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SAP Bolsters NetWeaver's MDM Capabilities Part Three: Market Impact

Written By: Predrag Jakovljevic
Published On: December 3 2004

Market Impact

SAP NetWeaver, has become the main pillar of SAP AG's (NYSE: SAP) strategy to remake itself into a platform vendor. With this and mySAP Business Suite, the broadest suite of enterprise applications in the market, SAP will sell possibly everything from application servers via middleware to Web services (envisioned, in SAP's case, to orchestrate business processes by means of packaged composite applications across and atop existing systems). In mid-July, SAP announced that it has acquired substantially all of A2i, Inc a Los Angeles, California-based (US), privately-held software company, which, since 1993 has developed and marketed xCat, the platform for enterprise-wide product content management (PCM) and cross-media catalog publishing, but with the touted simplicity and accessibility of desktop applications.

Given its leadership position and the resulting clout in the market, SAP's decision on any technology carries a significant weight. To that end, having a company with the stature of SAP complementing its SAP Master Data Management (SAP MDM) product with a PCM platform that provides more than traditional product information management (PIM) capabilities of bringing together, in a single place, all the information needed to bring a product to market, is likely to increase PCM concept's awareness, validate the space and speed up its ever-growing adoption of late.

At the same time, the acquisition likely represents SAP's tacit admittal that SAP MDM, despite its impressive capabilities and concepts outlined above, remains one of the less complete and mature components of SAP NetWeaver, and thus could not alone fill the gap created by inevitable, disparate data sources any more distributed enterprise (let alone the supply chain), particularly for the retail and consumer packaged goods (CPG) customers that most urgently require PIM and global data synchronization (GDS) solutions. Namely, as business applications' continue to expand, so does a propagation of data sources across businesses and IT systems. Achieving consistent understanding of this scattered data has become a major hurdle to improved business processes, with redundancy, waste, and a plethora of lost opportunities as a result.

As a matter of fact, one of the more exciting products preceding SAP NetWeaver's MDM component was the Collaborative Master Data Management (CMDM), which introduced the notion of cleansing all of the data in many dispersed systems of record. This meant not only having one unified copy of the customer, supplier, employee, or item master (rather than as many as dozens thereof), but also understanding the context/relationships in which, for example, items are linked to products, stock item or spare parts record. The fact that SAP has long been developing this initiative with several prominent corporate customers, including Dow, Motorola, and Nokia, might give some vindication to Oracle's long-touted notion of a single database with a single data model underlying all business applications, creating a so-called "single version of the truth" for all enterprise data.

This is Part Three of a five-part note.

Parts One and Two detailed the event summary.

Part Four will look at SAP and A2i.

Part Five will discuss challenges and make user recommendations.

Why Acquire A2i?

SAP MDM has thus subsequently become SAP's strategy to deliver information consistency to its users, with the aim to improve decision making, translate opportunity costs into gains, and reduce the cost of IT maintenance. However, at the same time, apparently, SAP has found out that the realm of PIM/PCM necessitates too many challenging requirements, with a compelling enough time-to-market urgency to make an acquisition worthwhile, as was in the cases of its earlier acquisitions of former TopTier and TopManage for the respective ensued developments of SAP EP and SAP Business One small and medium business (SMB) solution (for more information, see SAP Acquires TopTier to Further Broaden Its Horizons and SAP Tries Another, Bifurcated Tack at a Small Guy).

The A2i technology hereby adds a specific data model onto SAP MDM's technological foundation. In other words, it is likely to expand SAP's traditional focus on transaction-centric data management—i.e., while typical master data like part number, price, and product description are sufficient for handling transactions, they are not sufficient to execute the sell-side, buy-side, or PLM/NPDI (new product development and introduction) issues around merchandizing, marketing, and promotions.

Hence, the acquisition might have two additional impacts:

1) it might provide hope for many customers stressed by multiple SAP instances, third-party, and legacy applications, and subsequent product information pains, such as conflicting product information and global data cleansing and synchronization; and

2) it may also indicate a new direction for enterprise solutions—a convergence of applications that would combine structured data with unstructured content.

For one, while companies in many industries are trying to get to a "single source of the truth" for product information, the CPG and retail markets have the most urgent needs, especially where GDS mandates are forcing companies into a more unified production information strategy. For example, some powerful retailers like Wal-Mart, Carrefour, Home Depot, and Ahold are mandating that their over 10,000 suppliers submit product information through electronic channels rather than paper-based, as to shorten processes and reduce costs and data errors. To that end, product-oriented companies on both sides of the retail value chain (i.e., suppliers and buyers/customers) would benefit from implementing sound PIM/GDS solutions.

For years, CPG firms have sent inaccurate (inadvertently or not) product data to retailers, but now they are under notice to fix the problem, pay penalties, and even may lose out at the end of the day. Therefore, nowadays, , they will have to analyze their priorities and develop a PIM/GDS action plan that delivers semantically reconciled data compliance with the above mighty retailers' demands. Moreover, these suppliers could even offer their customers new relationship-enhancing value-added services once they have implemented cleansed and synchronized product information repositories.

As a help, the Uniform Coding Council (UCC) has established standards for product information and transactions known as UCCnet to which suppliers are mandated to subscribe. With this opportunity resonating, many catalog management and publishing providers like A2i have lately jumped into more lucrative PIM/GDS space. Further, depending on the market and geography segments, the global trade item number (GTIN), uniform product code (UPC), and European article number (EAN) data formats allow for the consistent identification of merchandise throughout the supply chain process, from product design to the point of sale (POS). The use of GTIN, UPC and EAN data promises to greatly increase the efficiency with which retailers and manufacturers can mark, track, and exchange detailed product information. As a result of these standards and technologies, many retailers, vendors, suppliers, and brand manufacturers have been able to reduce the cost of financial operations, mismatches between purchase orders and invoices, inaccurate product shipments, and stock-outs.

For a detailed discussion of these standards, see Mainstream Enterprise Vendors Begin to Grasp Content Management.

PCM Rises to the Forefront

It has become clear that suppliers need a comprehensive system that lets them manage product content as efficiently as they manage products. Thus, the requirement for robust PCM is finally being recognized by many enterprise vendors of late and among chief information officers (CIO) and IT managers, who are looking to create and manage a centralized repository of rich product content. The still current manual, paper-based item authorization procedures at some sites continue to create unnecessary shipment lag times and also impede the future growth. This is particularly true when on average a grocery retailer may be required the collection and entry of hundreds pieces of data to introduce one new product from one supplier into the network of thousands of trading partners.

Thus, some software vendors targeting the retail sector, such as QRS (soon to be merged with Inovis, after rescinding the merger with JDA Software, see Not All Acquisitions Happen: JDA and QRS) or General Exchange Services (GXS) (see GXS Acquires HAHT Commerce for More Synchronized Retail B2B Data) remain focused on enabling retail industry participants to connect with each other and transact business through the use of these automated communications and product identification standards. There are a number of other best-of-breed PIM players on the market, including FullTilt Solutions, Blue Martini, Cardonet, SAQQARA, Sterling Commerce, Comergent Technologies, CommercialWare, Flow Systems, Stibo, Liaison Technologies, and Velosel. Each has a number of customers using its solutions, but the PIM market is just now heating up and the lion share of the market is still up for grabs.

Nevertheless, hand-in-hand with the trend to conduct business transactions electronically via the Internet is an effort to clean up those transactions and reduce the occurrence of errors. Often enough, as already mentioned many times, the trouble with product attributes is that they do not match from one database to the next in the value chain. For every product under its brand umbrella, there are several product attributes, including definitions, specifications (product weights, measurements, calorie counts, etc.), images, naming conventions, marketing messages and prices. As a result, something as bland as a can of food comes with an array of data relating to pricing, description, promotion, and so on.

To make things worse, companies may have hundreds or thousands of products and multiple individuals may maintain each bit of product information, so the task of organizing and maintaining all this information is critical to the company. Bad data costs companies billions of dollars in incorrect purchase orders, subsequent returns and the manual effort required to fix them (see $40 Billion Is Being Wasted by Companies without Product Information Management Strategies—How Is Yours Coming Along?).

Accordingly, combined PIM and GDS applications automate the process by which suppliers, manufacturers, and retailers share information relevant to issues like inventory status and product specifications. This technology might also be an important underpinning and enabler for emerging plans around the radio frequency identification (RFID) technology, which is also high on these retailer giants' agenda. But, as mentioned earlier on, data synchronization would be a relatively simple task if the data were normalized, complete and error-free. Unfortunately, this is rarely the case, given product information is not created by a single department within the company and is usually not overseen by any single group. It is this lack of process within a manufacturer's business and around managing product information that facilitates errors. Yet, related systems such as logistics, invoice reconciliation and POS also need the same product information. The retail sector, particularly food and grocery industry, would hence greatly benefit from some on-line industry coordination when it comes to managing catalogs and B2B trading communities where UCC seems to be playing its part.

For a more detailed discussion of these requirements and the need for a unified system, see Mainstream Enterprise Vendors Begin to Grasp Content Management.

Generally speaking, PCM (sometimes also called PIM) refers to a system for managing all types of information about finished products, and it is a further evolutionary step of catalog content management backed with a workflow management. This is however different from enterprise content management (ECM), which more focuses on document management and other unstructured editorial and web content, whereas PCM is more granular around individual data elements and focuses on highly structured product content. ECM encompasses many of the above-cited technologies used to capture, manage, store, preserve and deliver content and documents related to organizational processes. In other words, it allows the management of an organization's unstructured information (such as e-mails, photos, spreadsheets, documents, etc.), wherever that information exists—stored in repositories, shuttled across networks, and managed over the course of its existence or life cycle.

However, regardless of the name or purpose, all the above software categories aim at the same goal of being the sole trustworthy, master source of product information for the enterprise. Still, business purposes for such systems could fall roughly into the following three groups:

  1. The product information related to the design, development, and introduction of the products, which belongs to PLM and PDM, as its subset, that captures and manages product data generated during the product design and development process.

  2. The information related to the buying (procurement) or selling side of e-commerce of the products, where PIM systems come into play later in the product life cycle, after a product is manufactured and introduced to the market. PIM vendors aim at helping manufacturers and distributors create centralized product information repositories that can be used for multiple purposes by people in various roles throughout the company and the supply chain.

  3. The information about already owned products, equipment, and facilities, i.e., assets.

Yet, to conduct collaborative processes, businesses need embedded intelligence. Business intelligence (BI) and analytics applications that are focused on structured data offer only a part of the total solution. In other words, businesses also need content management for the unstructured data and content, which can contain a majority of business information, given that many decisions makers collaborate via e-mail or voicemail, which are examples of vast unstructured info that currently resides outside of business processes and of the reach of ERP and BI systems.

Many companies are already realizing value from recent BI/ERP and PLM/ERP convergence and consolidation (see Has Consolidation Made the PLM Market More Agile? and BI Market Consolidation Compared to ERP Market Consolidation ). The eventual ECM and PCM convergence with ERP should also result with benefits of allowing companies to take advantage of knowledge and content hidden within enormous untapped pools of unstructured content.

This concludes Part Three of a five-part note.

Parts One and Two detailed the event summary.

Part Four will look at SAP and A2i.

Part Five will discuss challenges and make user recommendations.

 
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