This morning I had the opportunity to review the latest open letter to SAP customers authored by the company’s new co-CEO’s, Jim McDermott and Jim Hagermann Snabe.  I also took the opportunity to view recent press outreach interviews at the CeBIT Conference in Europe, as well as a recent appearance of the duo on the financial news network, CNBC. It should be no surprise that SAP has orchestrated its senior executive outreach from European venues.

First, let me get one point out of way.  I am of the belief that in any company, there can only be one CEO, one person accountable to drive a vision, set direction, and insure results for the shareholders. I must therefore admit that my views on SAP’s current leadership duo are a bit clouded, since I do not quite understand who has accountability for what. I also do not subscribe to the success of a management-by-consensus model, especially at critical times.

The SAP community should take note that the first statement in their communication to customers is the acknowledgement that SAP’s success will and always be linked to the success of customers.  It has become rather apparent these past months that SAP lost that perspective, instead, focusing more on SAP’s needs to continue to grow in a rather challenging and highly competitive enterprise software market. The previous declaration of a more expensive software maintenance program could not have been timed in a worst fashion, at the height of the past global recession as companies had to justify every incremental expense. SAP management also lost the confidence and trust of its employees, with perceptions that revenue and profitability growth were more important than providing customers the product innovation they desired. With the prior CEO tenure of Leo Apotheker, SAP’s internal power structure shifted toward the field organization, where license sales growth was more important than educating customers on product roadmaps and strategic direction. SAP’s confusing and layered organizational structure continues to force the company’s most influential customers to continue to nurture important contacts with product development and management teams within Germany.

I was pleased to note the commitment to accelerate the pace of product innovation, but SAP customers know of the constant lag times in execution of product innovation.  No doubt SAP supply chain and procurement customers have been rather patient waiting either for required new functionality or broader options in their technology deployments.  I could not believe that I actually heard Bill McDermott acknowledge the critical importance of end-to-end supply chain capability as a differentiator for SAP’s mid-market software offerings.  Perhaps SAP has finally understood that the company lost focus in SCM, while competitors did not.  SAP claims that its software touches 60 percent of the world’s transactions, yet confusion remains relative to the functionality included in SAP Business Suite 7 and ERP 6.  SAP customers need more efficient options in supply chain business intelligence and analytics, rather than having to rationalize BW vs. BusinessObjects as the BI platform.  I’ve been impressed with SAP CTO Vishal Sikka’s goals for more leveraged use of in-memory technology, which should capture the interest of the supply chain community.  The potential of this new in-memory technology is that aggregating global wide supply and demand plans could be performed literally on the fly, in real-time. 

I have consistently been of the view that SAP’s best strengths come from it roots as a technology provider that is driven and always sensitive to the needs of its customer’s business goals and unique industry challenges. It was one of the first ERP providers that understood the challenges of globally focused supply chain business processes, but execution of vision always lags.  While SAP may have strayed away from these goals, the new leadership structure has the opportunity to right the ship.  But storm clouds remain on the horizon. Crisp leadership, clarity of organization and clear accountability need to be top of mind.

Bob Ferrari

Disclosure: The Supply Chain Matters blog has not received any financial consideration related to influencing the content of this posting.

SAP conducted a summit meeting this week in Boston involving software industry analysts and market influencers.  The purpose was to share updates on SAP’s strategic direction and of course to favor more influence in the market.  I had the opportunity to view the keynote presentations and one presentation in particular caused me to think about implications for the global supply chain community.

Vishal Sikka, SAP’s Chief Technology Officer and Member of the Executive Board delivered a keynote titled Laying the Groundwork for Future SAP Technology.  In his remarks, Vishal addressed the four technology disruption trends which SAP is leveraging in future product direction.  The trends were:

1. In-memory computing, leading to new dimensions of analytics
2. Expansion of cloud computing options
3. Pervasive connectivity and mobile computing
4. Services Oriented Architecture (SOA) and interoperable components

Trends one and three should especially capture the interest of the supply chain community. 

New developments relative to in-memory computing are leading to orders of magnitude performance improvements in storing data. Think about a database table of multiple rows and columns.  Traditionally, database systems stored data by records consisting of rows.  Today’s technologies are enabling the capability to store data by columns.  Also, the price of memory devices has been reduced dramatically.  The net result is that system developers can now design applications that can store a company’s entire supply chain planning or enterprise data in main memory vs. constantly accessing an external data storage or information warehouse. 

What’s even more interesting about this trend is the fact that it was advanced supply chain planning and analytical applications that originally utilized in-memory technology.  Who could forget the early releases of SAP APO that featured Live Cache, allowing supply, demand and associated transactional data to be accessed within the application. This original technology was not without lots of problems, and much learning has been gained.

The potential of this new in-memory technology is that aggregating global wide supply and demand plans could be performed literally on the fly, in real-time.  Vishal noted lab results where a billion rows of data are analyzed in less than a second, utilizing a half dozen cheap blade servers. That is truly amazing.

We have recently noted the continued introduction of layered, more rapid supply chain planning applications that begin to leverage these new technologies.  Rather than having a planning or MRP cycle that is weeks or days in duration, we can now deploy analytical and decision support applications that provide event-driven planning.  Your firm can quote or book a significant order and instantly see the impact to all tiers of inventory or production. Your S&OP process can conduct various scenarios of demand or supply what-ifs.  And the list goes on.

However, with all enthusiasm around new technology, there are reality checks for our community to consider.  The first and foremost is data accuracy and consistency, which has always provided significant challenges.  The analogy of garbage at the speed of light has an even more important significance when you think about these new trends, not to mention that the reaction time to fix any bad data will become ever more time sensitive.

Does your organization actively address data accuracy and consistency? The global recession has brought about many unfortunate reductions in organizational headcount.  How many of these lost people were instrumental in insuring master data consistency?  Perhaps this post can garner some reader comments on this situation.

The third trend, pervasive connectivity and mobile computing also triggers some comment.  Recall the initial promises associated with the deployment of RFID technology as a mobile enabling technology to fuse the physical world of inventory with supply chain planning and execution applications.  The potential leverage of the technology has been limited by the current realities in the cost of RFID tags and infrastructure deployment. Vishal’s presentations included demos that featured user input of a queery and change of the plan on an Apple iPhone or other smartphone device. There is also the ability to review the latest sales and shipment plans on these same devices.  Really cool in concept! 

With the overall proliferation of these devices as a purely business tool, there are bound to be data security concerns if the device is stolen or misplaced?  Have we forgotten about those stolen laptop computers that had sensitive data compromised?

The takeaway is for readers to understand these technology trends that will lead to new innovation and streamlining of global supply chain business processes, but to add the practicality and context of what blocking and tackling issues need to be solved before considering future full-blown deployment. 

The continued agenda for the combined IT and supply chain functional community is to continue to context the opportunities that advanced technology can bring with practicalities of the process. The adage of plan ..plan ..plan always has a practical meaning.

Bob Ferrari

Disclosure: Neither this blog or The Ferrari Consulting and Research Group LLC has received any financial consideration related to influencing the above posting content.

You may have not noticed that this week, SAP announced an acquisition related to supply chain planning.  SAP announced an intent to acquire SAF Simulation, Analysis and Forecasting AG for a $90 million bid, and a small premium over SAF’s closing stock price.. Although this acquisition is small in terms of enterprise software standards, it does represent a strategic move to augment industry-specific functionality and capability.

SAF provides a specialized focus in retail and wholesale industry inventory planning, forecasting  replenishment and store optimization. Its associations with SAP date back to 2002 when SAP began to partner with SAF to augment high SKU planning needs specifically required for supporting retail supply chain planning and forecasting needs.  At the time, there was some customer confusion related to the capabilities of SAP APO Demand Planning vs. the functionality being offered by SAF.  SAP eventually branded the SAF capabilities as SAP Forecasting and Replenishment.

No doubt SAP has future intentions related to exploiting this acquisition.  My own speculation is that SAF functionality will be further leveraged within SAP’s Retail planning and forecasting offering.  I also speculate that other complex, high SKU planning and replenishment needs such as service parts planning and aerospace and defense, or government related needs may benefit from certain functionality within SAF. 

For the time being, SAP is in a legal quiet period until the proposed tender is accepted, and is no providing any specifics.

This will be an interesting area for SAP supply chain planning users to monitor.  Supply Chain Matters will plan to provide future commentary when more strategic information becomes available.

Bob Ferrari

IBM recently announced its Green Sigma Coalition, an industry alliance among technology oriented companies, which I believe should be applauded by our community. 

Charter members of this coalition are Johnson Controls, Honeywell Building Solutions, ABB, Eaton, Cisco Systems, Siemens Building Technologies Division, Schneider Electric and SAP, and each has indicated its willingness to work with IBM to integrate their products and services under the umbrella of a “Green Sigma” product offering. The program is further described as helping IBM Business Partners validate market and sell their offerings with an assurance that the product or service has been evaluated and demonstrated to reduce environmental impact based on customer use.

Green Sigma is an IBM approach that applies Lean Six Sigma principles and practices to energy, water, waste and GHG emissions throughout a company’s operations, which include transportation, manufacturing and distribution center operations that make-up a product’s value chain. A validation process calls for products and services to meet stringent criteria that address the reduction or use of resources such as energy, water or paper materials.  Submissions are to be reviewed by an IBM Energy and Environment Review Board.

IBM’s commitment to a sustainable supply chain includes its own internal operations.  As a founding member of the Electronic Industry Citizenship Coalition (EICC), the company accepts the EICC Code of Conduct as an equivalent and alternate to its existing Supplier Conduct Principles. IBM is also actively involved with two initiatives to analyze greenhouse gas emissions associated with its supply chain through its membership in the EICC and as a member of the Carbon Disclosure Project’s (CDP) Supply Chain Leadership Collaboration.

What I especially like is an approach that brings together real-time metering and monitoring with advanced analytics that can facilitate more-informed decisions regarding improved energy efficiencies and reduced environmental impact.

Well known and respected companies such as IBM, Hewlett Packard, and lately SAP continue to provide an active executive commitment toward more environmental sensitive products, and are now taking the lead in bringing together more environmentally sensitive technology from multiple companies. This can help in facilitating more green initiatives that involve many aspects of a company’s supply chain.  Surely other companies will follow in these efforts.  It just makes good business sense for both prospective customers as well as the companies themselves.

Bob Ferrari

I wrapped-up my presence here in Orlando today, and drove down the coast to visit my daughter.

One of my initial impressions of this conference was a reflection on the overall attendance. I must admit that I was at first skeptical about the estimated 10,000 attendee number, since my walks through the show exhibit halls and attendance at the various keynote theatre events did not convince me that there were that many attending. How can SAP attract this amount of people to a software conference when we are still in the midst of severe recession throughout the global economy? With so many other vendor and industry conferences experiencing lower attendance, what motivated IT and business professionals to come to this conference?

Then came last night’s Don Henley concert, and my skepticism was neutered. There they were, all 10K plus, partying and enjoying a great concert. They were indeed here.

So the question for me shifts to what were the real motivations to cause this many people to justify to their senior management groups that attendance at this combined event was absolutely essential for the business. As luck would have it, while attending a pre-concert event, I ran into the Global Head of Media Relations / Television for SAP, who called my attention to an SAP TV video shot on-site. As a blogger, I do not normally reference any marketing-focused video, but in this case I am taking license. This video is well done and if you screen out the occasional praises for SAP, and rather focus on what the attendee’s state as their motivators for attending, you will find some interesting insights.

Here is the SAP Video link. It runs just over four minutes.

Technology and product marketing managers should pay close attention to these nuggets. I noted the following:

• Cutbacks have forced our business to get more efficient
• SAP is a large investment, and we need to protect our investment with well educated decisions
• Growth plans have been scaled-back, but strategic roadmaps remain.
• Nice to have projects are out, but must-have projects are in.
• Support is very important, even in tough times
• It’s all about cost of the IT investment

So now I believe I have an answer to my skepticism- this year’s conference attendees were actually attending education and consultation meetings. What a refreshing difference.

Share your own observations in the Comments section related to this post.

Bob Ferrari