I live near the water in Baltimore; and as I write this blog, the spring winds are blowing hard against my windows.  The glass is rattling in the panes. They are trying hard to withstand the forceful gusts.  All day, it was ferocious. The whistling winds are signaling the end of winter, and the start of a new cycle called SPRING.  As a gardener, I love SPRING!
I think that March Winds are a great metaphor for this blog.  Supply Chain Management (SCM) applications have had a long, cold winter.  The market has never fully recovered from the BOOM and BUST cycle, or the failed promises, of i2 Technologies and Manugistics.  Advanced Planning Systems (APS) technology applications failed to meet expectations either as stand-alone technologies or as an extension to Enterprise Resource Planning (ERP).  However, I think that there are new winds blowing.  I think that SAP is getting serious about SCM again. I firmly believe that this is good news. Here I share what I think that it means for you, the market, and the greater world of enterprise applications.

Background

This week, I was one of two analysts invited to SAP’s Customer Value Network(CVN) conference in Newtown Square, PA.  (Can you say “I attended the SAP CVN SCM Event” without cracking a smile?  I cannot.) SAP is KNOWN for their acronyms. This event was NO exception.)
With attendance by over 240 attendees from 97 manufacturing/retail corporations, SAP met their goal to have a well-attended customer event.   The audience was primarily IT (CIOs and Directors of IT). (I seldom see Line of Business leaders at SAP events…this remains an achilles heel.)  In many ways, for me, it was like old-home week. (I enjoyed catching up with many clients and discussing my new business model over a glass of wine.)  For SAP, I felt like it was a warm-up event for the larger and more popular SAP Insider event in Orlando on March 21st (http://www.scm2012.com/). (You will be able to follow SAP Insider at twitter hashtag #SCM2012.)  In this blog post, I share highlights, insights; and of course, the SHAMAN’s point of view (POV).

The Headlines

The headline news was all about products. SAP has invested in two new solutions built on the HANA architecture (Sales and Operations Planning and Demand Signal management) and they have more closely partnered with three solution technology providers– ICON-SCM, Llamasoft, and SmartOps — in the building of the SCM framework .  The roll-out of SAP’s supply chain execution applications –Transportation Management and Enterprise Warehouse Management (EWM) is maturing, and there is stability in the product team. (I have worked with 20 of the 22 people on stage for the past five years.  Hans Thalbauer, now head of SCM Solution Management for SAP is shown on the left and Stephen Kreipl, SAP AG,  is shown in front of the Demand Signal Management presentation below.)
The solution architecture has deepened to include a collaborative application –Streamworks — for internal collaboration and there are now cloud-based solutions in the stack.  Not everything must be on premise.  Both of these developments are still a bit awkward within the TRADITIONAL SAP organization, but they signal needed change.
The SCM spring is also spawning a new consulting ecosystem. The event was sponsored by consultants, many of which, I had never heard of before. Have you heard of the names of Logistar, Intrigo, ITC Infotech, GOPA, K2 Professional Services, MySupplyChain, or Linear Logistics? For me, these were new contacts. They were joined in sponsorship of the event by names that I knew well like Bristlecone, Catalyst, Cognizant, Hitachi Consulting, Llamasoft, and Plan4Demand. Conspicously absent at the event were Accenture, Deloitte, Cap Gemini, Infosys, and Tata Consulting.  There is so much to tell the reader about the products, that I think that I will break the insights into a series of posts over the next couple of days.  In this blog, I am going to share the high level overview.

The Unspoken

In the sessions, there were often more questions than answers.  There was no pricing information available on the new applications, and SAP could not answer how the solutions were to be priced.  It was obvious that the pricing strategy is still an intense discussion amongst and within the team.  My experience with customers is that anything that uses the word HANA is an order of magnitude more expensive.  So, if you are interested in the new applications, buckle your belt.
The user of SAP products can expect no relief on maintenance revenue costs to fund these new products. While SCM budgets have grown from 38% spending on maintenance to 45% spending on maintenance, there is no relief in sight for the SAP user.  I believe that SAP’s goal is to sell more and still maintain the license fee structures.
The partnerships with three solution providers listed above is deepening.  The rest are becoming less important.  The original promise of Netweaver partnerships offering clients a choice of multiple partners has been replaced by deeper relationships with a few companies.  Additionally, the old partnership with LogicTools for network design has been replaced with the partnership of Llamasoft and the old partnership with Vision Chain has taken a back seat with the pending release of the Demand Signal Management. The software partners of choice in SAP’s launch of the new solutions framework are now clearly ICON SCM, Llamasoft and SmartOps.  The product discussions even include development of intense roundtrip integration with ERP ECC 6.0 (e.g. Deep integration like the CIF interface in APO.) with this set of suppliers.
There is some very new stuff bundled in this footprint.  I am excited to see the inclusion of Sentiment Analysis (data from a partnership with NetBase) as part of the discussion in Demand Signal Management.  This is the first example of a Demand Signal Repository (DSR) that combines structured and unstructured data to not only answer what was sold when, but why.  (Look for more on this in later blog posts.)
Net/Net.  This is the most new news that I have seen from SAP in a LONG time.  And, you know that the SHAMAN has been covering SCM for more years that she would like to count.

The Shaman’s POV:

While the overview of the individual products was clear, the roadmap of how to use the products within the suite is not.  At the end of each presentation, there was a Question and Answer session. Each session’s Q&A was peppered with user questions on when to use solution XYZ with approach PRQ or solution ZDN.  SAP was not ready for the questions.  It is not clear today, for either the SAP team or the customer, how these solutions fit together to solve industry-specific problems. It is my hope that this becomes a sharper message before the SAP Insider event.  If not, the sessions at Insider will transgress quickly into confusion.
There is growing unrest within the SAP client base on total cost of ownership.  The original promise was that the selection of SAP would reduce TCO.  Many CIOs that I have talked to within the last month are angry that they have gotten very little industry-specific user enhancements for their maintenance dollars.  They see it as an increasing “tax”.  For these organizations, a sales call with an unclear solution positioning for a new SCM footprint with a high price tag will not be a pleasant experience for the sales team.  (One that the Shaman would love to have on tape….)  I think that this is a shame, because it may shut down a discussion to try SAP’s first real release of S&OP or the maturing, and promising, supply chain execution solutions. It will put increasing pressure on replacing best of breed solutions.
I am disappointed that the solution framework does not provide an answer to the increasing pressures for Master Data Management (MDM).  I think that SAP needs to own and provide a solution for this increasingly problematic area.
While I am delighted to see the inclusion of a collaborative application in the enterprise suite of products, buyers of the product need to realize that is only a baby step.  The collaborative application is not integrated with a Business Process Management(BPM) tool to guide collaborative workflow or business analytics to guide learning.  It is not as deep as Salesforce Chatter or as useful as an internal Jive or Lithium platform or as easy to use as Socialcast.  Those without an enterprise social networking tool may find it useful as a starting point; however, the expectations for a more mature group need to be calibrated.  It also does not meet the traditional SCM collaboration definition. The use of collaborative tool along with workflow management with SAP SNC to do true supply chain collaboration would be a beautiful thing.
To answer the questions of how to use these solutions properly, I think the right answer is “it depends.”  The answers to many of the questions that SAP was being should have been framed based on supply chain maturity and the goal of the business process.  If I were presenting the materials, I would encourage the audience to step-back and answer some basic questions and then design the framework for usage around the industry-specific business requirements.  The questions that were paramount for me leaving the session were:

• Why does real-time parallel processing in HANA make a difference, and where should it be used?  What is the advantage of real-time data?  When does it make the supply chain more nervous (reactively twitching) and when does it make the supply chain more responsive?  Should it be real-time data or right-time data?  I think that the best use of HANA will be in Available-to-Promise (ATP), response management and advanced analytics. However, there are more questions, at this time, than there are answers.
• What is the role of the order in this new footprint?  What is the role of the forecast in the new pprocess?  My point of view is that as the organization becomes more market-driven, that the order becomes less important as a SCM signal. I also believe that the forecast becomes more important.  For process-based industries like consumer products and chemical industries (due to the ability to be more demand driven based on the use of downstream data), the supply chain becomes more pull-based using channel data; and similarly, in discrete industries, that the order-to-cash process is substituted with a contract-to-delivery focus. I also believe that revenue management grows in importance to support this maturation process.  Revenue management as a topic was consicuously absent.
• What is the role of optimization in meeting the goals of the supply chain?  And, the role of planning?  SAP’s traditional audience has been focused on transactional efficiency.  The emphasis of the presentations at the CVN event was on improving operational decision making.  I believe that this is not enough.  It is easy for companies to confuse the urgent with the important; and I believe that planning represents the important.  I would have liked to have seen SAP pull the discussion up a level.  I don’t believe that you have a shot at delivering supply chain excellence without a firm foundation in optimization and planning; and for SAP customers this means redefining and enhancing SAP APO as opposed to throwing the baby out with the bath water.
• What is really needed in integration and synchronization to support this new footprint?  How well does this footprint meet the needs of the extended supply chain? I believe that increasingly supply chains need to sense.  The signal needs to be outside-in not inside out, and that the focus needs to be on the evolution of horizontal processes.  SAP’s new solution make progress in two of the three areas, and it is an important step; but today, it is not a home run.

What do you think?  How are you feeling about SAP’s new releases?
I will write more on the specifics of these SAP solutions throughout the week. However, I do think that we are seeing the spring thaw in the evolution of supply chain applications through the cold, barren winter period of post-acquisitions for SCM vendors.

Summary

This week, I should finish the manuscript of the book that I am writing with my co-author Charlie Chase. The book is titled Bricks Matter.  The manuscript is due on March 15th, and I will be doing a happy dance as I touch the keys to finish the last of 98,000 words.  It will publish on August 8th.
Next week, I am spending time with clients discussing change management and S&OP.  This seems to be a hot topic.  I will be doing some video shoots tomorrow on the research in this area and posting them on my new u-Tube channel.  Until then, you may want to check out my video on what I am up to in my new company( http://www.youtube.com/watch?v=rFhpk-3CE64).  Hopefully, the new website will be up next week along with two new reports.  Until then, all the best!