by Thomas Wailgum

Can SAP Get Its Supply Chain Mojo Back?

Mar 08, 2010
Data CenterEnterprise ApplicationsIT Leadership

An AMR Research report questions SAP's commitment to its supply chain management product portfolio. Will the new co-CEOs offer better product, clearer vision and sweeter incentives? Customers are dubious.

Customers have a message for SAP: Your SAP supply chain mojo has not been rising. And we’re not happy about it. Among the myriad, daunting challenges facing SAP’s new co-chiefs—and there are many—is what to do about its core supply chain management product portfolio.

New co-CEOs Bill McDermott and Jim Hagemann Snabe have seemingly inherited both a blessing and a curse with SAP’s supply chain management software stack: A large and loyal installed customer base that is, according to a new report from AMR Research VP of supply chain research Noha Tohamy, “becoming more vocal in demanding innovative SCM products that can support their strategies of standardizing on SAP.”

In other words: Customers are desperately seeking SAP SCM innovation.

[ Don’t miss’s 5 Reasons Why Businesses Still Hate Enterprise Software | Also read Why the “Oprah Effect” Can Take Down the Best Supply Chains ]

Yet SAP has long relegated SCM to the status of RHSC (red-haired step-child), and the company has stumbled articulating its SCM and supply chain planning roadmaps, according to Tohamy.

“Overall,” she writes, “the software giant has been sluggish in bringing to market an SCM offering that makes SAP not just the largest SCM vendor in revenue, but an innovator and leader in meeting increasingly complex supply chain needs.”

The report lists the following “exhibits” in her allegations:

A. “On the supply chain planning front, expanded functionality and market presence have come more from its partners like SmartOps rather than the mother ship. And from a services standpoint, many of the successful implementations of APO, SNC, and GATP were driven by SAP’s implementation partners, ranging from Infosys to Bristlecone.”

B. “SAP has yet to offer a cohesive sales and operations planning (S&OP) product. The software vendor halted its S&OP development efforts when it acquired Business Objects, making the decision to migrate its S&OP capabilities to that platform. But in doing so, it lost many precious opportunities to expand its share in a product area that still ranks high on the priority lists of users.”

C. “SAP gets mixed ratings on expanding supply chain management into the domains of new product development and distributed manufacturing. The company has finally invested in product lifecycle management (PLM) improvements after years of slow response to client needs…but frustration remains with the depth of discrete industry product data management or industry-specific formulation.”

D. “SAP’s Perfect Plant vision is to optimize manufacturing’s assets and performance in concert with business goals. This requires connecting plants with ERP, but customers are often confused with the perceived overlapping capabilities of SAP MII and SAP NetWeaver PI.”

E. “SAP has made little inroads in its SaaS SCM strategy in a market that continues to see growing interest in this model.”

Why are these developments all somewhat surprising? It’s because SAP owns ERP, and supply chain management is like a first cousin or nephew to ERP and customers still favor single-vendor setups. But Tohamy alludes to fact that the competition—including JDA/i2 andManugistics—has moved faster and offered a clearer vision.

SAP has seen firsthand what can happen if customers stop believing in a vendor’s product and its future. In fall 2009, SAP announced a new price point for its CRM software: free for those customers purchasing either SAP’s Business All-in-One or the venerable SAP ERP software packages.

That alone should have scared SAP straight: If you don’t keep innovating with business apps, you might have to end up giving freebies away.

Can the Co-CEOs Deliver?

But, of course, the relative merits of the software itself are only part of the overall problem: Those who sell the software need to be properly incented to move the product.

“Supply chain management has never been a favorite child in SAP’s sales organization,” Tohamy writes. “Compared to an ERP sale, an SCM one isn’t as sizable, and the intricacies of supply chains make the sale cycle longer and more complicated.”

Tohamy urges SAP’s new co-CEOs to act now (the report is called “A Call to Action for SAP’s New Leadership: Shine a Light on Supply Chain Management”).

The duo is a bit of an odd couple, by design, it seems: Snabe has an extensive background in manufacturing and product lifecycle management, Tohamy points out. Therefore, the SCM innovation shouldn’t be too hard to get to the top of the agenda. And McDermott is a field sales legend.

Perhaps the two of them, combined, will be able to offer better supply chain product, clearer vision and sweeter incentives.

Do you Tweet? Follow me on Twitter @twailgum. Follow everything from on Twitter @CIOonline.