SAP - A Humble Giant From The Reality Land? Part 4: SAP's Strategy

SAP - A Humble Giant From The Reality Land?

Part 4: SAP's Strategy
P.J. Jakovljevic - August 7, 2001

Event Summary  

During its international e-business conference, SAPPHIRE, on June 12-15, SAP AG (NYSE: SAP), the leading provider of business software solutions, released a spate of upbeat announcements in its effort to portray itself as a reformed vendor of choice for all aspects of e-Business, including planning and collaboration. As an illustration thereof, SAP cited that its flagship suite has met with remarkable success in the market. SAP reached a major milestone in 2000 when the number of licensed users of its platform reached 1 million. Since then, more than 3 million additional users have reportedly licensed

About This Note: This is a five-part note covering the announcements at the SAPPHIRE conference, the market impact of those announcements, the challenges SAP faces, and user recommendations. Part Five will contain links to the previous parts.

SAP Strategy 

It appears as though SAP feels confident now that its software solutions outside core ERP can stand on their own and attract new customers beyond its humongous install base. SAP strategy is to decouple systems into components, to transactionally connect them through exchanges, and to present the information to users through portals. To that end, SAP has identified the following product lines as main pillars of its product strategy:

  • Portals - through its SAP Portals subsidiary

  • Market places/Internet exchanges - through its SAPMarkets subsidiary

  • SCM - through SAP Solutions subsidiary

  • CRM - through SAP Solutions subsidiary

  • PLM - through SAP Solutions subsidiary

Portals - Through Its SAP Portals Subsidiary 

Portal solutions are the linchpin of SAP's technology transition strategy, as they are aimed at simplifying end-user access to corporate business data and other information stored in a variety of heterogeneous applications. To ensure seamless user access and rapid response, enterprise portals have to provide integration at the user level. SAP believes enterprise portal and information products from SAP Portals will be the easiest, most powerful way for people to directly take charge of information and processes with one entry point to the wide variety of structured and unstructured information, as well as legacy systems already in use in the business.

The SAP Portals portfolio includes enterprise portals, business intelligence applications, content offerings and professional services. Enterprise Portal offerings comprise the Enterprise Information Portal, Enterprise Collaboration Portal and Enterprise Unification Portal. SAP must be pleased that its portals strategy has been endorsed even by a former archrival Baan (see, It Is Possible - SAP And Baan Strange Bedfellows).

Market Place/Internet Exchanges - Through Its SAPMarkets Subsidiary 

Exchanges would connect systems at the business process level. The strategy for private exchange solutions should expand the benefits of integration and collaboration within an enterprise and across business boundaries. SAPMarkets delivers solutions that automate business processes across boundaries, supporting the full-range of exchange-based business processes for SCM, e-procurement, and PLM.

Having departed from ill-fated public exchanges, SAP has refocused on private exchanges. The SAPMarkets private exchange strategy is based upon MarketSet 2.0, the jointly developed product from SAPMarkets and Commerce One. MarketSet provides integrated, collaborative e-marketplace applications that support processes for the complete value chain, including design, sourcing, procurement, planning, order management and business intelligence. Key application capabilities in MarketSet 2.0 include Collaborative Design & Engineering, Collaborative Procurement, Order Management, Collaborative Planning and Analytics.

Another product, Enterprise Buyer is a collaborative procurement solution that links to the entire supply chain for contract purchases, configurable goods, and catalog-based purchasing. Key application capabilities in Enterprise Buyer 2.0 include real-time supplier communications, workflow efficiencies, support of most types of procurement, integration with collaborative planning and engineering and browser and wireless access.

SCM - Through SAP Solutions Subsidiary 

After years of wavering, SAP's SCM software, as well as CRM and PLM software seem to be catching up with the functionality of niche specialists. While SAP's aspirations of selling these as standalone point solutions are still going to face fierce pure-players competition, SAP can at least rely on cross-selling to a huge existing base. The percentage of revenue coming from SCM speaks for the fact that resolving the 'nuts-and-bolts' collaboration problems that span multiple enterprises and multiple functional areas is becoming more important than ever.

Supply Chain Event Management (SCEM) within mySAP SCM should create a more responsive and cooperative networked supply chain via adaptive intelligent agents that monitor, predict, and react to evolving events in the supply chain. Given that most ERP vendors provide constrained-based planning or advanced planning & scheduling (APS) functionality, SAP's trump might be its broader strategy to support extended enterprise business processes via user-level integration through portals and via process-level integration through Private Marketplace Exchanges (PTX). By acknowledging the existence of a heterogeneous applications environment SAP now provides its planning and collaboration supply chain functionality to the real world of trading partners who need to jointly forecast and plan but who may not all be on the same instance of R/3 or who may even run on another ERP system.

While initially tardy in joining the e-commerce gold rush, SAP has recently exerted immense effort and expertise in delivering collaborative commerce business maps that define steps, roles, technologies and value statements of more than hundred collaborative business scenarios. The scenarios have been incorporated into the recently announced SAP Solution Architect tool, which comprises a number of other integrated tools such as the e-Business Case Builder, AcceleratedSAP and Best Practices for The SAP Solution Architect is connected to the SAP Solution Manager, a portal for implementing the system operations infrastructure and supporting ongoing operations of an entire enterprise solution. Both the SAP Solution Architect and the SAP Solution Manager are connected to the SAP Service Marketplace, which provides a partner directory, catalog-based buying and selling of services, business collaboration with the SAP community and information exchange forums. These three elements together are devised to form SAP's service infrastructure covering the entire life cycle of an e-Business solution.

CRM - Through SAP Solutions Subsidiary 

With mySAP CRM 2.0, SAP delivered a CRM product that was only strong enough to attract the business within the installed base. However, with the release of mySAP CRM 3.0, due out at in Q3 2001, SAP could significantly close the functional gaps with CRM market leaders. While the functionality of the mySAP CRM product suite has yet to match the breadth and depth of CRM pure players (e.g., Siebel Systems), SAP's (as well as PeopleSoft's, Baan's and Oracle's for that matter) huge potential advantage is the integration of its CRM, SCM and eBusiness products to its back-office ERP systems that handle the vital internal processes so important to customers. The new system should potentially allow manufacturers to get a 360-degree view of all their customer relationships. This kind of knowledge only comes from integrating CRM software with back-office systems. Additional advantages of SAP CRM product are its alleged interconnectivity to other third-party ERP systems, the loyal customer base and SAP's approach of not over hyping its product capabilities.

With the new release, the Customer Service area should include an Interaction center, Customer self-service, Service management, Claims management, Field service, Dispatch modules, and SAP features Order Fulfillment. The addition is SAP features Order Fulfillment which covers an area long ignored by leading CRM vendors, even though it is a key component of the customer relationships.

SAP has completely rewritten the sales portion of the R/3 Sales & Distribution (SD) module on the platform. The only apparently poor functionality in the product lies in the realm of dedicated support for partners' relationship management (PRM) throughout the entire sales processes. The major improvement with the new release, again, will be the ability to deploy the product entirely independently of an R/3 or other components. This again illustrates SAP's decision to make its products more flexible and open. While SAP' s success in selling outside of its installed base remains to be seen, the release represents an important step forward due to the touted integration to other ERP systems that exist in most of SAP's corporate customers' divisions. It would now be quite conceivable for a new SAP customer to start with CRM or any other component, rather than traditional R/3 ERP system.

PLM - Through SAP Solutions Subsidiary 

Where SAP has a likely lead over most of its competitors is with the mySAP PLM product, which does not stop short at the basic functionality like engineering change management (ECM) and product data management (PDM). As mentioned in Part Two, the application also includes Product Designer, which is aimed at capturing product requirements in a collaborative way with customers and suppliers; Recipe Management, which is aimed at consumer goods and process manufacturers; and Asset life-cycle management for complex engineer-to-order (ETO) and asset intensive firms. The other modules include Life-cycle data management, Program and project management, Life-cycle collaboration, Quality management, and Environment, health & safety (EH&S).

Better risk management, better component usage, faster time-to-market, reduced cost-to-market, reduced maintenance costs and improved after market sales and service are substantial business benefits promised by PLM. SAP seems to have a product that is well devised and a sizable reference customer base, which could soon promote it to the leadership position within the PLM market.

This concludes Part Four of a five-part note on recent developments covered by the SAPPHIRE e-business conference. Part One covered Alliances and Partnerships. Part Two covered SAPs expanding functionality. Part Three discussed the Market Impact. Part Four discussed SAP's strategy. Part Five covers the challenges SAP faces and User Recommendations.

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