The Architect’s World – Episode 39
xPRO becomes iPRO
Surely, some of my SAP colleagues/associates are going to send me hate mail on this blog! But here is an alternate view-point that I wish to share with the SDN community.
What got conceptualized on SDN as a composite application, built as a safe passage for Ariba Buyer customers, taking on SRM/EBP, is now a certified Partner Composite by SAP AG. Thanks to all of you who provided me offline feedback on the same! In the previous blogs, we created the requirements (business and technical) for an e-Procurement system that would provide customers with a safe passage from Ariba Buyer, at the same time, explore the options of doing away with the need of an SRM/EBP solution altogether. The aim of xPRO is to explore the options the customers may have today of leveraging SAP NetWeaver purely as a business application platform, and following the path of building custom composite applications on the same with CAF 7.0 by bringing together MDM, XI, BI, WAS, R/3 and EP (let’s forget the new names for now). A custom e-procurement composite that is scalable to a sourcing and e-marketplace solution is needed to streamline purchasing needs and reducing spend to arrive at a greater degree of acceptability in the purchasing community by building in best practices in purchasing and doing away with functionality that increases costs and dependence on a vendor. Be it Ariba, be it SAP. Ariba Spend Management Suite has to be retired from the landscape, but a better solution needs to be arrived at. Org.A. SRM has been evaluated but the fitment needs are more custom. Comparison pales when one does it between Ariba Buyer and erstwhile Commerce One. The functionality match has to increase to address the key business process issues. The need of the hour is to simplify the landscape in tune with SAP’s ESA roadmap, but with a better business fitment. Does this mean that now customers have an option to explore this concept and extend it to other areas as well?
In this blog, we will explore the option of extending this concept to a wider horizon. Why just e-Procurement? The xPRO concept now spawns off a completely new set of radical ideas to help customers reduce TCO by upto 75% by leveraging the SAP NetWeaver platform and CAF.
A skeptics view – Why the world of Composites can turn into the next B2B bubble:
As straight as it gets, one could potentially view SAP’s point of view on composites in three different ways, when it comes to the evaluation of the world of “white-spaces”. No matter what the jargon, if one peels through the layers of the hype, the questions an Architect is faced with could be as follows:
1. If the “White-spaces” of an SAP application were so important, why would it not be on the Product roadmap?
2. If all the “white-spaces” were published (as one gets to see in the Solution Maps), how is SAP helping the customers do away with best-of-breed vendors as stated by Shai time and again?
3. If organizations like Ariba are powering themselves on the SAP NetWeaver platform, how is it going to help the CTO/CIO create a consolidated SAP landscape?
4. If a “white-space” is truly a “white-space”, why is SAP not doing the similar acquisitions with what it did with LightHammer and tweaking it to change to xMII?
5. Are the published “white-spaces” truly gaps or gaping holes? If they are gaps – they might become esoteric Partner Composite applications and SAP sees no value in them. If the “white-spaces” are gaping holes, obviously, SAP will do something about it. So, how do a CXO truly bring out the value of a composite with CAF to create a truly SAP-only landscape? Is this approach with the “Partner Catalog” not best-of-breed applications in a new garb? Old wine in a new bottle? It surely is.
Logically speaking, the very fact that SAP NetWeaver is a platform now provides the CXO with unlimited options. Think the cost of implementing an SRM solutions costs a bomb and requires heavy customization? Excess maintenance costs in your Shop floor application system? Rare skills in APO and customization required? As long as you have the ECC footprint and the SAP NetWeaver platform, the other option is to build the next practices, instead of implementing the best practices alone with the world of CAF. Cost Impact? Upto 75%. And a packaged partner composite is certified as an SAP solution.
Bottomline – If the implementation costs of any SAP product goes beyond 30% in customization, maybe, it would make sense to build it with CAF.
Locking horns with SAP AG to truly lower TCO:
Anyone dealing with SAP on a regular basis would note that such an approach will have a few folks within SAP see red and a lot of others endorsing the same – clearly based upon the functions they would perform within. From a partner perspective, it still boosts up the Incremental Influential revenue for SAP. From the CXO standpoint, she has the option of truly lowering TCO by upto 75%, from The role of any CXO or a Chief Solution/ESA Architect within an organization that has a heavy SAP only footprint is not to get taken in by the hype and hoopla surrounding composites, but, rather to take a very practical view of the same. Bottomline – If SAP NetWeaver is truly a Business platform (which it certainly is!), the CXO has the option of doing away with ANY SAP or a Non-SAP solution that is A) Non needed B) Is immature c) requires heavy customization d) Is just not there!, and creating their own “SAP Certified Composite Application” that could be built per Industry standards, customer-specific requirements and providing a completely new paradigm of customization, fully leveraging an SAP landscape and driving home early ESA Adoption. Consider our example with xPRO here – we took off on Ariba Buyer.
So, why restrict the xPRO (xPRO on SDN and iPRO in the real world) concept only to “white-spaces” only? Why not new custom-built IS-Solutions, why not a brand new manufacturing execution or a Shop floor application system? Want to replace i2 and APO doesn’t excite? The core – ECC 5.0/6.0 is all that one needs. And this is only a sample. Please note that the example below is a hypothetical one and can be challenged.
Concept demonstration through xPRO:
Take the example of Org.A and think through the solution benefits.
When you were implementing/are planning to implement an e-Procurement solution, say, you are doing away with Ariba Buyer or you are contemplating whether to go for an SRM/EBP solution or not. Roughly, the Initial outlay in terms of FTE, licensing, infrastructure, support, supplementation costs, and implementation and support costs – all may approximate to a total of USD 10-15 mio once you consider all costs. The promised returns for the same on an annualized basis may be touted as USD 5 mio or more (depending upon the situation). The accrual period for the same would be spread over a period of 2-3 years to streamline procurement till you get to see the color of the money. Therefore, a close to a year of implementation to go-live, streamlined spend over the next 2-3 years including rollouts. By the time, the CTO gets to see the savings, either it is time to upgrade or to customize or there is a technological shift in the market. When do the true savings actually come in? Note that these are only rough-cut estimates and may have no bearing to the real world – but you do the math.
Slice it up:
The next step is to analyze the spend that actually could go through the e-procurement system. Slicing it up, one of the ways to analyze the streamlined spend is to check the various spend categories to figure out where the spend actually happens. In the case of Org.A, one can clearly see that one of the areas of spend (approximately 20-30%) is the area that the CXO should be focusing upon. But hang on – Isn’t this depicting only catalog spend? What about the ad-hoc spend? Let us just consider the catalog spend for the time being. Org.A realizes that the majority of the spend being routed through the spend that calls for a TCO reduction – a major chunk of it is being spent on IT services itself! Org.A managed to streamline it’s spend alright, unfortunately, the streamlined spend was mostly on IT costs. This certainly proved one point – a spend management solution is needed, a solution that is built on towards ESA, a solution that needs to be scalable to a sourcing solution and if need be – towards CRM as an online store or a B2B marketplace. And a solution that would be a long-term one that leverages its existing investments, is aligned to its SAP roadmap and would be cost effective.
Analyze your savings & guess what you got!:
Now, we take the pie and see where the savings actually lie. Org.A realized that the chink of the spend in the first three years of gestation of the e-procurement solution and around IT services was as high as 80%. Of this, a significant chunk was being spent on licensing, implementing, servicing, customizing and upgrading the spend management solution itself. Of course, the spend constituents would change every year and Org.A would have to monitor it on a regular, ongoing basis. But that is true with any purchasing department. This leads to one moot question – Is the spend on all these forming a significant chunk of the actual streamlined spend itself? Wouldn’t Org.A benefit significantly by reducing these costs and have a solution of its own? Of course, best-of-breed is not something that CXOs may want to invest in, but wouldn’t that apply to composites as well?
The way that Org.A see it is – do away with the Spend Management application itself, create one as a composite that is adapted to its environment and make it an xAPP. They get an SAP solution, stick to the SAP-only-roadmap vision, get on the ESA bandwagon, adopt SAP NetWeaver. It plans to adopt a similar strategy with other SAP applications, except for ECC, to ensure that the SAP product development is on its toes, and if one size doesn’t fit all, make it. CAF as the new paradigm to customization.
The above concept will have its fair share of critics and endorsers (if there is such a word!). But the fact remains – Composite applications have the ability to shape the future of adaptive, innovative organizations. This concept is extendable to many other business functions as well. And we will explore more ideas around the same in this series.