1. Hosted by SAP Beyond the Edges of the Enterprise Michael Dominy The Yankee Group Mdominy@yankeegroup.com

2. Hosted by Agenda Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations

3. Hosted by Beyond the Edge: Definitions & Clarifications “The Edge” The Business Process and IT intersection between an enterprise and the outside world. Includes the management of access to interaction between the enterprise and its customers, suppliers, or complementary business partners.

4. Hosted by Beyond the Edge: The Opportunity Reduce Inventories $117 - $293 billion Increase Sales $83 - $166 billion How? Connecting, collaborating, and synchronizing with the extended supply chain

5. Hosted by Beyond the Edge: Who’s Cares? (Enterprises)

6. Hosted by Beyond the Edge: Who’s Cares? (Vendors)

7. Hosted by Beyond the Edge: Application Characteristics Edge applications Automate business processes that require human or machine input from external partners Integrate data and information from multiple heterogeneous systems inside and outside the four walls of an enterprise SAP Netweaver and xApps as examples

8. Hosted by Agenda Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations

9. Hosted by IT Spending Shifts: Away from Operational Backbones 75% Increase at the Edges!

10. Hosted by IT Spending Shifts: …Beyond the Edge HR Finance Engineering Procurement Mfg/Ops Planning Logistics Customer Service Marketing & Sales Operational Backbone Customers Suppliers Outbound Logistics Financial Services Inbound Logistics

11. Hosted by Agenda Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations

12. Hosted by Edge of the Enterprise Research: Research Sources Interviewed more than 110 B2B decision makers in the past 12 months Billions in revenue and technology spending Surveyed 78 North American ERP users to Validate the Edge budget shift Identify key Edge business drivers Inquire about ERP strengths and weaknesses Finishing a Q3 Edge of the Enterprise survey of 300 end-users

13. Hosted by Edge of the Enterprise Research: Phone Interviews Results from 78 ERP decision makers at Global 2000 organizations Interviews conducted in Q1-Q2 2003 Conducted by experienced enterprise application analysts Interviews averaged 45 minutes Gathered detailed IT budget data, 2003 project data, vendor preference information

14. Hosted by Edge of the Enterprise Research: Interviewee Demographics Large Global 2000 organizations Averaged $2.4 billion in revenue Averaged 7,000 employees Utility, telecom, manufacturing, wholesale, and transportation services were interviewed 76% of respondents were manufacturers Even split between process and discrete manufacturing Concentration in high-tech and consumer goods manufacturing

15. Hosted by Edge of the Enterprise Research: Interviewee Demographics 61% of respondents run SAP R/3 Majority of respondents on version 4.6 Several running version 3.1 None running SAP Enterprise 4.7 or Netweaver

16. Hosted by Edge of the Enterprise Research: IT Budget Impact Overall IT Budget 64% increased IT budget from 2002 to 2003 Average budget increase was 3.7% Budget growth ranged from –6% to 23% Edge Investments and Budgets 95% increased investment in systems that require/enable browser- or machine-based partner input Edge budget growth ranged from –3% to 300% Average Edge budget increased 75%! Average 2003 Edge budget totals $5.8 million 2003 Edge budgets ranged from $440,000 to $66 million

17. Hosted by Edge of the Enterprise Research: Budget Growth

18. Hosted by Edge of the Enterprise Research: Average Edge Budgets

19. Hosted by Edge of the Enterprise Research: Budget Drivers Budget shift is driven by prioritization, not capital expenditure Do more with less Extend existing systems Develop in-house ROI in months not years

20. Hosted by Edge of the Enterprise Research: Budget Analysis

21. Hosted by Edge of the Enterprise Research: Budget Analysis Most interviewees expect edge investment to increase substantially with economic improvement Most edge investment is dedicated to customer facing systems Among interviewees, suppler facing systems were secondary investment priorities 300 end-user survey…

22. Hosted by Edge of the Enterprise Research: Projects Primary, secondary, and tertiary edge projects were captured and classified Primary edge projects included Web-based sales content delivery, order entry, pricing, order status Machine-based order management Collaborative forecasting Collaborative logistics Electronic catalogue VMI

23. Hosted by Edge of the Enterprise Research: Project Categories

24. Hosted by Edge of the Enterprise Research: Objectives Collaboration and Coordination Cost reduction through collaborative planning and distributed order management and fulfillment Sales and marketing content delivery Inventory visibility and supply tracking Common theme across objectives: Strengthen relationship, integration and coordination with customers to improve service and reduce costs

25. Hosted by Edge of the Enterprise Research: Vendor Preference / ERP Abilities Interviewees were asked to rate incumbent ERP vendor’s ability to meet primary edge technology need (1 to 5 scale, 5=very high ability and 1=not at all capable) 62% of respondents did not consider their ERP vendor as a solution to an Edge of the Enterprise technology need Among respondents that rated their ERP vendor, average rating was 2.3 SAP users rated SAP 2.4 for its ability to meet edge technology needs

26. Hosted by Edge of the Enterprise Research: SAP Customer Example 1 Company: Multi-billion dollar global consumer packaged goods company Goal: Reduce logistics cost through collaboration Solution: SAP + RedPrairie + Nistevo Finding: SAP unable to meet edge requirements – Collaborative Logistics

27. Hosted by Edge of the Enterprise Research: SAP Customer Example 2 Company: Multi-billion dollar global beverage manufacturer Goal: Collaborate with downstream distributors (forecasts, marketing & promotions, etc.) Solution: SAP + Manugistics + Vignette Finding: SAP unable to meet edge requirements – CPFR and Content Management

28. Hosted by Edge of the Enterprise Research: SAP Customer Example 3 Company: Multi-billion dollar global high tech manufacturer Goal: Synchronize supply and fulfillment across the extended supply chain network Solution: SAP + Synchronization Hub Finding: SAP unable to meet edge requirements – Distributed Order Management

29. Hosted by Edge of the Enterprise Research: SAP Customer Example 4 Company: Multi-billion dollar global consumer products manufacturer Goal: Collaborative Customer Business Planning Solution: SAP+custom application+best-of-breed Finding: SAP unable to meet edge requirements – Customer level sales, marketing and merchandise planning

30. Hosted by Edge of the Enterprise Research: SAP Customer Example 5 Company: Multi-billion dollar North American electric utility Goal: B2B Procurement Exchange Solution: SAP + SAP B2B Procurement Products Finding: SAP able to meet edge requirements – SAP able to address transaction oriented supply- side applications where the SAP customer has significant power or influence

31. Hosted by Agenda Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations

32. Hosted by Technology Drivers: Enabling Edge Initiatives Plummeting hardware costs Pervasive Internet access Java XML Interoperability

33. Hosted by Technology Drivers: Methodologies, Standards & TCO

34. Hosted by Agenda Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations

35. Hosted by SAP’s Response Experiences with Commerce One Acquisition of TopTier SAP xApps SAP Web application server SAP Enterprise Edition – Core versus Extensions SAP Netweaver SAP Adaptive Business Networks SAP Licensing Strategies

36. Hosted by Agenda Beyond the Edge IT Spending Shifts Edge of the Enterprise Research Technology Drivers SAP’s Response Conclusions and Recommendations

37. Hosted by Conclusions Demand is shifting from the core to the edge 75% growth in edge applications and technologies Integration and customization costs are falling Edge projects are primarily customer-facing Sales effectiveness and distributed order management Most SAP customers have not been successful extending SAP beyond the edges of the enterprise

38. Hosted by Recommendations Establish a flexible architecture to support edge applications and initiatives but… Balance integration costs carefully  Edge initiatives require a mix of internal and external integration involving people, process, and data Validate interoperability claims  Ensure edge platforms and applications comply with Java, XML and Web services standards  Perform interoperability tests Example: Test best-of-breed on Netweaver

39. Hosted by Recommendations Follow the collaboration continuum Integrate  Optimize  Collaborate and Network Leverage edge (composite) applications rather than building from scratch Development, implementation, and support costs are too high to justify custom applications Be skeptical when core vendors claim expertise beyond the edges of the enterprise Managing network oriented business processes in fundamentally different than controlling internal activities

40. Hosted by Thank You! Michael Dominy The Yankee Group Mdominy@yankeegroup.com

41. Hosted by Break sponsored by

42. Hosted by Are you shift IT dollars and initiatives from internal technologies to the edges of the enterprise? Audience Response Hosted by