Many businesses purchase enterprise resource planning (ERP) systems to manage various business processes within the organization -- including accounting, human resources and purchasing -- in one integrated system. SAP -- an acronym for a German phrase meaning system analysis and program development -- is a computer program that some businesses use for their ERP system; it includes features for nearly all business operations.
One advantage of SAP is its flexibility. SAP allows companies to create their own rules within the SAP structure. These rules set the parameters for acceptable and unacceptable transactions. For example, the system will not allow a journal entry to process if it doesn't balance. Companies determine which employees access each area in the SAP environment. Only qualified personnel receive access to personnel data, such as wage rates. SAP also has the flexibility to integrate its data with a variety of databases. Users can download information into spreadsheets for further analysis.
SAP allows businesses to manage financial transactions, product life cycles and supply chain activities. The software has various analytical features, such as evaluating performance, reporting and decision making. SAP can analyze data from any source and conduct collaborative decision making. These features allow SAP to meet the needs of many complex businesses and government organizations.
A disadvantage of SAP is the high cost of purchasing and implementing this program. The company must purchase the software and hardware necessary to run the programs company-wide. Costs include labor costs of internal information technology (IT) employees or external consultants overseeing the process. Once the company implements the software, employees need to be trained. This involves training each employee in the functions they have access to. Ongoing costs include software maintenance and periodic upgrades.
Another disadvantage of SAP is the complexity built into the software. Most companies implement one feature or function of the software at a time, allowing employees to gain familiarity with the software before moving forward. The complete implementation process may take several years.