UPDATED 08:30 EDT / DECEMBER 17 2014

Reinventing ERP: SAP builds a platform for the new networked business

network SAP called us this week, ostensibly to correct some misconceptions they believe were presented in this recent story about the company’s marketplace, but the conversation quickly turned to SAP’s vision of how businesses are evolving and how technology must support that change.

SAP believes that traditional business structures are about to be fundamentally disrupted by the services economy, and it has an expanding network to support this transformation. The software giant is uniquely well-positioned to do this, having invented the enterprise resource planning software that drove huge corporate efficiency gains beginning in the 1980s. But companies of the future won’t look the same as they do now, and that demands a new approach to technology infrastructure.

The great corporations of the 20th century did everything themselves, building massive vertically integrated organizations in the process. But businesses of the future will provision everything that isn’t strategic as a service. This will enable them to move fluidly into and out of new markets and make collective intelligence available to everyone on the network.

Netflix embodies this new model. The company generates more Internet traffic than any other entity, yet it doesn’t own the technology to deliver its streaming video. That’s outsourced to Amazon.com, Inc., which is one of Netflix’s biggest competitors.

SAP’s network supports this new business model. Its vision maps closely to one recently defined by Computer Science Corp.’s David Moschella in a research brief that has been the subject of much discussion here at SiliconAngle/Wikibon. Moschella suggests that a “digital fabric” is emerging that will support much faster and more flexible ways of doing business in the future. The winners will be those that most creatively and effectively manage multiple service providers.

“We believe the next era of business productivity will occur between enterprises,” said Tim Minahan, chief marketing officer of the SAP Cloud. “This demands a new way to manage resources that responds differently to changing market dynamics or threats and disassembles quickly when you need to move on.” Noting that one-third of the workers in a typical U.S. company are now on someone else’s payroll, Minahan said this trend is already well along.

SAP aims to be the curator of a “connected community that’s a single point for managing all of your resources, processes and spend as simply as possible,” Minahan continued. SAP began putting the pieces in place two years ago with the 2012 acquisition of Ariba, Inc., which operates the world’s largest network of digitally connected companies. It continued with the purchase of workforce management vendor Fieldglass, Inc. early this year and travel services supplier Concur Technologies, Inc. earlier this month. No doubt more deals are in the pipeline.

But the SAP marketplace also supports any independent suppliers who want to join. “You can go to discovery.ariba.com and join today,” Minahan said. Customers can tap into any of the services offered there, with fees accruing to sellers at different volume levels.

The immediate benefits of the network lie in efficiency and cost savings, Minahan said. For example, a traveler who needs 50 copies of a slide presentation for an upcoming meeting can use the SAP network to quickly find a pre-approved printing vendor without scouring through directories and maps. Copies are delivered and billing and expense reporting are managed automatically via other services on the network. Other travel amenities, such as flights and hotels can be handled seamlessly using Concur and other partners on the SAP network.

But the real diruptive potential of the SAP approach lies in discovery, Minahan said. As customers find new services and create new processes in novel ways the network will take on new utility. Like Netflix, SAP’s network recommends new partners based upon the behavior of individual customers, and customers can tap into the community for advice and ideas, as well as invent their own unique combinations.

That’s why SAP bristles at comparisons of its marketplace vision to an app store. “It’s not an applications marketplace but a digital marketplace for managing services,” Minahan said. It’s also a template for where business is going.


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