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Hosted by SAP Beyond the Edges of the Enterprise Michael Dominy The Yankee Group [email protected]

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SAP Beyond the Edges of the Enterprise. Michael Dominy The Yankee Group [email protected]. Agenda. Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations . Beyond the Edge: Definitions & Clarifications. - PowerPoint PPT Presentation

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Page 1: SAP Beyond the Edges of the Enterprise

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SAP Beyond the Edges of the EnterpriseMichael DominyThe Yankee [email protected]

Page 2: SAP Beyond the Edges of the Enterprise

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AgendaBeyond the EdgeIT Spending ShiftsEdge of the Enterprise ResearchTechnology DriversSAP’s ResponseConclusions 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 billionHow?• 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

Page 8: SAP Beyond the Edges of the Enterprise

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AgendaBeyond the EdgeIT Spending ShiftsEdge of the Enterprise ResearchTechnology DriversSAP’s ResponseConclusions and Recommendations

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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

HRFinance

EngineeringProcurement

Mfg/OpsPlanningLogistics

Customer ServiceMarketing & Sales

Operational Backbone

Customers

Suppliers Outbound Logistics

Financial Services

Inbound Logistics

Page 11: SAP Beyond the Edges of the Enterprise

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AgendaBeyond the EdgeIT Spending ShiftsEdge of the Enterprise ResearchTechnology DriversSAP’s ResponseConclusions and Recommendations

Page 12: SAP Beyond the Edges of the Enterprise

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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 2003Conducted by experienced enterprise application

analysts Interviews averaged 45 minutesGathered detailed IT budget data, 2003 project

data, vendor preference information

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Edge of the Enterprise Research: Interviewee Demographics

Large Global 2000 organizationsAveraged $2.4 billion in revenueAveraged 7,000 employeesUtility, 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 knowNoYes

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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 trackingCommon theme across objectives:• Strengthen relationship, integration and coordination with

customers to improve service and reduce costs

Page 25: SAP Beyond the Edges of the Enterprise

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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

Page 26: SAP Beyond the Edges of the Enterprise

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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 collaborationSolution: SAP + RedPrairie + NistevoFinding: SAP unable to meet edge requirements –

Collaborative Logistics

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Edge of the Enterprise Research: SAP Customer Example 2

Company: Multi-billion dollar global beverage manufacturer

Goal: Collaborate with downstream distributors (forecasts, marketing & promotions, etc.)

Solution: SAP + Manugistics + VignetteFinding: SAP unable to meet edge requirements –

CPFR and Content Management

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Edge of the Enterprise Research: SAP Customer Example 3

Company: Multi-billion dollar global high tech manufacturer

Goal: Synchronize supply and fulfillment across the extended supply chain network

Solution: SAP + Synchronization HubFinding: SAP unable to meet edge requirements –

Distributed Order Management

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Edge of the Enterprise Research: SAP Customer Example 4

Company: Multi-billion dollar global consumer products manufacturer

Goal: Collaborative Customer Business PlanningSolution: SAP+custom application+best-of-breedFinding: SAP unable to meet edge requirements –

Customer level sales, marketing and merchandise planning

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Edge of the Enterprise Research: SAP Customer Example 5

Company: Multi-billion dollar North American electric utility

Goal: B2B Procurement Exchange Solution: SAP + SAP B2B Procurement ProductsFinding: SAP able to meet edge requirements –

SAP able to address transaction oriented supply- side applications where the SAP customer has significant power or influence

Page 31: SAP Beyond the Edges of the Enterprise

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AgendaBeyond the EdgeIT Spending ShiftsEdge of the Enterprise ResearchTechnology DriversSAP’s ResponseConclusions and Recommendations

Page 32: SAP Beyond the Edges of the Enterprise

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Technology Drivers:Enabling Edge Initiatives

Plummeting hardware costsPervasive Internet accessJava XMLInteroperability

Page 33: SAP Beyond the Edges of the Enterprise

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Technology Drivers:Methodologies, Standards & TCO

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AgendaBeyond the EdgeIT Spending ShiftsEdge of the Enterprise ResearchTechnology DriversSAP’s ResponseConclusions and Recommendations

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SAP’s ResponseExperiences with Commerce OneAcquisition of TopTierSAP xAppsSAP Web application serverSAP Enterprise Edition – Core versus ExtensionsSAP NetweaverSAP Adaptive Business NetworksSAP Licensing Strategies

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AgendaBeyond the EdgeIT Spending ShiftsEdge of the Enterprise ResearchTechnology DriversSAP’s ResponseConclusions and Recommendations

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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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RecommendationsEstablish 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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RecommendationsFollow 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

Page 40: SAP Beyond the Edges of the Enterprise

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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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