SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 1 On the Opportunities and Threats of e-Marketplaces Dr. Bernd-Uwe Pagel SVP Marketplaces SAP AG

SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 1

On the Opportunities and Threats

of e-MarketplacesDr. Bernd-Uwe Pagel

SVP Marketplaces

SAP AG


Agenda

The Evolution of B2B Networks

E-Marketplaces @ SAP

Software Provisioning vs. Service Provisioning

Summary


Agenda




Summary


SAP has 2,5 Years History ine-Marketplace Business

Foundation of Foundation of SAP MarketsSAP Markets, an , an SAP subsidiary SAP subsidiary to develop and to develop and

market solutions market solutions for e-for e-

MarketplacesMarketplaces

Announce-Announce-ment of the ment of the partnership partnership

between SAP between SAP Markets and Markets and

Commerce OneCommerce One

Delivery of Delivery of three versions of three versions of MarketSetMarketSet, the , the joint solution of joint solution of SAP Markets SAP Markets

and Commerce and Commerce OneOne

Reintegration Reintegration of SAP Markets of SAP Markets

into SAP and into SAP and Foundation of Foundation of the the Business Business

Unit Unit MarketplacesMarketplaces

SAP becomes a SAP becomes a member of the member of the

GTWAGTWA

March 2000 June 2000 Fall 2000 -Spring 2002

TodayApril 2002


SAP has Achieved a Strong Market Share


SAP Stays Committed

• e-Marketplaces will play a substantial role in the business strategy of SAP customers

• e-Marketplaces requires different engagements compared to the classical software business

• SAP has established a separate Business Unit focussing on e-Marketplaces only– Customer care and partner management– Solution development and support– Knowledge and skill sharing across all SAP e-Marketplaces

and their participants– Joint business development w/ successful customers


Key Success Factors of e-Marketplaces

Quick decision-making and little politics on Board level

Experienced, industry-networked management team with strong backing of investors

A value proposition which is sustainable and attractive for ALL Marketplace participants

Technology partnerships with long-term perspective and sufficient inhouse skills

Simple services and a focused offering, not “everything for all”

Governance

Execution

Business Model

Reliability

Focus


Agenda




Summary


SAP Believes in Open B2B Networks and Supports their Evolution

•Build an open community of Exchanges– Interoperability governed by SLAs and contracts– Pooling of Services to lower cost– Faster ramp-up of ww transaction volume

•Deliver additional values to participants– Accelerating global roll-out of on-ramp solutions (e.g., e-

Procurement, Private Exchanges)– Enabling a global consolidation of the supplier base– Cost-efficient offering of value-added services (e.g., Supplier

Integration and Activation, Content Services)– Supporting global sourcing efforts (e.g., Global Spend Reporting)


Portals and Exchanges are Complementary

Private

Public

Pri

vacy

Integration IntensityInformationIntegration

ProcessIntegration

Portal Exchange

Collaboration Services betweeninternal operational companyunits

Process Integration Enablement(e.g., master data harmonization)

Intercompany ConnectivityServices (e.g., Document Routing,Mapping, Roundtrip Procurement)

Value Added Services (e.g. ASP, Sourcing, Financial andLogistics Services)

Company-internal end-user information Service

User Interface canconsolidate visibility andaccessibility of internalsystems

Community Knowledge and Content


Nature of Services and Complexity of the Eco-system are Controlling the Deployment Options

Public & PrivatePublic & Private

PrivatePrivate

Nature of Service

Complexity of Ecosystem

(External business partner relationships, product structure, corporation structure)

low highStandardized

Unique

PublicPublicStandardized

Products,Catalogue

Procurement

GIG Complex Corporation,Catalogue

Procurement

Shell

Complex Relationships,

Direct Procurement

eAEC(Scope, connectivity,

complexity, cross-industry,

strategic importance)


Creating B2B Portfolios

Content & DataManagement

Source: PwC Research and Ascet, 2002.

PublicPublic PrivatePrivate

Horizontal Horizontal e-MPe-MP

Vertical Vertical e-MPe-MP

PrivatePrivateExchangeExchange

Service Catagories

IT Integration

Community Content & Industry RegistryCommunity Content & Industry Registry

Customer Service and SupportCustomer Service and Support

Catalogs & Content Services (Non-strategic)Catalogs & Content Services (Non-strategic)

Catalogs & Content Services (Strategic)Catalogs & Content Services (Strategic)

eAnalytics (Performance Monitoring+Reporting)eAnalytics (Performance Monitoring+Reporting)

ContentMgmt

CRM

BI

B2B Transactional Integration/Mapping ServicesB2B Transactional Integration/Mapping Services

B2B Document Routing & Security ServicesB2B Document Routing & Security Services

B2B EDI VAN Replacement & Registry ServicesB2B EDI VAN Replacement & Registry Services

Middle-

ware

Settlement, Payment & ClearinghouseSettlement, Payment & Clearinghouse

Logistics & Transportation ServicesLogistics & Transportation Services

Supply Chain Event ManagementSupply Chain Event Management SCEM&

LogisticsFinancials

Collaborative Design & EngineeringCollaborative Design & Engineering

Supply Chain Collaboration (e.g. CPFR)Supply Chain Collaboration (e.g. CPFR)

Asset MaintAsset Mainteennaance & Managementnce & Management

Order FulfilmentOrder Fulfilment

PLM

SCM

Collaborative Project ManagementCollaborative Project Management

Procurement (Direct / Strategic)Procurement (Direct / Strategic)

Sourcing & RFx Services (Direct / Strategic)Sourcing & RFx Services (Direct / Strategic)

Procurement (Indirect / Non-strategic)Procurement (Indirect / Non-strategic)

Sourcing & RFx/Auctions (Non-strategic)Sourcing & RFx/Auctions (Non-strategic)

SRM

CollaborativeBusiness

Applications


Current Sweet Spots of e-Marketplaces

Content & DataManagement

Source: PwC Research and Ascet, 2002.

PublicPublic PrivatePrivate




Service Catagories

IT Integration

Community Content & Industry RegistryCommunity Content & Industry Registry

Customer Service and SupportCustomer Service and Support

Catalogs & Content Services (Non-strategic)Catalogs & Content Services (Non-strategic)

Catalogs & Content Services (Strategic)Catalogs & Content Services (Strategic)

eAnalytics (Performance Monitoring+Reporting)eAnalytics (Performance Monitoring+Reporting)

ContentMgmt

CRMBI

B2B Transactional Integration/Mapping ServicesB2B Transactional Integration/Mapping Services

B2B Document Routing & Security ServicesB2B Document Routing & Security Services

B2B EDI VAN Replacement & Registry ServicesB2B EDI VAN Replacement & Registry Services

Middle-ware

Settlement, Payment & ClearinghouseSettlement, Payment & Clearinghouse

Logistics & Transportation ServicesLogistics & Transportation Services

Supply Chain Event ManagementSupply Chain Event Management SCEMLogistics

Financials

Collaborative Design & EngineeringCollaborative Design & Engineering

Supply Chain Collaboration (e.g. CPFR)Supply Chain Collaboration (e.g. CPFR)

Asset MaintAsset Mainteennaance & Managementnce & Management

Order FulfilmentOrder Fulfilment

PLM

SCM

Collaborative Project ManagementCollaborative Project Management

Procurement (Direct / Strategic)Procurement (Direct / Strategic)

Sourcing & RFx Services (Direct / Strategic)Sourcing & RFx Services (Direct / Strategic)

Procurement (Indirect / Non-strategic)Procurement (Indirect / Non-strategic)

Sourcing & RFx/Auctions (Non-strategic)Sourcing & RFx/Auctions (Non-strategic)

SRM

CollaborativeBusiness

Applications

Process& Opera-

tionsStandard-

ization

ProcessStandardization& Optimization

ContentStandardization& Aggregation

ConnectivityStandardization


Interoperability Between e-Marketplaces and Private Exchanges is Generating Business

Nature of Service

Complexity of Ecosystem

(External business partner relationships, product structure, corporation structure)

low highStandardized

Unique

(Scope, connectivity,

complexity, cross-industry,

strategic importance) PrivatePrivatePrivatePrivate

Shell

PrivatePrivatePrivatePrivate

eAEC

PublicPublicPublicPublic

Shared Services/ Technical platform

Supplier Gateway/Content Management Services


eAECglobal – Private Areas on a Public Platform

Public Exchange Public Exchange

(AECglobal’s Procira)(AECglobal’s Procira)

Public Exchange Public Exchange

(AECglobal’s Procira)(AECglobal’s Procira)

eProcurement & eProcurement & Collaborative Projects: Collaborative Projects:

MulticompanyMulticompany ExchangeExchange

eProcurement & eProcurement & Collaborative Projects: Collaborative Projects:

MulticompanyMulticompany ExchangeExchange

Supplier Portals Supplier Portals Supplier Portals Supplier Portals

eProcurement & Collaborative eProcurement & Collaborative Project Project Private ExchangePrivate Exchange

eProcurement & Collaborative eProcurement & Collaborative Project Project Private ExchangePrivate ExchangeeProcurement & Collaborative eProcurement & Collaborative

Projects: Projects: Private ExchangesPrivate ExchangeseProcurement & Collaborative eProcurement & Collaborative

Projects: Projects: Private ExchangesPrivate Exchanges

Skanska

Hochtief

SubcontractorSupplier

Supplier

SupplierSupplier

„Shared Applications“


Shell – Enabling a Complex Coorporation to Transact High Volumes on an e-Marketplace

Supplier B Supplier C

Operating

Unit 2

Supplier x

Operating

Unit 1

MarketSet

Supplier A

Operating

Unit n

TradeRanger

Shell Private

Exchange

EBP

Operating

Unit 3

5 business areas

> 130 countries

> 90.000 employees

>1000 suppliers worldwide

EBPEBPEBP

Non-

SAP

...

Objectives

–Reduction of content management cost–Industry-wide content standardization–Supplier connectivity

–Global spend visibility–Process integration with back-end systems–Harmonization of material and supplier master data


Future Sweet Spots of e-MarketplacesPublicPublic PrivatePrivate




<<<<

Process& Opera-

tionsStandard-

ization

ContentStandardization& Aggregation

+ More processes become standardized- Strong competition by hosting and outsourcing providers

ProcessStandardization& Optimization

ConnectivityStandardization

ContentMgmt

CRM

BI

Middle-ware

SCEMLogistics

Financials

PLM

SCM

SRM

Web Services technology eases integrationof e-Marketplace services into corporateprocesses and drives standardization

+ Content standardization, aggregation, distribution, and maintenance are key- Suppliers self-manage their catalogs

Web Service technology reduces cost ofB2B connectivity; e-Marketplaces offermapping services and process consulting


Agenda




Summary


The Standard Software Model (1)

• License revenues are the health indicator of a sw vendor– Mirror the actual value of the SW (flat fee + usage fee)– Have to refund initial CODev and cover COS– Revenue and cost not proportional (one time development cost;

neglectable production cost; the higher and more tangible the value, the lower the COS)

– Drive multiple follow-on revenues (maintenance, ProServ)

• Maintenance rev provide a predictable recurring rev stream– Follow license revenue pattern with delay– Balance out seasonal und economic rev variation– Retain value of sold software– Have to cover cost of support and further development

To Unterstand this modelis crucial for every e-MP doingbusiness with a std sw vendor!


The Standard Software Model (2)

• ProServ provisioning mandatory for vendor– Assure quality of implementation and customer satisfaction

– Unlock value of SW and drive usage revenues as well as up- and cross-sales

– Revenues proportional to cost

• COS have to follow deal size– Direct sales to „Fortune 10,000“

– Channel sales to SMB via partners who cross-sell complemen-tary (!) products & services

• Market potential has to justify initial investment!


Future Sweet Spots of Std SW VendorsPublicPublic PrivatePrivate




<<<<

ContentMgmt

CRM

BI

Middle-ware

SCEMLogistics

Financials

PLM

SCM

SRM

Content tools and core exchange technologywill be suitable for e-Marketplaces as well ascorporate customers; market for preintegra-ted generic mp-specific services and contentdepends on # of remaining mps

EAI / B2B IntegrationPlatform

Collabora-tive

applica-tions

&tools

E-Market-place

specificservices

Content Management &Data Warehousing tools

Low number of surviving e-Marketplacesand revenue potential only in some caseswill match the business model requirementsof large standard sw vendors

Revenue potential for behind-firewallsolutions much bigger due to strategicnature of solutions (value) and # sellablecopies; several applications and tools willbe deployable on e-Marketplaces as well


E-Marketplaces are Responsible for their Solutions – No Software Vendor can be!• There will be no out-of-the-box marketplace solution

– Select a reliable vendor for platform services– Select a strategic vendor for application services and tools to keep

integration cost low, but do not expect extra flexibility and focus from this vendor

– Shop, customize, or build missing functionality, but watch TCO and ROI carefully

• e-Marketplaces need technology and integration expertise – to blueprint the solution required to do business– to select vendors and consultants– to oversee implementation and operate/maintain the solution,

but must not become tech shops!


Coll. Apps Suited for e-MP Deployment• SRM: Central Supplier Directory

– Self-service registration of suppliers and assignment to product catagories; questionnaire-based search functionality

– Consolidated view on corporate-wide supply base– Extended and monitored supplier community through mp-deployment

• PLM: Project Collaboration– Project, document & folder management– Communication channel consolidation and better project controlling– “Pay by project” cost advantage through mp deployment

• SCM: Collaborative Inventory Management– Visualization of inventory status– Reduced inventory stock (manufact.) resp. out-of-stock rate (CPG)– Complete view (all materials, all suppliers, all customers) through mp

deployment

For solution detailsplease see appendix


Relationships between SW Vendors and e-Marketplaces are Manifold • Supplier-customer relationship

– E-Marketplace buys solutions of sw vendor; operationsof this sw has no adverse affect on other business of sw vendor (e.g., platform technology, content tools like Central Supplier Dir.)

• E-Marketplaces as partner for value-added services– E-Marketplace complements „on-ramp“ solutions of

the sw vendor and gets access to his customer base (e.g., connectivity services, industry content)

• E-Marketplace as channel partner– E-Marketplace resells sw solutions into its community

(e.g., on-ramps for SMB like SAP BusinessOne)– E-Marketplace offers solutions of the sw vendor as ASP (e.g.,

Project Collaboration, Coll. Inventory Mgmt., eProc.)

Uncritical

No competition

elsewhere!Needs synchronized

sales strategy and ops


ASP Partnerships Require Alignment of Business Cases, Trust, and „Creativity“• Careful segmentation of the target market to avoid channel

conflicts• End-customer buys sw license from sw vendor and can

freely chose whether to access a hosted version on a MP (for add‘l service fee) or a Private Exchange deployment

• Differentiation between a lightweight version for e-Marketplace ASP (less integration, less functionality) and a full-fledged version for Private Exchange deployment

• Solution hosted on e-Marketplace is only used temporarily until inhouse impl. is ready in order to reach a quicker ROI

• ...


Agenda

Evolution of B2B Networks



Summary


Summary – SAP stays committed!• e-Marketplaces will play a significant role in the

ecosystem and therefore also in the business strategy of SAP customers

• SAP remains a committed software partner for e-Marketplaces and will provide new services, but cannot take full responsibility for the technical evolution of a marketplace

• SAP is open to discuss all kinds of business partnerships• SAP has established a separate Business Unit responsible

for SAP‘s worldwide marketplace acitivites and central point of contact


Questions?


Appendix


SAP Central Supplier Directory (SRM) – Selected Features• Supplier

– self-service functionality for registrationand data maintenance

– Flexible introduction of new supplier attributes– Supplier relationships

• Products– Assignment of suppliers to product categories– Questionnaires by category

• Buyer– Private data areas for buying organizations

to capture specific supplier information– Advanced search functionalities by

questionnaires– Supplier evaluation based on questionnaires


SAP Central Supplier Directory (SRM) – Value Proposition• If deployed on a Private Exchange

– Consolidated view on corporate supply base

– Process improvements• Supplier evaluation and selection (e.g., RFI)

• Spend and performance analysis

• Supplier monitoring

• Supplier data maintenance through self-service

• If deployed on a Public Marketplace (in addition)– Access to worldwide supplier information

– Ongoing monitoring of the supplier market

– Sales tool for suppliers


SAP Project Collaboration (PLM) – Selected Features• Overall Project Modelling

– Virtual teams– Role-based authorization concept – Definition of communication channels– Tracking and archiving of user contributions– Notification mechanisms for users

• Document and Folder Management – Versioning– Hierarchical structures/multiple views– Various content types (documents, discussions,

data sheets, bookmarks, notes)– User-dependent definition of folder areas– Markup and Redlining

• WebEX integration


SAP Project Collaboration (PLM) – Value Proposition• If deployed on a Private Exchange

– Consolidated communication channels

– Process improvements• Well-defined roles and communication mechanisms

• Consistent and traceable access and exchange of documents

• Project progress controlling

• If deployed on a Public Marketplace (in addition)– Operational cost advantages through ASP („Pay per project“)

– No upfront investments and immediate benefits (faster ROI)

– Neutral administrator of cross-company projects


SAP Coll. Inventory Mgmt (SCM) –Selected Features• Visualization of inventory status and predefined industry-

standard replenishment processes– Enterprise-internal inventory visibility– Supplier Managed Inventory (SMI) in

discrete industries– Visibility into inventories of contract

manufacturers (High-Tech and Automotive)– Visibility into distribution centers (all industries)– Distributors offering visibility to their

customers (Service)

• Customizable alerts– Depending on quantity, percentages, or trends– Multiple delivery methods (e-mail, pager, WSDL)

• ASN responds from suppliers via browser or Web Service

Benutzername: testuser SupplyOn Lieferantenanbindung

Sortierung nach Sachnummer/Dispositionstyp/Status

0815 Min 150 Demand vom Max 600 Letze Lagerbew.:

in inspection = 0 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 24 1 8 Okt Nov DezStock = 450 Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep Sep SepDemand 75 90 100 80 60 110 90 60 85 125 90 70 110 80 100 420 380 370 620 1580 1700in transit 150

calc. Stock 375 285 185 105 195 85 -5 -65 250 125 35 -35 -145 -225 -325 -745 -1125 -1495 -2115 -3695 -5395planned Shipments 400min Proposal 65 155 215 0 25 115 185 295 375 475 895 1275 1645 2265 3845 5545max Proposal 225 315 415 495 405 515 605 665 750 475 565 635 745 825 925 1345 1725 2095 2715 4295 5995

450

01. Sep 0230. Aug 02

[Order Monitor] [ Organisation: Buyer xyz] Sachnr. 0815 VMI Detail Monitor

Sachnr. VMI - Detail

[ Planfunktion ] [ Zeitskala ] [ Alerts ]

Benutzername: testuser SupplyOn Lieferantenanbindung

Order Monitor

Sortierung nach Sachnr.

Sachnr. Status

[Sortierung nach Supply-Trigger]

JKL23 D

XV20 C

DC10 K

WI8 C

Q39 V300 600

270 470

300 600

270 470

300 600

270 470

10/09

25/09

15/1010/09

25/09

15/10

02/10

05/10

02/10

05/10

1040

5 10 10 15

1040

5 10 10 15

10/09 25/09 05/10 12/10 15/10

SupplyTrigger

Screen Set

Generatoren

OrgansationBuyer

WerkBuyer

Bosch FeW

Bosch AnW

Conti Ffm

INA HZGA

ZF W4711

(SELLER SICHT)


SAP Coll. Inventory Mgmt (SCM) – Value Proposition• If deployed on a Private Exchange

– Reduced stock (discrete industries)• Reduced capital consumption risk• Reduced capital cost• Reduced inventory cost

– Increased accuracy of production schedules and steady utilization (less overtime) on supplier side

– Reduced out-of-stock rate (CPG/Retail)

• If deployed on a Public Marketplace (in addition)– Minimized connectivity cost through hub concept– Availability of consolidated data about all inventory-managed

commodities of the participants– Additional services to provide complete and personalized views for the

individual agent (by commodity, by supplier, by customer)

Documents

SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 1 On the Opportunities and Threats of e-Marketplaces Dr. Bernd-Uwe Pagel SVP Marketplaces SAP AG