This posting is an obvious follow-on to our prior commentary about this September turning out to be a noteworthy month for technology related announcements.
Yesterday, SAP announced its intent to acquire Concur Technologies, a provider of cloud-based travel and expense management software. SAP was willing to shell out a whopping $8.3 billion in one of this enterprise technology provider’s largest acquisition deals to date, surpassing the prior acquisition database technology provider Sybase for $7.1 billion in 2010. It is also one of the most significant moves under the leadership under the now singular CEO leadership of Bill McDermott.
After pondering the announcement, the SAP user community should wonder whether SAP is again taking precious financial resources away from its mission of supporting manufacturing and service industry core business process support needs. Instead, this enterprise software provider has an apparent focus on being a multi-purpose business network company in the definition of SAP.
According to business media reports, Concur reported revenues of $546 million and an operating loss of a little over $24 million in its latest fiscal year which ended a year ago in September 2013. In its announcement, SAP indicates that Concur has a revenue run rate of more than $700 million in its current fiscal year, implying a revenue growth rate in the mid-twenty range. That is not all that spectacular for hot, cloud-based tech providers.
SAP was willing to invest half the Concur amount, namely $4.5 billion in its acquisition of cloud-based sourcing and procurement provider Ariba, which is now an SAP operating company and is being positioned as a longer-term cloud-based strategic platform for B2B supply chain sourcing, planning and procurement in direct and indirect materials support areas. SAP has since acquired Fieldglass, a cloud-based provider of contingent labor and services management technology to augment Ariba network capability. But as SAP procurement and supply chain customers have noted, the product roadmap for broader diversified business network potential benefits currently span a long, multi-year window, with multiple moving parts involving other SAP technology and applications areas. One can certainly speculate that Ariba as a stand-alone entity would execute at a far faster pace.
SAP is thus willing to pay in excess of a 10x multiple, no small change, to secure long-term strategic potential in an indirect procurement services category. Granted, travel makes-up a considerable expense for any company, but for larger enterprises, the product value-chain is of higher importance to bottom-line results. The business travel services field is a very crowded one, providing competition challenges with other noteworthy existing players, which will surely get more dynamic with this news.
Readers should note that in their announcements related to business network moves, enterprise vendors emphasize the value of transactions within the network. In the specific case of this Concur announcement, the number communicated is $600 billion in transaction volume. That is the clue toward the real intent, that being incremental revenue growth from transaction fees. However, customers and their procurement teams have become more savvy in this game, and are not reluctant to trade one business network for another if transaction costs exceed budget goals.
At first blush, this Concur deal appears to this author to be more about feeding SAP’s sales teams with added deal volume. That impression is reinforced by statements indicating that the majority of SAP customers do not currently run Concur. Giving the benefit of doubt, we certainly do not have privy to the full picture, thus we along with SAP customer and partner universe will have to await more articulation regarding yet another elongated business network player and roadmap.
September is a unique month. Folks return from summer vacations, outings and getting closer to family, and then, the marketing juices ramp-up. These past two week alone have featured non-stop significant announcements concerning enterprise, B2B and supply chain management focused technology which we will capsule.
On the enterprise and ERP software front, the blockbuster news is the announcement that the founder of Oracle, Larry Ellison, is stepping aside, but alas, he is instead assuming a different role.
Larry Ellison to Step Aside
Business and social media is buzzing with today’s stunning announcement that Oracle founder Larry Ellison will step aside from his CEO role in favor of two Co-CEO’s. The Wall Street Journal’s alert story termed the announcement as: “one of the momentous corporate handovers in the history of Silicon Valley.” Well stated!
Other publications equate the significance to when Bill Gates gave-up the CEO role at Microsoft in favor of Steve Ballmer.
Both Safra Catz and Mark Hurd, two other senior leadership executives will assume the role of Co-CEO’s. But there’s more. Ellison will supposedly assume the role of Oracle’s Chief Technology Officer (CTO). Isn’t that interesting?
Twitter is lit-up with all forms of reactions, one tweet equates Ellison stepping down to assume the CTO position the equivalent of Vladimir Putin stepping down to become Prime Minister of Russia. Somewhat humorous but perhaps insightful.
Obviously, there is more to this announcement which is timed just before the kickoff of Oracle’s annual OpenWorld customer conference that begins this weekend.
Supply Chain Matters has been on-record of not inclined toward the Co-CEO model at technology companies. We did not see it as productive when it was previously practiced at SAP, AspenTech and other firms. The broader organization plays favorites as to whom will prevail as the ultimate successor and strategic initiatives suffer from internal political maneuvering and jousting. Just make a frikkin decision on whom is the top dog and let the chips fall.
Look for lots more buzz emanating from San Francisco and Redwood Shores in the coming days.
SAP Announces Next Iteration of Collaborative Supply Chain Management
The latest significant announcement from Walldorf concerns SAP Supply Chain Orchestration, an initial significant milestone from SAP’s prior acquisition of sourcing and procurement provider, Ariba. The application is described as integrating functionality of SAP Supply Chain Network Collaboration (SNC) and Ariba’s Collaborative Supply Chain application. The combined application will be made available as a private cloud-based delivery platform which includes the SAP HANA Enterprise Cloud service.
For existing customers utilizing either SAP SNP or Ariba Collaborative Supply Chain, the obvious questions will be on depth of support for both indirect and direct materials procurement collaboration, along with license pricing structures incorporated in this new application. There are obvious implications regarding other SAP applications supporting supplier network connectivity.
Supply Chain Matters is in the process of gathering additional data and will provide a follow-up commentary.
Infor Announces Updated Release Supporting Sales and Operations Planning
ERP provider Infor announced Infor Sales and Operations Planning 10x. The 10.4 version of the application is reported to feature Infor’s 10x technology platform and includes a built-in social collaboration engine, Infor Ming.le, to aide in facilitating and recording internal discussions across all process participants. The enhanced application reportedly features a single point to review planning alerts, exceptions, tasks and workflows along with enabling escalations from process stakeholders.
A rather neat feature is a termed playbook component to assist in organizing those time-consuming pre-S&OP meeting reports into structured chapters along with generating formatted Microsoft PowerPoint presentations. A built-in GIS capability provides users with a visualization of where various product demands are occurring, along with other data.
SPS Commerce and Bristlecone Partner for Cloud Transaction Automation
SPS Commerce, a technology provider with a focus on retail industry cloud services has partnered with specialty SI firm Bristlecone in expanded support for Oracle Applications to the SPS Universal Network, a broad retail industry trading partner network consisting of 55,000 members.
The announcement indicates that joint customer, Fruit of the Loom, recently deployed the Cloud Transaction Automation offering for Oracle. The Cloud Transaction Automation Solution is the latest addition to SPS Commerce’s portfolio of services.
Oracle Introduced Cloud Support for Transportation and Global Trade Management
Finally, we conclude our technology capsule commentary with news that Oracle has released Oracle Transportation Management Cloud and Oracle Global Trade Management Cloud applications. According to the announcement, Oracle has now made the functionality of its applications in this segment available for either on premise or cloud deployment. Both applications are noted to be designed for phased, rapid deployment from either Oracle Consulting or other Oracle specialized partners.
Readers may recall that the basis of Oracle’s transportation management support offerings is from the former acquisition of G-Log. These cloud-based deployment options were part of the multi-year product roadmap involving support in supply chain transportation, trade and supply chain execution areas.
Disclosure: Bristlecone is a current client of the Ferrari Consulting and Research Group
In previous Supply Chain Matters commentaries, we have observed that utilization of SAP’s supply chain focused applications can serve as both a blessing and a curse. The blessing comes from the structural rigor for integrating enterprise-wide transactional, operational execution and master data with supply and demand planning. This rigor is often cited as the curse, since today’s highly dynamic supply chain business processes are expected to respond to ever increasing levels of network-wide complexity. Adding supplemental supply chain suppliers, partners or planning locations can cause planners to fall behind and become the critical stumbling block. The problem exists both in rather large as well as growing supply chain organizations.
In the specific case of SAP’s APO (Advanced Planning & Optimization), many SAP customers have deployed the Demand Planning application incorporated within SAP APO. It is probably the most widely deployed module, and for good reasons. Many industry supply chains are focused on being far more product or service demand-driven, thus sensing and responding to various multi-channel demand is a critical process capability.
Highly experienced users of the various components of SAP APO are either often promoted to higher levels of broader supply-chain wide responsibility, or they jump to other organizations that are willing to compensate more for APO-specific skills. As less experienced supply chain planners step-in, productivity and planning effectiveness suffers because the new planners lack the experience to manage input data, master data synchronization, and planning optimization results. Planners revert to their more comfortable Microsoft Excel skills to massage planning data for the broader organization and APO begins to become an operational data store rather than a planning solution. These types of challenges will likely increase as SAP migrates many of its supply chain planning capabilities toward it cloud-based, S&OP Powered by HANA platform that has integrated business planning as its prime objective.
To specifically help industry supply chain organizations respond to these challenges, Supply Chain Matters has been raising awareness to a cadre of smaller but highly focused system integrators who have developed self-contained, capsulized service offerings that address very specific business problem needs, including those related to SAP APO. Their focus remains targeted scope technology and services that can springboard and overcome business process or systems challenges on a far more timely basis.
One such firm is Bristlecone, a laser-focused services company primarily addressing supply chain deployment and time-to-value challenges. The firm’s client list spans a broad swath of industry supply chains including consumer products, chemical, energy, high-tech, industrial, and pharmaceutical. As our readers are well aware, each has its own unique supply chain planning process needs and requirements. Bristlecone has been populating its Bristlecone Online Store with a collection of fixed-cost, application accelerators developed from prior successful customer implementations.
To specifically address the challenges of SAP APO Demand Planning productivity, the firm has packaged a fixed-price service, best practices and enhanced productivity offering termed Demand PlanningNow™ that augments SAP APO with offline and online augmented capabilities. Demand PlanningNOW provides a flexible Microsoft Excel front-end interfacing directly with SAP APO Demand Planning as the back-end. According to Bristlecone, the service offering helps SAP APO teams by providing added flexibility and versatility for working with large data sets and multiple partners utilizing Microsoft Excel as a more familiar user front end tool. The packaged tool further provides an offline mode that allows users to perform simulations prior to uploading data as well as tracking data changes, providing front-end data validation and user alerts to unaligned data. As an added plus, Demand PlanningNOW™ can leverage SAP’s built-in security and does not require additional system security capability.
Bristlecone informed Supply Chain Matters that this productivity accelerator has been deployed with user training and software in less than 2 days at some customer sites, although the documentation quotes a conservative two weeks. In either case, Bristlecone’s Demand PlanningNow™ provides yet another example of a fixed scope, fixed-price technology accelerator application built on a niche supply chain planning SI firm’s acquired knowledge, best practices and technical expertise acquired from numerous implementations and supply chain team interactions.Your SAP focused supply chain planning organization may want to explore these available collections of application productivity accelerators from smaller but highly focused SAP systems integrators as an alternative to more expensive wider scope services.
Disclosure: Bristlecone is a current client of the Ferrari Consulting and Research Group.
We all tend to have our favorite sports teams and we often come to enjoy the classic rivalry among certain teams. Regardless of the season’s record, the game between two noted rivals is often an event to itself.
So it is among certain businesses as well as large enterprise software firms where bitter rivalries seem to transcend other needs. One such longstanding rivalry has been SAP and Oracle where a contentious legal battle continues to unfold to what Supply Chain Matters views as a public embarrassment for both of these firms.
A prior SAP subsidiary, TomorrowNow, which turned out to be not one of SAP’s most astute acquisitions, had been performing software maintenance support for Oracle clients. Oracle sued SAP in 2007 after discovering thousands of suspicious downloads of its software. SAP later admitted that its subsidiary had violated Oracle’s copyright protections leaving a jury to resolve the level of damages to be paid. Oracle sought damages in excess of $1 billion, and indeed a jury found in favor of Oracle in a 2010 trial proceeding. However, a U.S. District Judge determined that Oracle’s claim was excessive and revised the damage award to $272 million. Both firms then agreed that SAP would pay Oracle $306 million in damages plus substantial legal costs to settle the matter. Oracle then elected to pursue the case before the 9th U.S. Circuit Court of Appeals in an attempt to recover the original $1 billion claim.
Last week, the 9th U.S. Circuit Court of Appeals court ruled on this matter. Media reports indicate that for the most part, the appeals court rejected Oracle’s $1.3 billion damage claim, in essence ruling that Oracle must either accept a lower amount or face a new trial. The three judge panel instructed the lower court to offer Oracle a choice of $356.7 million in damages or seek a second trial. Thus far, Oracle has declined to publically comment as to which action it will take.
After four years of legal wrangling, it is time for both firms to move on. Both have suffered public embarrassments in the eyes of each’s individual customers. From our lens, both firms have other pressing needs in terms of investments and services for supply chain, manufacturing, procurement and B2B network customers.
In our Supply Chain Matters coverage of the B2B and supply chain technology space, we had previously provided commentary related to GXS, Inc. The roots of GXS stem back to the late sixties with its initial founding as General Electric Information Services (GEIS) providing computer time-sharing to general users, migrating to support value-added network (VAN) services such as EDI for both GE and external clients. By 1998, GEIS’s global electronic trading community exceeded 100,000 trading partners, and in 2002, the renamed GXS was spun out as an independent technology services provider purchased by venture capital firms Francisco Partners and Norwest Venture Partners.
In June of 2012, Supply Chain Matters declared that GXS was a hidden gem in the B2B information services and application support arena. In November of 2013, GXS was acquired by OpenText Corporation, Canada’s largest software technology provider. The purchase price at the time was reported to be approximately $1.2 billion, roughly 2.4 times GXS Fiscal 2012 revenues. T
The crown jewels of GXS is the GXS Trading Grid a global platform to support e-business and supply chain information integration that supported upwards of 550,000 trading partners and included some big-name and rather influential industry supply chains. The question was what Open Text’s strategic intent would end to be regarding the acquisition.
Earlier this month, this author was invited to attend a one-day industry analyst briefing hosted by members of the senior management team of OpenText. By the end of the day, I had acquired a broader understanding of OpenText’s business strategy, particularly as it concerned the leveraging of the newly acquired B2B transactional support network. However, we walked away with some remaining open questions regarding the broad scope of the strategy.
For readers unfamiliar with OpenText, this vendor classifies itself as a broad-based Enterprise Information Management support provider. Product support areas are rather broad and include:
- Enterprise Content Management (ECM) – areas such as content management, secure email and electronic content, data and cloud integration.
- Business Process Management (BPM) – classic business process workflow tools suite.
- Customer Experience Management (CEM) - areas such web based content management, customer communities, and digital assets management.
- Information Exchange and Discovery- areas such as B2B communication and transactional integration, secure messaging and information discovery.
Because of this rather broad technology support footprint, the OpenText vertical industry targeting strategy is broad ranging from manufacturing and retail to financial services, government, public utilities and other industries. Open Text’s prime targeted customers are CIO’s and internal IT, but with this broadened strategy and the acquisition of GXS, customer constituencies will have to include cross-functional supply and value chain groupings.
It was rather obvious to this analyst that OpenText acquired GXS for the value of its B2B supplier and trading partner network. However, the evolving strategy is more about leveraging the Trading Grid in the context of EIM, document exchange, quicker on-boarding of supplier and trading partners and managed services support. The current OpenText strategy assumes the existence of other business applications that touch or interact across the network and that business value is derived from the ability to leverage content among various business applications within and across the network.
The provider has placed a rather large emphasis on its partnership with SAP, which it classifies as its most strategic partner. The vendors’ EIM technology is positioned to support needs for SAP Business Suite, Ariba, and Microsoft Sharepoint content access, information management and electronic document exchange needs. The current most attractive interest among SAP installed based customers was described as a supplier electronic invoice solution where OpenText sits aside the Ariba Network. Briefing presentations emphasize that the firm was one of the first SAP ISV’s to run Archive Server on HANA for customers needing to manage combinations of both structured and unstructured data. Having achieved recognition as an SAP Solution Extension, 14 OpenText product offerings are currently sold jointly by SAP and OpenText sales teams. That implies that the SAP salesperson is directly compensated for selling OpenText technology in a deal. Asked by this analyst as to which other vendor in the current market is viewed as a prime competitor, the answer turned out to be IBM and its Sterling based B2B network. I would disagree, but that is subject matter for an additional commentary.
From our lens, it would appear that SAP is positioning OpenText for near-term customer requirements in EIM, B2B transactional and content integration needs. A very open question is how SAP will position such partner support once Ariba and its Ariba Network platform become more integrated with broader SAP Business Suite, SAP Supply Chain Management, SAP SRM and SAP HANA enabled information and business intelligence needs over the longer-term window. Joint customers will need to continue to monitor the evolution of the partnership. Another open question would be the overall cost of layering these various technologies vs. the market appearance of a more holistic business network platform that marries infrastructure, content, application and business intelligence.
As for OpenText and its continued support for B2B and end-to-end supply chain business network and BPM support, a lot will depend on whether the OpenText management team can place more concentrated emphasis on manufacturing industry, retail and online commerce business process support needs. The vendor further needs to alter its current product marketing messaging to be more in-tune with today’s industry specific business process challenges and desired business outcomes for supply, services and value chain networks. The entire day of briefings included very little mention of vertical industry focus and approach.
If readers require more specific intelligence and insights, give us a call.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
SAP conducted its annual Sapphire NOW users conference in the U.S. and utilized this customer forum to once again communicate significant changes and implications concerning future direction. The prime theme that SAP management delivered to customers was the SAP Run Simple message, which for many day-to-day users of SAP, is a message that is received with some cynicism. None the less, the implications are rather profound and real. Supply Chain Matters penned a prior commentary regarding the implications of SAP’s new strategies focused on integrated business planning that has since received significant reader and social media activity.
Among the keynotes delivered at Sapphire was the often anticipated talk by Hasso Plattner, one of the original founders of the company and existing Chairperson of the company’s Supervisory Board. While Hasso’s annual talks to SAP customers tend to sometimes be academic and lengthy, they often contain candor and important insights regarding SAP direction or missteps in the market. This year was no exception.
One of the most significant messages delivered by Hasso was that enterprise software running on-premise is going to the cloud, no matter what. That is why SAP’s new strategic emphasis is now all about reengineering for “the cloud.” The message from Hasso was that it is no longer a matter of if but rather a matter of time. That alone is a significant message coming from SAP’s founder and most influential investor. He further indicated that four years ago, SAP leadership was initially very apprehensive regarding the challenge to change 400 million lines of code within its ERP backbone system, but has now come to the conclusion that it would have no choice but to do so. Software that was designed many years ago under different assumptions related to business processes and existing technology at the time, now has to better match the realities of today’s new business and technology paradigms. Hasso’s drumbeat message remains: “simplicity beats complexity”.
A very significant implication of SAP’s ongoing re-engineering towards leveraging HANA and the cloud is the goal to eliminate “aggregates” within its internal system’s functions. Aggregates are when the system calculates for instance, gross margin, income statements or a supply chain planning optimization. Long-time SAP APO user teams can best relate to this concept by considering APO’s in-memory or former “live cache” design concept, where all planning related transactional and master data is drawn into the planning engine to formulate optimized supply chain plans.
Instead, the new HANA based cloud or on-premise technology will store all of SAP transactional data in memory (column-store) and will respond to information needs and reporting requirements by assembling models and algorithms on top of transactional data. The implication is a system with a far smaller footprint that users will eventually have the infinite freedom to re-arrange information hierarchy’s on-the-fly in a matter of a few seconds. By Hasso’s description, that opens opportunities for the system to perform all functions via models and algorithms and the ability to perform more predictive and simulation based analysis capabilities based on system-wide data.
Other significant implications will be the even more critical importance to accurate master data, internal skills in modeling and simulation of supply chain related data and the ability of supply chain planning and fulfillment teams to perform multitudes of what-if or target supply chain goal fulfillment analysis.
Of course, this broad and sweeping scope of SAP focused change is going to take additional time, perhaps years in scope. There will be critical decisions that customers will need to make over that time period. At Sapphire, SAP further communicated its increased dependence on select key partners to assist both SAP and its existing customers to more quickly and successfully navigate this ongoing and significant transition.
Existing SAP customers need to seriously think about the implications of this shift in technology direction, especially as it relates to supporting today’s and tomorrow’s broader and more complex supply chain management needs. While complexity and frustration may rule today’s mindsets, start seriously thinking about what these new changes imply for integrated supply chain and business planning support needs under the SAP HANA enabled banner. Such changes involve a changing mindset, new and different skill needs as well as a reliance on a trusted external consulting and support partner.
It is no secret that SAP APO, while designed as a bullet-proof supply chain planning system built around SAP master and transactional data, is somewhat difficult and inflexible in its ability to provide a means to support rapidly changing supply chain business processes or to support a new data paradigm where the majority of supply chain related data exists in an external demand or supply network. In a prior Supply Chain Matters posting, we noted that the structural design rigor and tight internal system linkages has led to many work arounds, including spreadsheets and supplemental systems. In many cases, the full potential of supply chain optimization, such as optimized supply planning is avoided because of the complexity and lack of understanding of innards of SAP APO. However, those teams that have taken the dedicated time and patience to learn and understand such innards with supplemental tools have managed to leverage APO functionality and subsequent benefits.
As noted in prior commentaries, as SAP continues to build out its described muscle platform, organizations need to focus efforts on the further mastering of broad-based supply chain planning and fulfillment process modeling, optimization, simulation and master data management capabilities. There are available tools and knowledgeable partners who can help you to re-focus your current efforts and direction and better respond to line of business needs, customer fulfillment or product management requirements, while helping to facilitate the skills and new capabilities roadmap that prepares for what will come in the new world of SAP.
Key SAP strategic partners such as Intrigo Systems, are not only focused on SAP APO, but the broader SAP Supply Chain Management, both today, and in the realities of the SAP HANA enabled environment. The Intrigo Systems Optek tool suite consists of modules that have been designed to place the planner more in control of the process while making SAP APO functionally more effective today, and in the future capabilities of SAP Supply Chain Management.
© 2014 The Ferrari Consulting and Research Group LLC and the Supply Chain Matters Blog. All rights reserved.
Disclosure; Intrigo Systems is a current client of the Ferrari Consulting and Research Group.