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The Development of Enterprise Resource Planning Systems
version of SAP R/3 was released in 1992. Each subsequent release of the SAP R/3 software
contained new features and capabilities. The client-server architecture used by SAP
allowed R/3 to run on a variety of computer platforms, including UNIX and Windows NT. 27
The SAP R/3 system was also designed using an open architecture approach. In open
architecture, third-party software companies are encouraged to develop add-on software
products that can be integrated with existing software. The open architecture also makes
it easy for companies to integrate their hardware products, such as bar-code scanners,
personal digital assistants (PDAs), cell phones, and global information systems with the
SAP system.

New Directions in ERP
In the late 1990s, the year 2000, or Y2K, problem motivated many companies to move to
ERP systems. As it became clear that the date turnover from December 31, 1999, to
January 1, 2000, could wreak havoc on some information systems, companies searched for
ways to consolidate data, and ERP systems provided one solution.
The Y2K problem originated from programming shortcuts made by programmers in
the preceding decades. With memory and storage space a small fraction of what it is today,
early programmers developed software that used as few computer resources as possible.
To save memory, programmers in the 1970s and 1980s typically wrote programs that only
used two digits to identify a year. For example, if an invoice was posted on October 29,
1975, the programmer could just store the date as 10/29/75, rather than 10/29/1975. While
this may not seem like a big storage savings, for companies with millions of transactions
that needed to be stored and manipulated, it added up. These programmers never
imagined that software written in the 1970s would still be running major companies and
financial institutions in 1999. These old systems were known as legacy systems. Many
companies were faced with a choice: pay programmers millions of dollars to correct the
Y2K problem in their old, already outdated software—or invest in an ERP system that
would not only solve the Y2K problem, but potentially provide better management of
their business processes as well. Thus, the Y2K problem led to a dramatic increase in
business for ERP vendors in the late 1990s. However, the rapid growth of the 1990s was
followed by an ERP slump starting in 1999. By 1999, many companies were in the final
stages of either an ERP implementation or modification of their existing software. Many
companies that had not yet decided to move to a Y2K-compliant ERP system waited until
after the new millennium to upgrade their information systems.
By 2000, SAP AG had 22,000 employees in 50 countries and 10 million users at
30,000 installations around the world. By that time, SAP also had competition in the ERP
market, namely from Oracle and PeopleSoft.

PeopleSoft
PeopleSoft was founded by David Duffield, a former IBM employee who, like SAP’s
founders, faced opposition to his ideas from IBM management. PeopleSoft started out
offering software for human resources and payroll accounting, and it achieved
considerable success, even with companies that already were using SAP for accounting
and production. In fact, PeopleSoft’s success caused SAP to make significant modifications
to its Human Resources module. In 2003, PeopleSoft strengthened its offerings in the
supply chain area with its acquisition of ERP software vendor JD Edwards. Then, in late
2004, Oracle succeeded in its bid to take over PeopleSoft. Today, PeopleSoft, under

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