SAP Launches Hosted Sourcing Offering

Lets companies test drive e-sourcing solution before committing to behind-the-firewall application

Lets companies test drive e-sourcing solution before committing to behind-the-firewall application

Berlin — October 27, 2004 — Enterprise solution provider SAP this week announced that it is offering a hosted platform that allows companies to use the mySAP Supplier Relationship Management solution (mySAP SRM) for preliminary sourcing engagements, giving customers the chance to test drive the e-sourcing solution prior to committing to a full-blown implementation of the behind-the-firewall version of the solution.

According to SAP, this offering will allow companies to substantiate the benefits of sourcing and supply management before moving to a complete SRM implementation. Companies now have the option to run a series of events — including requests for information (RFIs), requests for quotation (RFQs) and reverse auctions — on the hosted platform as a trial phase before bringing it in-house and embedding the sourcing methodology within their core purchasing processes.

Explaining SAP's decision to offer the hosted platform, Faheem Ahmed, director of SRM solutions strategy with SAP, emphasized that the solution provider still believes that enterprise sourcing, with a behind-the-firewall implementation, is the best option for companies. But customers have been asking for a way to dip their toe in the e-sourcing waters before they dive into a full-blown implementation.

"We still believe that most companies will eventually want to own the software and manage it themselves," Ahmed said, "and that they are going to move beyond doing two or three events a month — or even two or three events a week — to doing them on a continuing basis. It's going to be part of everyday life. And to do that, you cannot have a model where you pay by the event.

"However, we realize that's not going to happen overnight," Ahmed continued. "A lot of customers are saying, 'Why can't you give us a trial model? Why can't you help us learn about this and move to the enterprise level later on?'"

Customers may be looking to gain category expertise and event preparation expertise before they move to the full platform, Ahmed said. They could use the solution for a set period, or SAP could run a certain number of events for them and train the customer's staff and suppliers on how to use the system.

Nevertheless, SAP does not see itself becoming a hosted-application provider, Ahmed emphasized. "It's not a departure from our business model," he said. "But we see that we need to do this as part of our proof of value."

Companies that try the hosted service and then opt to migrate to the behind-the-firewall solution will be able to move all their data, history and reports from the hosted system to the enterprise solution, SAP said.

Currently three customers are using the hosted SRM solution, including Pilgrim's Pride Corporation, the second-largest poultry producer in the United States. Pilgrim's Pride was already a mySAP Business Suite customer, but the company had kept SRM on the backburner and had been implementing other modules of the Business Suite. But after dipping their toe into SRM by using the host solution, the company is pushing forward with an implementation of SRM because of the payback to date.

"Our first two auctions on SAP's hosted platform have already given us nearly one million dollars in savings," said Tim Thomas, senior vice president of procurement with Pilgrim's Pride. "By conducting these events, we have gained a better understanding of the preparation and training required for successful sourcing engagements. Based on the results we saw from the initial auctions, we look forward to using mySAP SRM on a more permanent basis."

SAP also announced an expanded network of service providers that support its "Vision to Reality" (V2R) solution design methodology. SAP said that V2R allows companies to visualize how their current purchasing processes may be improved through the application of enabling technologies like mySAP SRM. Customers can choose to include V2R services within a mySAP SRM contract or purchase them separately.

Event preparation and management services are now available through SAP, Intersources and Computer Sciences Corporation. Specific consulting engagements are available for all aspects of sourcing and for all levels of experience, SAP said, including opportunity assessment, category prioritization, strategy development, program management, buyer education and supplier enablement.

SAP also expanded an existing partnership with Capgemini to customize its QuickScan strategy development methodology for mySAP SRM. SAP said that aligning the strategic consulting services from Capgemini with the enabling technology solution from SAP makes it easier for customers to identify savings opportunities, improve sourcing processes and develop better supply strategies. Some of the services now available through this partnership include purchasing health checks, process design and innovation, rapid prototyping and solution implementation.
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