Report to the Lead Member for Corporate Services
2nd February 2004
SAP Hardware and Software Upgrade
Background
SAP R/3 software has been live at Salford City Council since April 2000. The
hardware and software were installed in October 1999 and financed by way of
a five year operating lease. The current lease expires in November 2004.
The initial implementation replaced the existing general ledger, accounts
payable, accounts receivable and payroll systems and also computerised the
council’s purchasing processes.
The original fixed-price contract with
PricewaterhouseCoopers included the provision of hardware, software and
implementation services. The hardware was specifically sized to guarantee
system performance for the level of transactions in the specification, based on
holding three financial years’ data.
It is proposed to replace the existing hardware with higher specification
servers to provide greater capacity to store data, guarantee performance and
enable SAP developments to progress.
It is also proposed to upgrade the current SAP software from version 4.6B to
the latest version 4.7 (also known as SAP Enterprise).
Software Upgrade
Salford is currently using SAP’s R/3 software release 4.6B, having upgraded
from release 4.5B in August 2000. Since August 2000 there have been two
further software releases, 4.6C and 4.7 (which is also referred to as R/3
Enterprise). Release 4.6C did not offer any significant benefits to Salford and
as SAP had stated that public sector payroll functionality would be part of
SAP’s standard software solution from release 4.7, the preferred upgrade
path would be direct from release 4.6B to 4.7.
This would enable
amendments (including legislative changes) to the SAP payroll module to be
tested and implemented as soon as possible and without additional software
patches being required from SAP. This is a significant benefit to managing
SAP payroll functionality for public sector organisations.
In addition to the core software (4.7), R/3 Enterprise has additional integration
tools to assist e-business strategies.
The existing SAP version will run out of maintenance at the end of this year.
Maintenance charges for 2004 have been increased by 2%.
It is, therefore, proposed that a project to upgrade the SAP software should
proceed.
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Current hardware
Salford currently uses Sun Solaris servers to run the R/3 software. This
currently comprises of a development server, a training server and two
application servers connected to a database server to run the live (production)
system. The annual maintenance charges for supporting this hardware
infrastructure are currently £60,000.
There is only one more slot available to add further disk space to the
production database. This would add a further 36 gigabytes to the system
that is currently sized at 140 gigabytes.
The current hardware is on a five year lease that expires November 2004.
New hardware
During 2003 many major hardware suppliers introduced new servers and
operating systems at very competitive rates. The servers now available are
more powerful and more robust with better operating and system monitoring
tools available to system administrators. With current market conditions being
favourable, the Sun Account Manager was contacted and asked to provide
estimates to migrate to new hardware. Sun were provided estimates of
increased transaction and performance requirements to an appropriate
system infrastructure proposal. The technical proposal would replace the
current infrastructure and provide approximately double the current memory
and between two and three times faster processing with three times the
current database storage capacity.
Estimated costs
Cost
£
Item
Hardware and operating software
Implementation services
3 years maintenance
Total
79,000
23,000
39,000
141,000
The implementation services also include configuration that would enable
both R/3 4.6B and R/3 Enterprise to operate on the hardware. This would
assist the planned system upgrade.
The above costs assume that Salford will replace the existing hardware with a
similar infrastructure. However, with current hardware prices, there would be
merit in having an additional production database server to provide an even
more robust system.
The total costs are less than the current maintenance charges paid to Sun
Microsystems Systems Ltd. It was clear with these estimated costs and the
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potential further use of SAP’s R/3 software that migration to new hardware in
early 2004 would be beneficial to the Council.
The following options were considered:Option 1 – Sun Solaris Unix servers
Migrate to new Sun servers using Sun’s latest Solaris operating system. This
technology is known to the Salford SAP administrators and would be the
lowest risk to the SAP system and therefore the lowest risk to Salford City
Council’s main business system. This option would enable the earliest
migration and upgrade date to be achieved.
Three quotations have been received from recognised Sun hardware
providers as detailed in the following table:Company:
Hardware*
Implementation services
3 year maintenance
Sub total
Q Associates
£
Esteem
£
Sun
£
101,734
27,000
46,588
148,322
94,312
21,950
44,213
138,525
127,298
21,950
57,420
184,718
175,322
160,475
206,668
(excluding implementation
services)
Total
Option 2 – Other Unit server providers
There are other major Unix hardware providers in the market, including Sun,
Compaq, IBM and Hewlett Packard. All these suppliers could provide a
suitable Unix platform to run the SAP system. Using another Unix provider
(i.e., not Solaris Systems) would require the SAP system administrators to be
trained in the new operating system and performance monitoring tools. In
addition to the additional training requirement, additional time would be
required to evaluate bids from other Unix server providers.
Option 3 – Windows NT
There is an option to move to a completely different platform. This option to
move to an entirely different system infrastructure would be more complex
and at a greater risk to the SAP operation than either Option 1 or Option 2
above.
It is considered that Option 1 is the most appropriate solution to the council. It
enables the current skills and technical expertise of system administrators to
be utilised and represents the lowest risk to the council.
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Costs
The current hardware and software lease expires in November 2004.
Negotiations have taken place with the lessor, Heller Global Vendor Finance
Ltd., to agree a residual value to be incorporated into a new lease for the
replacement Sun hardware. The comparative costs are:Current
Budget
2004/05
£000
Lease hardware and software
New lease – hardware & software
(3 years)
Hardware maintenance
Software maintenance licence
Revised
Lease
2004/05
£000
Budget
2005/06
£000
277
185
117
nil
117
60
136
15
136
15
136
473
453
268
The replacement of the hardware can therefore be accommodated within the
existing leasing budget in 2004/05 and will deliver a significant saving in
2005/06.
Discussions are currently taking place with SAP about user licences relating
to portals, employee self-service, customer self-service, etc. It may be
necessary to utilise part of the cost saving to fund licences for future
development projects.
Implementations
In co-operation with Salford’s SAP support provider, Axon Solutions Ltd., a
hardware migration and software upgrade plan has been prepared. The
target is to achieve upgrade of the SAP production server over the Easter
weekend 2004. The project plan is attached at Appendix 2.
Recommendation
To progress the SAP development plan shown at Appendix 1 it is
recommended that the purchase of new hardware and the upgrade of SAP
software be approved.
It is also recommended that, based on quotations from three providers, an
order be placed with Esteem for the supply of the hardware and services
detailed at Appendix 2.
Recommend arrangements be made to finance the hardware and software by
way of an operating lease over a period of three years.
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