From kirana stores to hybris: SAP’s evolving Business Network strategy

A variety of details about how SAP intends to exploit the commerce functionality of the hybris platform emerged at a press conference this week announcing the completion of the hybris acquisition. The slide to the right showed hybris in the larger context of SAP’s broader strategy particularly well.

There was some additional information provided on the relationship between the new acquisition and existing cloud assets.

SAP officials say hybris is also complementary to Ariba. Luedi puts it simply: Ariba makes the processes of procurement more efficient; hybris does the same for the sell side. [Jonathan] Becher [SAP CMO] adds that there will be natural connection points between Ariba and hybris. [SOURCE]

The idea of “Matrix Commerce” as promoted by Ray Wang and Constellation Research is a good example of an interpretation of commerce that provides a context for such connection points to take place.

Yet, the mere presence of such connection points fails to provide any further details about how hybris really fits into SAP’s broader strategy.

We have to travel halfway around the world — to India — to find clues about one possible interpretation of its future.

Project Ganges

A good starting point for our exploration is an an SAP project called Ganges. It focuses on improving the IT infrastructure of micro-businesses, such as kirana shops (“small, usually family-owned shop selling groceries and other sundries”).

A start-up project within SAP’s Global Business Incubator, Ganges would come out with case studies to tell what all small businesses should do benefit from IT solutions.

“We are doing research and development on how to make kirana shops benefit from IT. So far, only small IT is in use there. They use it mostly for point-of-sale. But there is a lot. They can use it to interact with distributors and product companies for inventory management,” Aiaz Kazi, Senior Vice-President (Platform, Products and Invention) of SAP, told Business Line.

At first glance, this innovative project would appear to have nothing or very little to do with the hybris acquisition, but a LinkedIn profile from someone in the project provides additional material to consider. One must take job descriptions such as this associate product manager position with a grain of salt, but it yielded two interesting points:

1. The description “SAP Last Mile Retail Network” showed that a broader focus — retail networks — was involved, though the main focus is on those micro-businesses in the supply chain that are often difficult to involve in IT-supported processes.
2. The description of active involvement with the “device team” is intriguing and demonstrates that the project was more extensive than I had thought. 

At this point, there were only a couple touch points between Project Ganges and hybris:

• FCMGs and distributors are potential hybris customers
• Hybris also provides similar POS-related functionality.

The Retail Network

Continuing my search, I discovered a presentation from Abhijit De (Vice President & Initiative Lead, Ganges) that provided a broader context. As described in his slides, the focus is on business networks – in this case, retail networks.

A video interview with Abhijit De provides further evidence of the goal of Project Ganges: the creation of Business Network as a Service (BNaaS)

Project Ganges has a much broader scope than I had ever imagined and involved a variety of customer types beyond just the kirana stores.

Why is the Retail Network so unique/important?

India is just the initial market for the solution — other markets are planned in the future.

Such notions of Matrix Commerce are usually focused on larger economies and their participants. But the Retail Network / Project Ganges focuses more on emerging economies, where SAP expects/requires that much of its future growth will be based.

The inclusion of all participants in the retail supply chain — as seen in the design thinking-based deep analysis of the requirements of kirana stores — demonstrates the project’s awareness of the unique characteristics of such markets and their participants.

These are non-traditional customers usually ignored by traditional vendors, yet they represent the most promising avenue to increase SAP’s global reach.

What could hybris possibly contribute to the Retail Network?

If you look at the initial diagram of the Retail Network, there are a variety of potential touch points between the Network and hybris, especially regarding Retailers and CPGs.

The B2C functionality of hybris was a critical interest for SAP, as the company’s Mark Ferrer noted at the press conference this week. Retailers want to reach their customers via every channel, including mobile and online, as well as in their stores.

“We’ve been transforming SAP over the last three to five years,” Ferrer said. “Now all of these technologies are starting to converge.”

This feature-set fits quite well to the customer-related goals of the Retail Network:

FMCG/CPG companies

Improved supply chain efficiency

Higher efficacy on marketing and promotion spends

Increased revenue due to increased retailer capital

Retailer

Access to additional working capital (through bank credit)

Increased income from selling value-added services (e.g., billpay, mobile top-ups)

Thus, the hybris functionality complements the existing BNaaS plans and provides the Retail Network additional features earlier than expected and in a quality and maturity that might not otherwise be possible. 

The goal is that the “SAP Retail Network is the first of five last-mile business networks (pharma, oil and gas, steel, food, and microATM) that together generate more than $1B+ for SAP.” [SOURCE] and hybris provides functionality – especially regarding B2C – that directly benefit these planned Business Networks. 

Note: I’m not suggesting that SAP only acquired hybris to fill in gaps on its Retail Network offering – obviously, hybris solutions will be used in a variety of other contexts. Yet, such usage scenarios – although involving various other SAP assets (OnPremise CRM, HANA, etc) – don’t really provide a long term (5 years+) strategic perspective that I’m hoping is guiding SAP’s activities in this area. 

Note: I’m also not underestimating the efforts involved in integrating Ariba or hybris in the Retail Network or indeed in other Business Network as a Service offerings – they are non-trivial. Yet, SAP is evolving and its acquisitions are made with this evolution in mind. 

Other POV

• HANA: As to be expected HANA is also involved in such BNaaS offers and I’m often reminded of Vishal Sikka’s remarks at the Business Suite on HANA launch in January where he described “re-inventing business networks with the transformative capabilities of the SAP HANA platform” [SOURCE].
• The role of the HANA Enterprise Cloud: It appears that the Retail Network will be running on the HANA Enterprise Cloud (HEC) [SOURCE] . If true, then the Retail Network is a new variety of HEC application that is not focused on traditional SAP solutions (Business Suite or BW) but rather on the “new and unprecedented applications powered by SAP HANA” that also run in that environment.
• Timeline: Some might suggest that such offers are just ideas and still far from reality – yet SAP is much closer than some might expect. The first Go-Live of the Retail Network for India is planned on August 15, 2013. [SOURCE]
• Design Thinking: The emphasis of design thinking in the Retail Network is impressive and extensive. I was especially pleased to hear about the role of this methodology in the design of the POS device so that even illiterate retailers might be able to use the device. 
• One cloud strategy: I think the inclusion of the Ariba functionality in the offer is critical inasmuch as it shows that SAP’s various cloud assets – which are usually viewed separate – are coming closer together.
• Adapting to the mobile-related requirements of emerging economies: The fact that SAP is using GPRS to send the POS data to the cloud-based Retail Network [SOURCE] shows that SAP has learned from its experience in Africa and the banking sector there.