Organization

SAP R/3 is arranged into distinct functional modules, covering the typical functions in place in an organization. The most widely used modules are Financials and Controlling (FICO), Human Resources (HR), Materials Management (MM), Sales & Distribution (SD), and Production Planning (PP). Those modules, as well as the additional components of SAP R/3, are detailed in the next section.

Each module handles specific business tasks on its own, but is linked to the others where applicable. For instance, an invoice from the Billing transaction of Sales & Distribution will pass through to accounting, where it will appear in accounts receivable and cost of goods sold.

SAP has typically focused on best practice methodologies for driving its software processes, but has more recently expanded into vertical markets. In these situations, SAP produces specialized modules (referred to as IS or Industry Specific) geared toward a particular market segment, such as utilities or retail.

Using SAP often requires the payment of hefty license fees, as the customers have effectively outsourced various business software development tasks to SAP. By specializing in software development, SAP hopes to provide a better value to corporations than they could if they attempted to develop and maintain their own applications.