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SAP Beyond the Edges of the Enterprise

Michael DominyThe Yankee [email protected]

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Agenda

Beyond the Edge

IT Spending Shifts

Edge of the Enterprise Research

Technology Drivers

SAP’s Response

Conclusions and Recommendations

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Beyond the Edge: Definitions & Clarifications

“The Edge”• The Business Process and IT intersection between

an enterprise and the outside world.

• Includes the management of access to interaction

between the enterprise and its customers,

suppliers, or complementary business partners.

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Beyond the Edge: The Opportunity

Reduce Inventories $117 - $293 billion

Increase Sales $83 - $166 billion

How?• Connecting, collaborating, and synchronizing with

the extended supply chain

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Beyond the Edge: Who’s Cares? (Enterprises)

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Beyond the Edge: Who’s Cares? (Vendors)

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Beyond the Edge: Application Characteristics

Edge applications • Automate business processes that require human

or machine input from external partners

• Integrate data and information from multiple

heterogeneous systems inside and outside the four

walls of an enterprise

SAP Netweaver and xApps as examples

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Agenda

Beyond the Edge

IT Spending Shifts


Technology Drivers

SAP’s Response


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IT Spending Shifts:Away from Operational Backbones

75% Increase at the Edges!

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IT Spending Shifts:…Beyond the Edge

HR

Finance

Engineering

Procurement

Mfg/Ops

Planning

Logistics

Customer Service

Marketing & Sales

Operational Backbone

Customers

Suppliers Outbound Logistics

Financial Services

Inbound Logistics

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Agenda

Beyond the Edge

IT Spending Shifts


Technology Drivers

SAP’s Response


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Edge of the Enterprise Research: Research Sources

Interviewed more than 110 B2B decision makers in the past 12 months• Billions in revenue and technology spending

Surveyed 78 North American ERP users to• Validate the Edge budget shift

• Identify key Edge business drivers

• Inquire about ERP strengths and weaknesses

Finishing a Q3 Edge of the Enterprise survey of 300 end-users

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Edge of the Enterprise Research: Phone Interviews

Results from 78 ERP decision makers at Global 2000 organizations

Interviews conducted in Q1-Q2 2003

Conducted by experienced enterprise application analysts

Interviews averaged 45 minutes

Gathered detailed IT budget data, 2003 project data, vendor preference information

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Edge of the Enterprise Research: Interviewee Demographics

Large Global 2000 organizations

Averaged $2.4 billion in revenue

Averaged 7,000 employees

Utility, telecom, manufacturing, wholesale, and transportation services were interviewed• 76% of respondents were manufacturers

• Even split between process and discrete manufacturing

• Concentration in high-tech and consumer goods manufacturing

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Edge of the Enterprise Research: Interviewee Demographics

61% of respondents run SAP R/3• Majority of respondents on version 4.6

• Several running version 3.1

• None running SAP Enterprise 4.7 or Netweaver

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Edge of the Enterprise Research: IT Budget Impact

Overall IT Budget• 64% increased IT budget from 2002 to 2003

• Average budget increase was 3.7%

• Budget growth ranged from –6% to 23%

Edge Investments and Budgets• 95% increased investment in systems that require/enable

browser- or machine-based partner input

• Edge budget growth ranged from –3% to 300%

• Average Edge budget increased 75%!

• Average 2003 Edge budget totals $5.8 million

• 2003 Edge budgets ranged from $440,000 to $66 million

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Edge of the Enterprise Research: Budget Growth

3.7%

75.3%

0.0%

20.0%

40.0%

60.0%

80.0%

Total Edge

IT Budget Growth

IT Budget Growth

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Edge of the Enterprise Research: Average Edge Budgets

$3.31

$5.81

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

2002 2003

Average Edge Budget

Average Edge Budget

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Edge of the Enterprise Research: Budget Drivers

Budget shift is driven by prioritization,

not capital expenditure• Do more with less

• Extend existing systems

• Develop in-house

• ROI in months not years

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Edge of the Enterprise Research: Budget Analysis

71%

20%9%

0%

20%

40%

60%

80%

100%

Percentage of Respondents That Increased Edge Spending in 2003

Don't know

No

Yes

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Edge of the Enterprise Research: Budget Analysis

Most interviewees expect edge investment to

increase substantially with economic

improvement

Most edge investment is dedicated to customer

facing systems

Among interviewees, suppler facing systems

were secondary investment priorities

300 end-user survey…

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Edge of the Enterprise Research: Projects

Primary, secondary, and tertiary edge projects were captured and classified

Primary edge projects included• Web-based sales content delivery, order entry, pricing,

order status

• Machine-based order management

• Collaborative forecasting

• Collaborative logistics

• Electronic catalogue

• VMI

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Edge of the Enterprise Research: Project Categories

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Percent of Respondents

Electronic Catalogue

Customer Portal

Electronic Pricing

BtoBi

Procurement Management

Collaborative Forecasting

Distributed Order Management

Other

Edge Projects

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Edge of the Enterprise Research: Objectives

Collaboration and Coordination

• Cost reduction through collaborative planning and

distributed order management and fulfillment

Sales and marketing content delivery

Inventory visibility and supply tracking

Common theme across objectives:

• Strengthen relationship, integration and coordination with

customers to improve service and reduce costs

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Edge of the Enterprise Research: Vendor Preference / ERP Abilities

Interviewees were asked to rate incumbent ERP

vendor’s ability to meet primary edge technology

need (1 to 5 scale, 5=very high ability and 1=not

at all capable)

• 62% of respondents did not consider their ERP vendor as a

solution to an Edge of the Enterprise technology need

• Among respondents that rated their ERP vendor, average

rating was 2.3

• SAP users rated SAP 2.4 for its ability to meet edge

technology needs

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Edge of the Enterprise Research: SAP Customer Example 1

Company: Multi-billion dollar global consumer

packaged goods company

Goal: Reduce logistics cost through collaboration

Solution: SAP + RedPrairie + Nistevo

Finding: SAP unable to meet edge requirements –

Collaborative Logistics

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Company: Multi-billion dollar global beverage

manufacturer

Goal: Collaborate with downstream distributors

(forecasts, marketing & promotions, etc.)

Solution: SAP + Manugistics + Vignette


CPFR and Content Management

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Company: Multi-billion dollar global high tech

manufacturer

Goal: Synchronize supply and fulfillment across

the extended supply chain network

Solution: SAP + Synchronization Hub


Distributed Order Management

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Company: Multi-billion dollar global consumer

products manufacturer

Goal: Collaborative Customer Business Planning

Solution: SAP+custom application+best-of-breed


Customer level sales, marketing and

merchandise planning

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Company: Multi-billion dollar North American

electric utility

Goal: B2B Procurement Exchange

Solution: SAP + SAP B2B Procurement Products

Finding: SAP able to meet edge requirements –

SAP able to address transaction oriented supply-

side applications where the SAP customer has

significant power or influence

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Agenda

Beyond the Edge

IT Spending Shifts


Technology Drivers

SAP’s Response


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Technology Drivers:Enabling Edge Initiatives

Plummeting hardware costs

Pervasive Internet access

Java

XML

Interoperability

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Technology Drivers:Methodologies, Standards & TCO

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Agenda

Beyond the Edge

IT Spending Shifts


Technology Drivers

SAP’s Response


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SAP’s Response

Experiences with Commerce One

Acquisition of TopTier

SAP xApps

SAP Web application server

SAP Enterprise Edition – Core versus Extensions

SAP Netweaver

SAP Adaptive Business Networks

SAP Licensing Strategies

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Agenda

Beyond the Edge

IT Spending Shifts


Technology Drivers

SAP’s Response


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Conclusions

Demand is shifting from the core to the edge

• 75% growth in edge applications and technologies

Integration and customization costs are falling

Edge projects are primarily customer-facing

• Sales effectiveness and distributed order management

Most SAP customers have not been successful

extending SAP beyond the edges of the

enterprise

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Recommendations

Establish a flexible architecture to support edge

applications and initiatives but…

• Balance integration costs carefully

Edge initiatives require a mix of internal and external

integration involving people, process, and data

• Validate interoperability claims

Ensure edge platforms and applications comply with

Java, XML and Web services standards

Perform interoperability tests

• Example: Test best-of-breed on Netweaver

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Recommendations

Follow the collaboration continuum• Integrate Optimize Collaborate and Network

Leverage edge (composite) applications rather than building from scratch• Development, implementation, and support costs are too

high to justify custom applications

Be skeptical when core vendors claim expertise beyond the edges of the enterprise• Managing network oriented business processes in

fundamentally different than controlling internal activities

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Thank You!

Michael DominyThe Yankee [email protected]

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Break sponsored by

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Are you shift IT dollars and initiatives from internal technologies to the edges of the enterprise?

Audience Response

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Documents

q3 edge

spending shifts edge

edge budget shift

enterprises slide

key edge business drivers

enterprise survey

enterprise sap netweaver

technology spending