This week, SAP conducted its combined 2013 ASUG and Sapphire customer conference in Orlando and Supply Chain Matters was able to view some of the executive keynotes and theatre presentations.  This author has attended many prior Sapphire events, and thus has a context of where SAP has come in this event and how overall customer messaging has evolved. In the near past, these events tended to be large on vision but lacking in details for customers to get excited about.

When we shared our Supply Chain Matters perception of Sapphire last year, our headline was one of bold vision but confusing messaging. That changed this year, and we were pleasantly surprised with the improvement in customer messaging and the crispness of product direction and strategy.  Customers should be much more of ease that SAP is now getting its full act together and has obviously completed its homework.

Co-CEO Bill McDermott’s opening keynote that featured an entire sports business theme candidly did not hit the mark for us, but subsequent executive keynotes from Co-CEO Jim Hagemann Snabe and Board member and CTO, Vishal Sikka were crisp and focused.  Snabe outlined SAP’s strategic advancements in three significant areas:

1. The ability to bring data and information, both transactional and analytical, of large global and other companies into one area.  In essence, a declaration that SAP will support all applications and information intelligence from main memory, vesting improving response times.
2. Introduce innovative new applications that can leverage the power of SAP HANA, as well as the power of cloud and mobile computing. This was the opportunity to introduce the Sapphire audience to SAP HANA Enterprise Cloud, which we previously commented on.
3. Much more increased attention by SAP on the end-user experience and how users desire to interact with SAP applications, which was described as completely new thinking on the user experience. SAP now views its benchmark for usability to not be contrasted with other enterprise systems but to consumer software such as Amazon.com and others.

In the context of B2B and supply chain messaging, there was a real effort to have Ariba, SAP’s most visible B2B acquisition, and gain maximum visibility in conference presentations. Similar to what occurred after SAP’s same-year acquisition of BusinessObjects, there was all gloss, with no real substance in articulating for SAP customers the all-important progress being made in integration of all of SAP’s current sourcing, procurement, electronic invoicing and catalog support functionality, not to mention the overall direct material B2B networking support strategy timeline. The emphasis was more to have SAP sales teams selling the potential of Ariba vs. the all important questions of what does Ariba bring to my existing product supply chain landscape vs. general procurement process support needs.

We did have the opportunity to view a presentation anchored by Hans Thalbauer, Senior Vice President, Line of Business Solutions for Supply Chain.  That presentation provided a bit more clarity as to long-term direction setting, including some integration among and between Ariba and other existing SAP supply chain applications.  However, for us, the important news from Thalbauer was that finally, SAP will begin to deploy SAP APO (Advanced Planning and Optimization) on a HANA architectural platform.

Last year, what seemed little noticed was a passing reference by SAP Supervisory Board Chairperson Hasso Plattner on the ability to significantly accelerate the performance of SAP APO by leveraging HANA capabilities.  In April of this year, SAP quietly announced in a News Byte the planned availability of SAP liveCache technology powered by the SAP HANA platform.  SAP APO users know all too well that liveCache was SAP’s original manifestation of in-memory computing and that it serves as the foundation of all data brought into the application.  Users, however, had to often deploy instances of SAP Business Warehouse (BW) in their landscapes as a supplemental repository of the APO information that could not be supported by liveCache.  In its earliest days of introduction, it was often referred to as “live crash” because of its limitations.  That has since greatly improved but make no mistake, this move to HANA will be the most significant announcement in the history of SAP APO.

It now opens the door for the application to support both planning and predictive analytical capabilities along with a more compressed footprint of data and information. It should also enhance the overall scalability and response times of not only APO, but other supply chain support applications in the SAP Business Suite.

We heard encouraging words from some customer presentations regarding the building interest with the SAP Sales and Operations Planning Powered by HANA application. We were previously disappointed with the released functionality at the time of announcement but it appears that gaps are now being addressed by SAP development teams and key implementation partners.

One other noteworthy mention was a clarification we heard regarding the near-term availability of both the SAP Business Suite on HANA and HANA Enterprise Cloud offerings.  Apparently the initial released versions will contain limited supply chain management support applications and no initial Ariba support.  That will hopefully change in the coming months.

Supply Chain Matters will follow-up with a more detailed commentary regarding SAP in B2B and supply chain management support in the coming weeks.

Bob Ferrari

Next week, SAP will kick off its Annual ASUG and Sapphire customer conference in the U.S.. Typical of these events, product and other announcements are the order of the week.

SAP started the ball rolling this week by pre-announcing an SAP HANA Enterprise Cloud Service program which is designed to provide customers a cloud deployment option for applications running on the SAP HANA platform. During the press announcement event, SAP Founder and Supervisory Board Chairperson Hasso Plattner termed this announcement as the biggest since the prior introduction of R3 ERP. He declared: “After 41 years of SAP standard software, this is as it should be.” In essence, SAP is betting that select customers will opt to run HANA based applications in a public cloud environment managed by SAP.

It has been over two years since this enterprise software vendor first introduced HANA to the market. Our initial Supply Chain Matters viewpoint was optimistic, terming this technology a game changing for supply chain and B2B applications, provided SAP could springboard its development schedule and not place the engineering burden on the backs of its customer base. We observed signs of delayed innovation with the initial announcement of the Sales and Operations Planning Powered by HANA application, but we have had a subsequent briefing and are now hearing that development efforts have broadened, along with systems integration partner expertise. This latest announcement is yet another step in the HANA innovation effort.

What was really interesting to watch in the press announcement event was Plattner’s articulation of all the customer benefits of both HANA and cloud computing.  This was an area that SAP was initially cautious to embrace, fearing a cannibalization of its legacy revenue streams.  Many of its most influential customer IT teams were expressing a stronger interest in private cloud deployment options especially when it related to mission critical business support needs. According to Plattner, by hosting HANA based applications such as ERP, CRM, Business Warehouse and other applications, SAP will gain the benefit of being able to optimally engineer its hosting infrastructure to make individual applications run faster, along with gathering direct user feedback on ease-of-use and response aspects of the applications.

In essence, SAP is now embracing an “engineered systems” approach to applications computing.  If that sounds familiar, it should. Rival Oracle adopted this type of strategy a couple of years ago after its acquisition of IT hardware provider Sun Microsystems.  Oracle is moving rather quickly down the path of engineered systems designed for multiple computing options, including private and public cloud support. We now have two of the largest Enterprise ERP providers endorsing both an engineered systems in the cloud approach for their applications, along with pitching the benefits of cheaper, faster and more responsive computing.

The market is changing quickly in adopting the cloud paradigm.

During the press Q&A session, both Plattner and Vishal Sikka, SAP’s CTO and Executive Board Member, were asked if this new option would support customer needs for private clouds.  The answer was no,  since this option only support a complete HANA hosted application environment. Sikka pointed out that many current IT landscapes include heterogeneous systems running multiple or customized applications.  Perhaps that will be a future option, but the answer points out, at least to us, that SAP is targeting this new service to up and coming enterprises that are willing to take the leap into full cloud computing. It also plunges SAP into providing global based IT hosting services under its direct management.

We anticipate that further details will be provided next week, along with any additional announcements. Open questions will obviously be in areas of pricing, support, and timetable of specific applications supported. Do not be surprised to hear competitors of SAP offering up counter views as well.

Bob Ferrari

Readers may recall the May 2012 announcement from SAP that it had acquired procurement technology and B2B services provider Ariba for $4.5 Billion.  SAP was willing to pay a 20 percent premium over existing market value to incorporate Ariba functionality and services under its umbrella.

Supply Chain Matters recently had an updated briefing from Ariba, now officially termed An SAP Company.  In our initial assessment of this acquisition, our view was that this marriage implied a lot of joint work over the coming months, especially in addressing functionality overlaps among current SAP applications supporting both indirect and direct procurement needs.  Our first follow-up briefing was therefore focused on the progress achieved thus far in bringing these two companies together in offering combined procurement business process technology and B2B supplier network services.   Progress has been made in the indirect procurement process area support, but more work remains in the direct materials support area.  Overall, that is what should be expected at this point.

The actual acquisition ultimately closed in the early part of calendar Q4 last year, thus integration efforts really have progressed about four to six months, depending on perspective.  In our briefing, the first priority was described as the combining of sales teams, which was characterized as going very well.  This area of initial priority should not surprise since Ariba had bounced back from an operating loss in 2011 to becoming somewhat profitable at the time of the acquisition announcement. Sales momentum is therefore a big deal for both parties. Ariba sales teams are now deployed in a SAP procurement product and B2B vendor network specialist category. If they have not done so already, SAP installed based readers can expect an Ariba sales representative to call to explore your current overall indirect procurement, overall spend and network maintenance challenges, while outlining the benefits of Ariba Supplier Network and associated services.

While some select SAP customers are nudging toward more direct procurement process support, more integration in this area will need to occur in the current months. Ariba’s internal teams are aligning to support SAP’s deep industry business unit (IBU) approach in addressing unique business process needs in sourcing, procurement and B2B supplier connectivity areas, which obviously takes some time. Our sense from the description of progress is that Ariba does not wish to oversell at this point, and is willing to take the time to develop a collective longer-term integration roadmap.

In product dimension, 25 groups are working on various areas of technology and application integration in what is described as a “library of options”. Teams are evaluating areas related to consistency in technology platforms, leveraging SAP’s newer technologies such as Crossgate and specific combined application offerings. Customers can also expect Ariba to continue to rely on its current information integration toolkit built on the HubSpan platform, but concentrate more on SAP’s strategic information integration platform components. The entire Ariba partner network is described as being in the early stages of review.  Readers can expect Ariba to have a more concentrated focus on small and medium sized businesses to leverage both its Supplier Network and SAP Business One accounts.

Bottom line from our perspective, the assimilation of Ariba within SAP is progressing as expected.

SAP customers can expect a strong emphasis on providing added value in various indirect procurement business process areas in 2013.

Given the scope of integration and assimilation challenges remaining in the direct procurement business process area, which is a core capability need of SAP installed base customers, we do not expect any major announcements until later this year.  However, our sense is that both teams are beginning to realize the overall market and competitive potential for more timely integration of the direct procurement and B2B process applications and corresponding SAP technology stack, but are being realistic on the work that remains to be completed.

Bob Ferrari

This Supply Chain Matters commentary is our initial assessment of the previously noted news that SAP had announced plans to acquire multi-echelon inventory optimization technology provider SmartOps.

For those unfamiliar with SmartOps, this vendor is a provider of multi-echelon inventory optimization and supply chain analytical software. The company was founded in 2000 by Dr. Sridhar Tayur, then on the faculty of Carnegie Mellon University.  Its initial software was named Multistage Inventory Planning and Optimization or MIPO. Dr. Tayur had credited this author with introducing SmartOps to the broader supply chain planning market back at that time, while I was Research Director for supply chain planning applications at AMR Research.  Later in my career, while at SAP, I helped to establish SmartOps as one of four different partners in providing SAP supply chain planning customers’ integration choices for the multi-echelon inventory optimization planning requirement needs.  SmartOps software was named as an SAP Industry Network Partner in 2006 and reached Solution Extension Partner status in 2009, one the highest levels of SAP partnership can achieve at the time.

One of the first SmartOps lighthouse customers was Caterpillar, followed later by John Deere and others.

Readers should keep in mind that since this proposed acquisitions remains in-process, neither side can provide any detailed content, although some information may be selectively shared with existing customers of both firms.  However, this author has had some general conversations to provide an initial assessment for our readers.

First, this announcement is not to be viewed as any real surprise. Effective multi-tier inventory optimization can save multi-national enterprises a ton of money, and that has fueled high interest in this software segment for quite some time. Some companies have literally been able to payback their investment in this software in less than a year, just from the total inventory savings.  The original concept was to have inventory optimization software such as SmartOps fully integrated with SAP APO, in essence, having SmartOps automatically plan inventory and safety stock target levels behind the scenes for planners.  The reality however was that very few customers were able to achieve this level of integration, because of a number of complex factors. None the less, just having a standalone inventory optimization analysis uncovered lots of opportunities for overall inventory deployment savings while maintaining or increasing customer service levels. Having certified integration with SAP’s integration stack coupled with SAP’s commitment to first and second-level software support added more attractiveness for SmartOps to be a preferable choice of SAP IT support  teams among various industry clients.

From a solution breadth perspective, analytics intelligence and demand sensing capabilities were added to SmartOps functionality beginning in 2011. The Enterprise Demand Sensing (EDS) is of special interest to manufacturers in the consumer goods sector because it determines daily sensed demand at the item, location or customer segment level, a functionality that was laggard in SAP Advanced Planning and Optimization (APO).  Thus, the acquisition announcement indicates SAP has plans to enhance both the SAP Sales and Operations Planning Powered by HANA application and the SAP Advanced Planning & Optimization (APO) application with these augmented capabilities.

By achieving SAP highest partnership status , SmartOps software was listed on the SAP price list with field sales representatives garnering significant commissions for selling either a standalone inventory optimization or combination supply chain planning and inventory optimization deal.  My sources indicate that the decision to pull the trigger on acquisition was therefore primarily advocated by SAP industry and field sales teams as a lever to increased customer interest in supply chain wide analytics.

The other more strategic aspect of this acquisition relates to an opportunity for leveraging additional cloud computing options, along with leveraging more analytics on the SAP HANA platform for the SAP Supply Chain Management installed base, especially for the SAP Sales and Operations Planning Powered by HANA application, which has a lot of potential interest from SAP customers, but needs additional springboards in deployable functionality.

SAP has thus upped the ante for existing technology players in the sales and operations and supply chain analytical applications area with particular targets being Oracle, IBM, Kinaxis, JDA, Steelwedge, ToolsGroup and others in this space. The question however remains how quickly SAP will execute on its supply chain focused cross-integration cloud and HANA based analytics vision once this acquisition is consummated.  The other open question is overall pricing of both cloud and HANA analytical offerings. If the SAP field persists in demanding seven figure deals in this area, best-of-breed vendors will continue to be a competitive alternative.

Supply Chain Matters will provide added analysis in the coming weeks when more information and market dynamics become more apparent.

Bob Ferrari

SAP has announced plans to acquire multi-echelon inventory optimization technology provider SmartOps.

According to the announcement, SAP has plans to leverage SmartOps utilizing the SAP HANA platform. The announcement further indicates an intent to enhance both the SAP Sales and Operations Planning Powered by HANA application and the SAP Advanced Planning & Optimization (APO) application. SmartOps has been a long time preferred partner of SAP for supply chain inventory optimization requirements and thus this announcement in a natural progression of that partnership.

As part of this acquisition, existing SmartOps employees will join SAP.  The transaction is expected to close during the first quarter of 2013, which is a good indicator that talks were already in an advanced stage.

Supply Chain Matters will provide a deeper dive into the implications of this announcement when additional information comes forward.

Bob Ferrari

Over on the Horses for Sources Blog, Phil Fersht has penned a commentary, Fooled by Forbes’ fantasy fiction?, which Supply Chain Matters would like to also echo.  In his commentary, Phil calls attention to publisher Forbes Magazine and its “BrandVoice” columns to blatantly promote various technology products from technology providers such as Oracle and SAP. Phil notes: “There is no sponsored content indication anywhere on the BrandVoice articles, not even a company logo at the top of the pieces.  Moreover, midway through last year, the column title was changed from AdVoice to BrandVoice, further blurring the lines between reality and fantasy. The list of praiseworthy articles is endless, and (seemingly) very convincing to the general reader, who is being fooled into thinking they are reading real journalism.” Phil provides a couple of specific examples for readers.

The reason that this commentary resonated with us is that we also have noted these fine lines of difference among certain business and supply chain publications which feature articles that pretend to be independent journalism, but smack too much of vendor marketing language without alerting readers to a business arrangement.  In his commentary, Phil notes a source indicating that the cost of entry for Forbes AdVoice is $1 million. Once more, a reference to an AdAge Digital article also questions the effectiveness of this format in generating prospective customer leads. This author was floored by both the scope and implied arrogance of that number.  How many technology vendors have a marketing budget large enough to support a $1 million program with a single business publication? Very few.

Phil further notes: “ No, they (AdVoice) don’t promise to make their content appear independent.  They position it as another marketing channel where editorial and advertorial co-mingle and co-exist.  They are, in fact, quite proud of the hits BrandVoice articles get relative to straight editorial.  They like that blending of content.”

As bloggers, we are required by regulatory guidelines to disclose any prior business relationships that may be associated to the content of a particular blog posting.  Readers of this blog will note that whenever Supply Chain Matters posts a commentary related to a named sponsor or existing client, we include such a disclosure.  The one exception we make is in announcing a blog sponsor, where it should be clear to our readers that sponsors have a relationship to that commentary.

We hold our sponsors and clients to higher standards, meaning that independent thought leadership is far different than the latest marketing brief. Should not top-tier business and supply chain periodicals do the same?  After all, you the reader, need to be aware of what is independent vs. paid or tutored opinion.

We echo that these practices are indeed a slippery slope, one that those with big pockets believe will influence you, the reader and prospective buyer of technology products and services

Cudos to Phil Ferscht for raising such awareness and outrage.

Readers are welcomed to voice their own opinions as well.

Bob Ferrari

Founder and Executive Editor