When Worlds Collide: Next Generation ERP

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1 ADVANCED MANUFACTURING RESEARCH When Worlds Collide: Next Generation ERP Bruce Richardson Vice President, Research Strategy When Worlds Collide The View From The Marketplace The Next Generation ERP Market Perspectives Products Technology Channels SAP s Role in The Next Wave

2 AMR s ERP Activity Since January, 1996, Evaluated/Negotiated 185 Contracts Deals -- $1.5 Billion Software Deal Size: 48-60,000 Seats More Than 10,000 Seats: 30% 5,000 to 10,000 Seats: 40% Less Than 5,000 Seats: 30% 1996 Range: $150K to $30 Million 1997 Range: $225K to $140 Million 1998 Deals: Three Over 20,000 Seats What Clients Tell AMR: We Want an Enterprise Backbone. We Need Real-Time Decision Support That Spans Our Operations. We Want Fewer Software Suppliers. Vendor Response: Push for Broader Footprints Conclusion: High End Market to Consolidate! Fewer, But Larger Vendors; Use Stock as Currency!

3 Next Generation ERP A Look Back in Time (1990) The World Before ERP and Client/Server MRP II Was $ 1 Billion Market -- Back Office Only Application Emerging Technologies: UNIX, RDBMS, 4GLs Motif, OSI, POSIX, Four $100 Million Vendors ASK, Dun & Bradstreet Software, SAP, and SSA SAP Closed FY90 at $313 Million $20 Million in North American Sales 110 North American Employees

4 Fast Forward to March 10, 1998 ERP is a $41 Billion Business Today! $ 13 Billion + in Software in 1998 $ 17 Billion in Services At Least $ 11 Billion in Hardware, Database, Networks, and Complementary Applications AMR Forecast for 1998: 35-40% Growth Replacement Market in US and Most of Europe New First Time Markets Growth Across the Spectrum Not Just for Manufacturers Anymore! Continued Growth Through: An Expanded Footprint: Supply Chain, Customer Management, Internet Apps... New Verticals: Retail... Global Coverage: Japan, Latin America New Channels: Service Bureaus, 3PLs... Moving Down Market Goal: Sell More Seats! Be As Pervasive as Microsoft Office How: Push Backbone Concept

5 The Backbone Concept Procurement Manufacturing Financials ERP Backbone Engineering Supply Chain Human Resources The Enterprise Backbone Horizontal Applications Finance and Accounting, Costing, Inventory Management, Procurement, Human Resources, Web Applications Layer on Industry-Specific Applications Shop Floor Control, Manufacturing Planning, Banking, Utilities, Public Sector. Infrastructure Support Distributed Standard Object Model, Workflow Real-time Intelligent Messaging, Published APIs... Move to Component Architectures What s The Next Generation?

6 Next Generation ERP: Increasing the Product Footprint Three Directions Supply Chain Management Customer Asset Management Linking to Engineering

7 Supply Chain Management A Brief History of Planning (1990) Before Supply Chain Management! A Wave of Point Solutions: Mainframe Based DRP and Forecasting Plethora of Finite Capacity Scheduling Fast MRP Using Custom Hardware Custom Warehouse and Transportation Systems No Market -- Totally Fragmented!

8 Supply Chain Planning and Scheduling Market to Reach $3 Billion in 2000! Was $350 Million in 1996 Most Expensive ERP Add-on Widespread Belief in Optimization Move From Point Solutions to Suites Supply Chain Planning Backbone Manufacturing Distribution Enterprise Planning Demand Transportation Suppliers

9 The Suite Spot 1. Demand Planning #1 Source of Pain Link Planning With Sales and Marketing Promotion and Event Planning Need for Causal Forecasting Point-of-Sale Integration 2. Distribution Planning DRP Load Balancing and Distribution Continuous Replenishment Sourcing Dynamic Deployment Available-to-Promise/ Profitable-to-Promise Rounding Out The Suite 3. Manufacturing Planning and Scheduling Material and Capacity Planning Line Balancing Theory of Constraints, Genetic Algorithms... Available-to-Promise/ Profitable-to-Promise Transportation Planning Transportation Management Load Balancing and Distribution Profitable-to Deliver 3PL as Key Channel?...

10 The Fifth Dimension 5. Enterprise View Graphical, 3D Model of the Entire Enterprise Coordinate Plants and Distribution Centers Plan All Transportation Lanes and Modes Check Resources at Contract Manufacturing Sites, Third Party Carriers, Suppliers Links to Data Warehousing Opportunity for Strategic Planning Add Execution for 21st Century War Room The New Supply Chain Planning Backbone? Strategic Planning Enterprise Supply Chain Planning Tactical Planning Operational Scheduling Demand Planning Distribution Planning Mfg Planning & Scheduling Transportation Planning ERP/ Data Warehouse

11 New Directions Embedded Planning Engines Inside... ERP Order Management (Pre-Configured ATP) WMS (ATP, Inventory Visibility) Sales Configuration (ATP) Specialized Views Financial: Activity Based Costing Data Executive: Performance Metrics Procurement: Internet Applets Sales and Marketing: Yield Management Partners: Collaborative Planning But, Where Is the Execution? Warehouse Management Transportation Management Order Management Product Configuration...

12 Customer Asset Management: Front End Applications The Customer Interaction Chain Wave of Point Solutions and Suites High End Market is Consolidating Natural Extension to ERP Order Fulfillment: Pricing, Promotion, Configuration/Packaging, Proposals, Delivery Link to Forecasting and Planning (Planograms) Will ERP Vendors Dominate CAM? Yes, In Dominant Verticals Adds Millions of New Seats Standalone CAM or ERP Extension

13 SAP To Make Aggressive SFA Push Last Summer Formed Customer Review Board In December, Buys 50% of K & V -- People, Not Product New Development of SFA Components Add Industry Templates and Workbench New Set of BAPIs First Shipments in 4Q98 Leverage Back Office/Front Office Ties Customer Asset Management Field Service/ Logistics Customer Support/ Call Center Self-Service Apps R/3 Backbone Sales Force Automation Marketing Automation Sales Configurators

14 The Final Frontier: ERP Meets Engineering SAP to Unveil R/3 Engineering? Customer Needs: LifeCycle Management -- Concept to Volume, New Product Introduction, End of Life Supplier Planning and Procurement Uniform Part Numbering Single BOM Specification Management... What s Available Now? New Configurator, PDM Component Aspect Alliance To Be Driven By A&D, Automotive, High Tech, Process Industries...

15 The Missing Link: ERP-to-Engineering Component/ Supplier Mgmt Product Data Management Supplier Planning R/3 Backbone LifeCycle Planning Product Configurator Specification Mgmt The Collision Point: VIPER

16 VIPER: A New Model... Vertically focused, Integrated solution (Broad Footprint), spans Planning and Execution, complete Replenishment management system Seriously, Though: Market Wants an Integrated System Spanning, Planning, Execution, and Optimization Provides Greater Visibility Re: Orders, Forecasts, Material/Capacity/Carrier Availability... Offers a Broad Footprint Supports Complementary Components Delivers Measurable, Business Value -- Fast!

17 The VIPER Suite Planning: Demand Planning, Deployment Planning... Execution: Inventory Management, Procurement, Order Management, WMS... Optimization: Simulation, Enterprise Optimization Services: VMI, System Audits Open APIs: Legacy ERP Systems, WMS, Transportation, Planning Add-ons, Merchandising Systems Next Generation ERP: VIPER SAP SFA SAP Customer Care SAP BIW R/3 Backbone SAP PDM SAP: APO SAP Configurator

18 Why SAP is Well-Positioned: Integration of R/3 to BIW to APO is Key Selling Point! Strong Customer Base Business Benefit Sell Focus on Rapid Implementations LiveCACHE, BAPIs, Other Enablers Challenges: Merging Planning and Execution Mindsets; The TMS/WMS Void Does SAP Push Suite Vendors Back to Point Solutions? Next Generation ERP: Enabling Technologies

19 The Next Generation Is Here! Business Framework Workflow Agents and Wizards BIW: Data Warehousing / OLAP Business Engineer Internet Commerce Collaborative Applications Computer Center Mgmt System LiveCache and New BAPIs! Next Generation ERP: New Channels

20 Return of the Service Bureau: The New Value Chain Utility Initiation Fee, Monthly Charge, Set Contract Multiple Uses: IT Outsourcing Business Process Outsourcing New Vertical Opportunities While Ideal for Small Sites, Remote Locations, Technology Averse, Applicable to Very Large Entities, too A Monthly ERP Bill Rent Software from SAP Or, a 3PL Or, Set Up Your Own R/3 Utility Manage Suppliers, Customers, Carriers...

21 Closing Thoughts In Summary: ERP Becomes Enterprise Backbone Financials, Inventory and Procurement, and HR Are Core Enterprise Apps Add Components for Specialty Manufacturing, Supply Chain, Customer Asset Management, and Collaboration Final Frontier: Engineering Wave of New Enabling Technologies and Delivery Options Look for New Pricing Categories, Too!

22 It s January 4, Do You Know Where SAP Is? $ 12 Billion Run Rate By YE2000 Global Presence -- 30,000+ Employees Selling Business Solutions to Every Type of Enterprise, Everywhere Leveraging a Wide Variety of Channels, including 3PLs and Service Bureaus $100 Billion+ Market Cap! Hey, What s the Price of SAPHY

23 Imagine That: You Can Buy The New SAP VIPER Suite... And the SAP Replenishment Applets You Can Buy All of This Via the Web... Or Lease it from the SAP Service Bureau Your Hasso Wizard Configures It for You! And You Run It All On Your New SAP Swatch Web Watch/Cell Phone! All Things Are Possible!

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