as screen variants are provided to let the user set field attributes whether to hide, display, or make them fixed fields (Kumar n.d.). This is what makes ERP system and SAP in particular so flexible. The table-driven customisation is driving the program functionality instead of those old-fashioned hard-coded programs. With this, new and modified business requirements can be quickly employed and tested in the system. Many other business application software have seen this table-driven customisation advantage and are now changing their application software based on this table customizing concept (Kumar n.d.). The standard programs and tables should not be changed as far as possible in order to minimise the upgrading costs (same as Kumar n.d.). The main purpose of using standard business application software like SAP is to decrease the amount of time and money spent on improving and testing all the programs. Hence, most companies will try to make use of the existing tools provided by SAP(same as Kumar n.d.). Characteristic Fluid Pattern Transitional Phase Specific Phase Competitive emphasis placed on.. Solution strategy for market entry. Product variation (SAP R/2) Never ending quality improvement. Planned quality along the entire product lifecycle and effort for Independence motivate development of own database, as well as simpler database system. Innovation stimulated by Market requirements for advanced solutions application Increased demand by Multinational/Global Market. Global Organization, plans on development in multiple international locations. Predominant type of innovation Data processing system. Process innovation by a system that can handle different languages and currencies. Creation of software applications for customers who primarily works on end to end business processes. Product Line Financial accounting software suite SAP R2 SAP R3, SAP Net weaver, mySAP.com Production Processes Focused on running financial accounting software through mainframe. Banking on systems stability and reliability has improved SAP R2 Linking e-commerce solutions to existing ERP applications, using state-of-the-art Web technology. Modern Architecture for High Performance and Availability Due to its modern architecture, SAP DB provides a high level of performance, scalability and robustness. In this way, the database can fulfil the performance demands of application environments with thousands of concurrent active users and very large data volumes. At the centre, multi-thread /multi-server architecture ensures a high degree of scalability with sparing handling of server resources. SAP DB fits flexibly into modern architectures such as multi-processor systems or cluster configurations, and uses the advantages for example, where high availability is concerned, without costly configuration. Due to the customisable architecture, SAP DB is suitable as a central database system both for three-tier and two-tier client-server environments (SAP DB n.d.). Effective locking mechanisms, efficient caching of data, intelligent optimisation of SQL applications, extensive parallel processing of read and write processes, and strategies to minimise the required write operations are among the architecture characteristics that significantly affect response times and throughput (SAP DB n.d.). SAP DB is designed for interruption-free round-the clock operation. Required maintenance tasks, such as configuration customization, the extension of data or log areas, data back-up, creation of table indexes and so on, can be performed during production operation without affecting the active users (SAP DB n.d). High Level of Automation for Unattended Operation As well as performance and robustness of SAPs Database Management system (DBMS), the main focus of the further development of SAP DB is on simpler operation of the database system (SAP DB n.d.). The vision of a database system that automatically manages itself to a large degree, and only requires minimal monitoring by the database administrator, is the guideline of development. Both the setting up of the database system and the running operation are largely automated. During configuration, SAP DB automatically sets the core parameters in accordance with the existing system environment. During the definition of database objects such as tables and indexes, the database administrator works exclusively at the level of logical schemas: SAP DB automatically makes the assignment to the physical data structures in mass storage, and the database system also handles the growth of tables and indexes completely dynamically (same as Anon n.d.). Analysis on Innovation Life Cycle Model for SAP Usefulness Lifecycle Models are largely qualitative tools by which regularities in the progress of an object between its generation and degeneration are identified; these regularities are used to deduce prognoses for future evolutions (Bullinger 2008). The Innovation Life Cycle (Utterback and Abernathy 1975) helps in determining the pattern and the basis of competitive strategy can and probably can change for most firms as the industry evolves. At the first stage (fluid phase), the introduction of the technology innovation of SAP was described as it entered the market with its financial accounting software. The dominant design used was also established which is the SAP Database management system due to its stability and reliability, moving it from the transition phase into the specific phase. The pattern starting from the product innovation was also taken into account. SAP and probably other firms in general went forward into a process innovation. Another useful attribute of this model is that the strategies employed by firms during the models stages can be clearly identified and analysed. Limitation Although the Innovation Life Cycle Model helps in examining and analysing the nature of competition within the industry to identify opportunities and potential threats, it has also several limitations. For one, this model basically is just a generalisation. In actuality, life cycles do not always follow a standard pattern that a firm has to go through. In some cases, growth is so rapid that the embryonic is skipped altogether, while others industries fail to get past the embryonic stage. Industry growth can be revitalised after long periods of decline through innovation and social change. For example, the health boom brought the bicycle industry back to life after a long period of decline (Hill and Jones 2010). The time span of the stages can also vary from significantly from industry to industry. Some industries can stay in maturity almost indefinitely if their products become basic necessities of life, as in the case of the auto industry. Other industries skip the mature stage and go straight into decline, as in the case of the vacuum tube industry. Transistors replaced vacuum tubes as a major component in electronic products even though the vacuum tube industry was still in its growth stage. Still, other industries may go through several shakeouts before they enter full maturity, as what appears to be happening in the telecommunications industry (Hill and Jones 2010).Another criticism is that they overemphasize the importance of industry structure as a determinant of company performance and underemphasize the importance of variations or differences among companies within an industry or a strategic group (McGahan and Porter 1997). Prediction of Future Evolution The existence of a life-cycle pattern of industrial growth is a significant stylized fact for the purpose of constructing a theory of uneven development, but the question remains as to how a particular pattern is itself to be explained (Harris 1978).It is quite difficult to predict what will be the future evolution of SAP if the projection is solely based on the life cycle model. Markus and Tannis (2000) correctly identified that success is a dynamic concept, and could be very different depending on the phase of implementation. Apparently, with SAPs trend of rapid growth and profitable annual revenues, we could assume that they will continue to grow and develop more reliable products and expand their client base. However, this is just a probability based on the trend we see in this model. A lot of factors still needs to be considered to really determine what will happen for the future of SAP. Conclusion Product Innovation is a vital task for the modern corporation (Shavinina 2003).Using the Innovation Life Cycle Model, one can understand how a technology such as SAP goes through the following stages. This model also aids in observing some patterns similar to other firms. For instance, during the fluid phase, it can be observed that SAP focused on determining first what the market really needs and concentrated on product innovation for their customers. During that stage and throughout the transition, the focus also changed as SAP reacted to the economic climate, industrial factors, and competition by finding opportunities to create more products based on their dominant designs success in terms of stability and reliability. They also provided again customers with a variety of software solution strategies to help their businesses. During the specific phase, SAP still continued to expand its clientele and created advanced software solutions to cater to other business process needs. They focused on maintaining their strategy of never-ending support to their clients while offering innovations to their current product roster We can also notice that SAP as a large firm is active in a range of technologies broader than the products they make, this reflects the multi-technology nature of their products, and the knowledge required to coordinate in-house product innovation with innovation in related production systems and supply chains.(Dosi, Teece and Chytry 2005). SAP has yet to saturate the market since a lot of business entities in demand of their products and services. Hence, it can be assumed that SAP is on the maturity stage of the life cycle but still on the growth stage. Looking at their share value with an increasing trend, it can be inferred that they are heading to the right direction (see figure 5). What does this suggest about using the innovation life cycle model? It is simply providing us a snapshot of a specific firms progress. Like other models, it has its own limitations and usefulness, most importantly for analysts, managers, and researchers who need to analyse and formulate strategies using any model which complements a target firm in a specific industry. Process of Literature Search The research was started by searching for any relevant material, both print and online, on the topics Innovation Life Cycle, Technology, etc. The technology chosen was SAP Database for Business Management, since it is a relatively familiar topic and sources are abundant on both print and internet media. After gathering materials, the sources were read to determine their relevance to this research. The model used was the Innovation Life Cycle Model of Utterback and Abernathy to have a clear process of steps related to SAP from its fluid stage to the specific stage, and to analyse patterns and changes throughout the whole model.