Editor's Notebook

wenty-four hours at the Sapphire '98 conference this fall offered me a quick look into the big-money, glamorous world inhabited by private-sector technology executives. All of downtown Los Angeles was crowded by attendees at Sapphire, an annual event sponsored by SAP, the German "enterprise resource planning" software company. The huge convention center was entirely given over to displays by SAP and its partners. At the famous old Biltmore Hotel, registrants found expensive gifts from SAP in their rooms. At night, lavish parties featured the Four Tops, the Temptations, and Rod Stewart.

The opulence reflected the large sums of money earned by SAP through sales of complex software capable of integrating many aspects of business operations. Budget and financial management functions can be meshed with procurement management, contract administration, human resources functions and much more to give executives a quicker and surer grasp of their units' performance. In the private sector, where rapid decisions on pricing and other issues can spell success or failure, the data is invaluable. I spoke to one tire company executive who said his firm was spending some $200 million to install SAP software--up to half of it for customizing the software with the aid of consultants costing an average of $200 an hour.

SAP America Inc., headquartered in Philadelphia, is making a push into government markets, and I started wondering how penurious agencies would justify spending such large sums. I got an answer from Thomas D. McGurk and Linda Fuchs, two financial management officials for the state of Florida. Florida is taking the SAP plunge, investing in human resources software at eight pilot sites. If the pilots succeed, the system will be extended to cover most of the state's 200,000-plus employees, at a cost of about $35 million over three years (or less than half of 1 percent of payroll and other HR costs). McGurk is using the $200-an-hour consultants, but bundling their costs in a larger service contract. With no comparable public-sector users available to serve as references, the Florida officials examined private-sector users of the software and came away convinced. Today, about a dozen state and local institutions are using SAP systems.

Purchasing such a big-ticket software package can be a bet-the-company decision. That makes the job of the sales force to make a few key breakthrough installations that will show the way for others. SAP has met the challenge in the American private sector, as the huge turnout for Sapphire demonstrated.

In the American public sector, it's too soon to tell. SAP systems are widely used by public institutions in Europe, and the company has been making inroads in North America, especially Canada. Some federal agencies have been showing interest and one, the National Credit Union Administration, is now running the system. Deeply experienced federal contractors like Litton PRC are gearing up SAP installation consulting services, betting that Uncle Sam will turn out to be a big customer. It will be interesting to see if large "enterprise" systems like those of SAP and rivals Peoplesoft, Oracle and American Management Systems take off in government. They can produce large efficiency gains, but require big up-front investments of money and time and a commitment to rationalizing business practices.