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 mySAP.com suite has met with remarkable success in
the market. SAP reached a major milestone in 2000 when the number of licensed
users of its mySAP.com platform reached 1 million. Since then, more than
3 million additional users have reportedly licensed mySAP.com.
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 mySAP.com. 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 mySAP.com 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 mySAP.com 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 mySAP.com 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.