Declares Victory Over Manugistics, Takes Aim at i2
S. McVey - March 15th, 2000
On February 25, SAP AG held an analyst education day at its Waltham offices
to give a progress review of its APO (Advanced Planner & Optimizer) application
worldwide rollout. Joining SAP were representatives from two members of
its client base, Dow Corning and Colgate-Palmolive. Their overviews highlighted
ongoing R/3 and APO implementations and focused on laying the groundwork
for additional APO installations within their enterprises.
Heinrich, Executive Board Member, SAP, provided the keynote speech for
the audience of 30 or so analysts and journalists. Though Heinrich spoke
with enthusiasm about the roughly 20 live customers of APO around the
globe, his most dramatic statement of the day came when he proclaimed
SAP to be the number two vendor of Supply Chain Management, pointing to
SAP's fourth quarter 1999 APO license revenue of $25 million. Many in
the room were openly skeptical, but does SAP have a case?
Based solely on its most recent quarterly results, SAP may be justified
in placing itself ahead of Manugistics whose license revenues for the
quarter ended November 30, 1999 came in at just under $15 million. Realistically,
many factors play a role in determining supply chain management market
leadership including a vendor's historical revenues, level of domain expertise,
number of satisfied clients, and staying power in periods of market downturn.
SAP has brought vast resources to bear on APO development and implementation,
it has yet to show mastery in these other areas. Manugistics and i2 are
no doubt taking seriously SAP's movement into this marketplace and are
developing strategies to handle an adversary with the potential to capture
large portions of their market share over the next 12 to 24 months. Most
in their favor is their superior understanding of the SCM business, though
this gap will decrease as time passes and SAP gains more experience with
the number of SAP customers with APO installations is growing monthly,
most of these have operated APO for less than six months in a live environment.
The presentations by Dow Corning and Colgate-Palmolive focused as much
on their R/3 implementations as on APO modules.
Corning is using two APO modules, Demand Planning and Supply Network Planning,
to manage one supply chain thread within its sealants business. While
it is seeing benefits from APO, the $2.6 billion chemicals venture acknowledges
the difficult road ahead as it expands the software to manage other parts
of its global business. Nevertheless, for Dow Corning SAP Team Leader
Lori Schock, "APO is the 'real deal', we're using it, and we're getting
value in return." She anticipates the next benefits will derive from implementing
APO's Global Available to Promise functionality.
capture the lead from established best-of-breeds i2 and Manugistics, SAP
would do better to set its sights on functionality, not revenue targets.
In order to offer competitive offerings that win market share, ERP vendors
need to solve the intractable problems of global enterprise planning,
such as raw material and capacity sharing across multiple supply chains,
problems that have yet to be adequately resolved by even the best-of-breeds.
While SAP works to achieve the vision laid out by the SCM vendors, these
same companies have the opportunity to move on and maintain their lead.
Companies with SAP R/3 should certainly consider APO for supply chain
management, but avoid picking APO without looking at what the best-of-breed
vendors i2 and Manugistics have to offer. Though some features discussed
at the analyst event are available in APO release 2.0, many of them will
not be ready until release 3.0, due out in the third quarter of 2000.
These include inbound/outbound transportation scheduling and optimization
and strategic network planning. Also coming in release 3.0 are production
planning and scheduling for repetitive manufacturing and high-speed planning
for configured products.