SAP has announced a roadmap for the development of its applications over the next three years.

But the business software giant still faces the challenge of migrating its vast base of legacy customers onto its latest technology to take full advantage of the planned advancements.

SAP chief executive Henning Kagermann told delegates at the company's Sapphire annual user conference that roughly half of its $1.2bn annual research and development budget will be spent on achieving the new Enterprise Services Architecture (ESA) strategy.

ESA will use the SAP NetWeaver web services platform to combine components of the mySAP application and deliver them as business-oriented services designed to meet company objectives - rather than making the organisation fit around the technology.

This style of development, often called a services-oriented architecture, is becoming increasingly popular for large-scale software programming. It promises to allow greater flexibility in deploying applications at a lower cost (Computing, 4 September).

'This means you can react faster, you can respond faster to market demands, you can adjust your business processes easier than before,' said Kagermann.

He says mySAP will be fully ESA compliant in 2007, with most of the necessary functions available for customers in 2006. The priority this year will be to create an inventory of web services components, and develop the first service - to support business collaboration.

Other services will focus on user productivity, business process flexibility and deployment options - allowing customers to decide which functions to keep in-house and which to outsource.

In 2005, mySAP will also include an ESA repository that could be used for custom-designed services from SAP users and partners.

'This architecture allows us to deliver the kind of software we could never deliver before,' said Kagermann.

The supplier is encouraging its customers to start planning now for how ESA could be introduced in their organisation.

'It will allow you to respond at low cost to the demands of your business,' said Kagermann.

But ESA depends on the use of the latest mySAP software and the NetWeaver platform.

Kagermann admits that about only one-third of SAP's 22,600 customers worldwide, have so far migrated to mySAP, with even fewer having fully adopted NetWeaver.

Most users are still running R/3, the company's client-server enterprise resource planning (ERP) system that was the foundation of its phenomenal success in the 1990s. SAP will continue to provide support and maintenance for R/3 until 2012.

'It is not a forced migration,' Kagermann told Computing.

The upgrade path takes R/3 users first to mySAP ERP, providing similar functions but supporting the latest technology platform, with the ability to add other features such as customer relationship management and supply chain management.

But Kagermann says users must realise the step up from the older product to the new will only increase.

'It is important to understand that what is evolutionary today can become revolutionary in a few years,' he said.

The challenge for SAP is to balance its desire to move users along its new roadmap with the recognition that it cannot provide sufficient resources to migrate such a huge customer base so quickly.

'We don't want a simple ramp-up, we want to stay within our scope as well,' said Kagermann.

'But it is important for customers to see the roadmap and its benefits.'

Homebase says it has achieved significant cost savings one year after completing a multi-million pound overhaul of its IT systems across 278 UK stores.

The DIY chain implemented SAP business software to integrate its supply chain management, merchandising, inventory control and order processing functions onto a single database.

More than 10,000 staff at head office and in stores have been using the system since it went live early last year, replacing a variety of disparate, mainframe-based applications.

As a result, Homebase has reduced the amount of stock it holds by 10 per cent, cut the amount of price markdowns on products, also by 10 per cent, and achieved a similar drop in the amount of inventory that goes missing from its supply chain.

'We have improved product availability and that means more sales,' said support and development manager Darrol Radley .

The project involved a lot of cultural change in the organisation, says Radley.

Store managers used to be responsible for replenishing stocks, but this function is now performed by a central team.

Control of horticultural products and hard goods has been integrated onto a single system for the first time.