1.  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

2.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 2 Agenda The Evolution of B2B Networks E-Marketplaces @ SAP Software Provisioning vs. Service ProvisioningSummary

3.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 3 Agenda The Evolution of B2B Networks E-Marketplaces @ SAP Software Provisioning vs. Service ProvisioningSummary

4.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 4 SAP has 2,5 Years History in e-Marketplace Business Foundatio n of SAP Markets, an SAP subsidiary to develop and market solutions for e- Marketplac es Announce- ment of the partnership between SAP Markets and Commerce One Delivery of three versions of MarketSet, the joint solution of SAP Markets and Commerce One Reintegrat ion of SAP Markets into SAP and Foundation of the Business Unit Marketplac es SAP becomes a member of the GTWA March 2000June 2000Fall 2000 - Spring 2002 TodayApril 2002

5.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 5 SAP has Achieved a Strong Market Share

6.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 6 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

7.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 7 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

8.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 8 Agenda The Evolution of B2B Networks E-Marketplaces @ SAP Software Provisioning vs. Service ProvisioningSummary

9.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 9 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)

10.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 10 Portals and Exchanges are Complementary Private Public Privacy Integration Intensity Information Integration Process Integration PortalExchange Collaboration Services between internal operational company units Process Integration Enablement (e.g., master data harmonization) Intercompany Connectivity Services (e.g., Document Routing, Mapping, Roundtrip Procurement) Value Added Services (e.g. ASP, Sourcing, Financial and Logistics Services) Company-internal end-user information Service User Interface can consolidate visibility and accessibility of internal systems Community Knowledge and Content

11.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 11 Nature of Services and Complexity of the Eco- system are Controlling the Deployment Options Public & Private Private Nature of Service Complexity of Ecosystem (External business partner relationships, product structure, corporation structure) low high Standardized Unique Public Standardized Products, Catalogue Procurement GIG Complex Corporation, Catalogue Procurement Shell Complex Relationships, Direct Procurement eAEC (Scope, connectivity, complexity, cross-industry, strategic importance )

12.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 12 Creating B2B Portfolios Content & Data Management

13.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 13 Current Sweet Spots of e-Marketplaces Content & Data Management Source: PwC Research and Ascet, 2002.PublicPrivate Horizontal e-MP Vertical e-MP Private Exchange Service Catagories IT Integration Community Content & Industry Registry Customer Service and Support Catalogs & Content Services (Non-strategic) Catalogs & Content Services (Strategic) eAnalytics (Performance Monitoring+Reporting) Content Mgmt CRM BI B2B Transactional Integration/Mapping Services B2B Document Routing & Security Services B2B EDI VAN Replacement & Registry Services Middle- ware Settlement, Payment & Clearinghouse Logistics & Transportation Services Supply Chain Event Management SCEM Logistics Financials Collaborative Design & Engineering Supply Chain Collaboration (e.g. CPFR) Asset Maintenance & Management Order Fulfilment PLM SCM Collaborative Project Management Procurement (Direct / Strategic) Sourcing & RFx Services (Direct / Strategic) Procurement (Indirect / Non-strategic) Sourcing & RFx/Auctions (Non-strategic) SRM Collaborative Business Applications Process & Opera- tions Standard- ization Process Standardization & Optimization Content Standardization & Aggregation Connectivity Standardization

14.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 14 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 high Standardized Unique (Scope, connectivity, complexity, cross-industry, strategic importance ) PrivatePrivate Shell PrivatePrivate eAEC PublicPublic Shared Services/ Technical platform Supplier Gateway/ Content Management Services

15.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 15 eAECglobal – Private Areas on a Public Platform Public Exchange (AECglobal’s Procira) Public Exchange (AECglobal’s Procira) eProcurement & Collaborative Projects: Multicompany Exchange Supplier Portals eProcurement & Collaborative Project Private Exchange eProcurement & Collaborative Projects: Private Exchanges Skanska Hochtief Subcontractor Supplier „Shared Applications“

16.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 16 Shell – Enabling a Complex Coorporation to Transact High Volumes on an e-Marketplace Supplier BSupplier 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 EBP 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

17.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 17 Future Sweet Spots of e-MarketplacesPublicPrivate Horizontal e-MP Vertical e-MP Private Exchange < Process & Opera- tions Standard- ization Content Standardization & Aggregation + More processes become standardized - Strong competition by hosting and outsourcing providers Process Standardization & Optimization Connectivity Standardization Content Mgmt CRM BI Middle- ware SCEM Logistics Financials PLM SCM SRM Web Services technology eases integration of e-Marketplace services into corporate processes and drives standardization + Content standardization, aggregation, distribution, and maintenance are key - Suppliers self-manage their catalogs Web Service technology reduces cost of B2B connectivity; e-Marketplaces offer mapping services and process consulting

18.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 18 Agenda The Evolution of B2B Networks E-Marketplaces @ SAP Software Provisioning vs. Service ProvisioningSummary

19.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 19 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 model is crucial for every e-MP doing business with a std sw vendor!

20.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 20 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!

21.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 21 Future Sweet Spots of Std SW VendorsPublicPrivate Horizontal e-MP Vertical e-MP Private Exchange < Content Mgmt CRM BI Middle- ware SCEM Logistics Financials PLM SCM SRM Content tools and core exchange technology will be suitable for e-Marketplaces as well as corporate customers; market for preintegra- ted generic mp-specific services and content depends on # of remaining mps EAI / B2B Integration Platform Collabora- tive applica- tions & tools E-Market- place specific services Content Management & Data Warehousing tools Low number of surviving e-Marketplaces and revenue potential only in some cases will match the business model requirements of large standard sw vendors Revenue potential for behind-firewall solutions much bigger due to strategic nature of solutions (value) and # sellable copies; several applications and tools will be deployable on e-Marketplaces as well

22.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 22 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!

23.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 23 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 details please see appendix

24.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 24 Relationships between SW Vendors and e-Marketplaces are Manifold Supplier-customer relationship –E-Marketplace buys solutions of sw vendor; operations of 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

25.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 25 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...

26.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 26 Agenda Evolution of B2B Networks E-Marketplaces @ SAP Software Provisioning vs. Service ProvisioningSummary

27.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 27 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

28.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 28 Questions?

29.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 29 Appendix

30.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 30 SAP Central Supplier Directory (SRM) – Selected Features Supplier –self-service functionality for registration and 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

31.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 31 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

32.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 32 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

33.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 33 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

34.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 34 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

35.  SAP AG 2002, GTWA Stockholm, Dr. Bernd-Uwe Pagel 35 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)