MusicNetwork is playing an innovative instrument, with information available at its fingertips, provided by the SAP Business One application

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1 MusicNetwork is playing an innovative instrument, with information available at its fingertips, provided by the SAP Business One application Highlights SAP Business One was implemented and tailored to specific business needs in less than 10 weeks No efforts for training and education due to self-explanatory software interface All existing data from legacy system migrated automatically Comprehensive view on all customer data, orders, deliveries, and invoices Customer Profile Company Name Industry MusicNetwork AG High-tech Revenue in 2006 approx. SFR 3 million ( 1.9 million) Employees 6 Headquarters Web Site Zurich, Switzerland Solution and Services SAP Business One Implementation Partner Operational Benefits Substantial improvements in employee productivity (CAGR): Sales department: 61% Customer support department: 40% IT operations: 75% Revenues increased by 5% through improved price and invoice management Value of stock holding reduced by 17% annually Cash collection cycle reduced by four days Return on Investment (ROI) Payback period (static): ten months Net present value (3 years at 10% discount rate): SFR 412,614 ( 257,884) Internal rate of return: 271% We are now able to get all business-related information at our fingertips without having to physically search the warehouse. And the investment in the SAP Business One application will be paid back in less than one year. Franco Stuppia, CEO, MusicNetwork AG

2 Challenges Company Overview MusicNetwork AG is one of the leading Swiss distributors of audio software and hardware located in Zurich. MusicNetwork AG offers a wide array of products for sale by specialist music stores, including high-quality prodducts from Apple, M-Audio, Native Instruments, RME Audio, Samplitude and Friend-Chip among many others. From standard solutions for home studios up to custom-made professional audio installations for commercial studios, MusicNetwork covers every facet of the audio spectrum. The wide variety of products is supplemented by enhanced customer services, such as consulting, training and support. Vision & Strategic Goals Achieve a higher degree of professionalism by having a single point of control for all customer, financial and stock data Grow employee productivity to handle revenue growth without increasing the workforce Support the company s growth with flexible, scalable software Challenges and Opportunities Replace inflexible legacy system with extendable solution to serve future needs Reduce IT costs by implementing a reliable software solution suitable for a small business running a mixed Apple and Microsoft environment Integrate additional points of sale into the solution, including an online internet shop as well as new branch and warehouse locations Solutions and Services SAP Business One Implementation Approach and Highlights Quick implementation within 10 weeks All customer and product item data could be transferred into the SAP Business One application automatically SAP Business One is intuitive software requiring no training or additional education Why SAP Sound analysis of existing business processes through systems integrator MTF Schweiz provided proof of the solution s suitability for MusicNetwork s business model SAP Business One application offers powerful and simple-to-use functionality Robust, scalable solution at an affordable price that is able to grow with MusicNetwork s business Software could be tailored to meet MusicNetwork s precise business requirements

3 Quantitative Benefits Significant performance improvements To support its growing business of marketing and distributing audio software and hardware across Switzerland, at the end of 2004 MusicNetwork decided to implement a new business management software application. The objective was to support the extension of MusicNetwork s sales and services capabilities, and to enhance its customer relationship management program. The SAP Business One application provided all the core functionality required by MusicNetwork, and the software could be easily tailored to best support MusicNetwork s business processes. With the SAP Business One solution, MusicNetwork achieved significant performance improvements across its business processes, especially in the sales and customer support area: Process Area Sales Customer Support Price Management Key Drivers for Improvement Order status and stock data available from a single source allows MusicNetwork to respond faster to dealers orders Increased order volumes handled by increasing the number of processed invoices and positions per employee as well as a reduction in the number of invoices and order positions by bundling separate orders Improved administration of serial numbers allows easier handling of orders Improved administration of serial numbers allows easy prequalification of customer requests Customer self-service online order status tracking reduces the amount of customer service calls Improved qualification of customer credit risk reduces bad debt Management of discount classes for dealers Reduced effort for price management as applicable discount levels depend on achieved revenues Performance Improvement Productivity improvement of 61% annually Increased productivity of service reps by 40% year by year Revenues increased by 5% each year Increased labor productivity in sales and customer support Having an online view of customer information and an integrated view of the inventory levels provides MusicNetwork with much more streamlined control of the order management process. For example, the number of invoices and open order positions are now kept to manageable levels. The resulting productivity increase allows MusicNetwork to handle substantially increased order volumes with only slightly increased resources, whereas without the SAP Business One application, MusicNetwork would have needed to hire additional headcount. This benefit is by far the largest driver of the very impressive ROI (see also benefit structure graphic). Net Cash Flow from SAP Investment SFr.

4 Quantitative Benefits (continued) Streamlined support processes With the SAP Business One application, MusicNetwork s customer support is able to verify whether a customer is located in Switzerland and whether they placed a direct order previously a difficult, if not impossible task. This identification ensures that the company does not lavish expensive after sales services on customers who did not actually obtain their products from MusicNetwork. For software customers, the SAP Business One application automates the administration of serial numbers, improving the management of service and repair orders by linking valid purchases with requests for support. With all the information available at their fingertips, customer service representatives are able to respond to inquiries immediately, without the delays involved in physically checking the warehouse for product availability or the current order status. By using the integration and automation features of SAP Business One, MusicNetwork has been able to manage the increasing numbers of customer inquiries without growing the customer support department headcount. Increased revenues, less administration from better pricing management MusicNetwork offers discounted purchase prices to dealers depending on the revenues and product volumes over specific periods. It was expensive to maintain a manual track of such discount deals, and the figures might be subject to discussion. The SAP Business One application s analytical capabilities allow MusicNetwork to handle pricing schemes by generating sales reports automatically, not only reducing the administration costs but also providing more accurate figures on which to agree the discounts. In conjunction with the improved ability to pre-qualify a customer s credit risk by looking at current sales reports and payment histories (and thus reducing the amount of bad debt), MusicNetwork is achieving an average revenue increase of 5% per year. Further, invoices generated automatically by approved sales order entries and the improved qualification of credit risks have allowed MusicNetwork to reduce the average cash collection cycle by 4 days. Other quantitative benefits The SAP Business One application is providing additional benefits in related areas; for example, it typically takes three weeks for replacement components to arrive from suppliers, which means that low inventory levels have a direct impact on customers. MusicNetwork is using the early alert functionality within SAP Business One to trigger the purchasing department system should the number of parts in stock fall below defined limits. By recognizing the need to re-order the components early, MusicNetwork eliminates the need to keep more parts in stock than is necessary, and has consequently reduced stockholding by an average of 17%. The migration from our old database system went very smoothly and easily. All the essential data was transferred to the new system automatically. Franco Stuppia, CEO, MusicNetwork AG Share of Benefits Improvements in sales 75% Other benefits 3% Improved price management 8% Benefits in support 14%

5 Qualitative Benefits Improved customer relationship management MusicNetwork has also implemented a comprehensive customer relationship program based on the SAP Business One application. Communication with customers has been greatly improved by automatically generating order confirmations, which are then ed to customers. Customers can use the relevant order tracking numbers to monitor delivery progress on MusicNetwork s internet portal, and the absence of paperwork has allowed MusicNetwork to cut total delivery times by 50%. Integrated customer communications have resulted in a substantial reduction in the number of calls to the support center, and, more importantly, have increased customers satisfaction with the level of service provided by MusicNetwork. Conclusion The SAP Business One application has proved to be the ideal solution for MusicNetwork. The solution was easy and quick to implement for a small company, and could be swiftly tailored to reflect the company s business processes not vice versa. The SAP Business One application has enabled MusicNetwork to increase employee productivity in its core business processes (sales & customer support), to increase average price levels through improved handling of the dealer discount program, and to achieve savings in working capital through reduced stock levels and a shortened cash collection cycle. Having all information on customers, orders and current stock available at a glance has not only enabled MusicNetwork s delivery times to be cut radically; it is also providing new levels of service to existing customers. These combined factors are leading to payback on MusicNetwork s investment in the SAP solution in less than a year. With the SAP Business One solution, MusicNetwork also established a platform for profitable future growth from additional sales channels that can be easily integrated with the central business management software. The SAP Business One application was able to adapt to all our business requirements and we did not have to change our business processes to fit the software. We are now fully prepared for the future, particularly opening new branches. Franco Stuppia, CEO, MusicNetwork AG Next Steps Open up a new business branch including a warehouse in the French part of Switzerland and integrate this operation into the SAP Business One application Integrate the operation of two regional warehouses and the settlement of all orders into the SAP Business One application Extend the online shop capabilities by providing a special area for registered customers and offering a download area for documents and software Lessons Learned Ensure close communication with the implementation partner right from the start of the project Document the business processes that need to be supported by the software and properly define the workflows that will be automated by the system

6 About the GP&S Value Analysis This study represents an investigation into the costs and business values of investing in the SAP Business One application. Research and value analysis were conducted by Gerlach, Porst & Steiner (GP&S), an independent global consulting and services provider for business growth. The analysis is based on telephone interviews with representatives of MusicNetwork and documents provided in the course of the investigation. Information contained in this publication has been obtained from sources considered reliable, but is not warranted by GP&S Gerlach, Porst & Steiner GmbH. All rights reserved. SAP, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. Sponsored by SAP