SAP Declares Victory Over Manugistics, Takes Aim at i2

  • Written By: Steve McVey
  • Published: March 15 2000

SAP Declares Victory Over Manugistics, Takes Aim at i2
S. McVey - March 15th, 2000

Event Summary

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.

Claus 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?

Market Impact

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.

Though 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 APO.

Although 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.

Dow 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.

To 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.

User Recommendations

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.


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