SAP The Changing Face of Business Networks Whitepaper


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SAP The Changing Face of Business Networks Whitepaper

  1. 1. SAP White Paper Information Interchange OnDemand The Changing Face of Business Networks How On-Demand Solutions are Revolutionizing B2B Collaboration
  2. 2. Table of Contents 5 Executive Summary 6 The Changing Face of Business Networks 7 Enterprise Business Collaboration Challenges 8 Addressing the B2B Collaboration Challenge What Industry Leaders Are Doing Getting a Handle on Costs Simplification and Consolidation Frank Ruland Siddharth Taparia 9 Simpler and More Flexible B2B Collaboration with On-Demand Solutions in the Cloud 10 SAP Information Interchange OnDemand (IIOD) – Revolutionizing the B2B Network 12 Customer Success— Artoni Transporti 13 Conclusion 14 Glossary of Acronyms and Terms
  3. 3. Enterprises are responding to the challenges of globalization by transforming business networks and improving B2B collaboration with customers, partners, and suppliers. Organizations that adopt on-demand B2B process transactions in the cloud will realize the greatest benefits in the form of reduced IT cost, lower compliance risk, and a distinct competitive edge.
  4. 4. EXECUTIVE SUMMARY Executive Summary Globalization, competitive pressures, and the increased speed of business mean that organizations must have the necessary automated systems and processes in place to address supply chain complexity and quickly create a collaborative partner community. While the benefits of e-business initiatives are clear, enabling business-to-business (B2B) integration using point-to-point EDI translators is time intensive and cost-prohibitive because of IT resource requirements and ongoing operational expense barriers. Manual approaches and legacy technologies such as B2B converters can no longer keep pace with the requirements for greater operational efficiency and lower cost. However, new solutions are emerging which simplify the B2B landscape by eliminating point-to-point integrations. They enable a rich repository of partners and facilitate the rapid growth of a processintegrated partner network. Furthermore, B2B enablers which employ a canonical messaging approach to process structuring can result in dramatic cost savings, increased business agility, accelerated decision-making, and lower compliance risk—while providing partners, customers, and suppliers with a distinct competitive edge. SAP White Paper –The Changing Face of Business Networks 5
  5. 5. The Changing Face of Business Networks Business networks have been around since the late 1970s, when the era of electronic data interchanges, or EDIs, began within the automotive industry. Before EDI, the only way to move documents between businesses was by mail or courier. There were no electronic options, and fax technology was not yet a practical solution. While B2B transactions have now been automated for over three decades, the high cost of establishing these networks has made them prohibitive for all but the largest of companies. Those organizations realized tremendous savings by linking electronically with large suppliers or key customers. Early EDI was originally based on private networks, requiring large capital outlays to implement. Adding incremental business partners was costly because the network architecture consisted of pointto-point connections. Savings achieved in these first-generation digital marketplaces focused almost entirely on lowering the cost of procured goods. Because traditional procurement systems and processes remained largely unchanged, procurement process cost reductions were minimal. EDI demonstrated the substantial savings opportunity from connecting buyers and suppliers over networks and automating business-to-business transactions. More recently, pervasive, low-cost connectivity to the Internet has lowered the barrier to entry for enterprises of all sizes, enabling them to connect electronically with counterparts for a fraction of the cost of a traditional EDI system. This has fueled the boom in B2B marketplaces, portals and networks. New systems now automate the procurement, sales process, and inventory management, as well as tighten the relationship between buyers and their suppliers in the supply chain. The days of EDI message formats dominating the B2B world are past. Online Survey results from the February, 2011 Forrester Re­ earch, Inc., report “The Future of s EDI” indicated that the most common message format (42% of the total) has become spreadsheets and other text documents. That percentage continues to increase. EDI comes in a close second (41%); followed by industry standard XML like PIDX, CIDX, ACORD, and HL7; financial formats like ACH, SWIFT and FIX; flat files; proprietary XML; and RosettaNet PIPs. B2B integration is evolving at a faster rate than ever before, and is influenced by the emergence of cloud-based social networks such as LinkedIn, Xing, and Facebook. These types of networks use a common cloud-based platform, along with consistent interfaces and processes that every member can easily access and use. The cost of entry is minimal, and the value of the network for individual members increases as the network adds new participants and expands in diversity and coverage. Now B2B integration is not just about exchanging documents, but about fostering a collaborative community. As a result, increased collaboration between companies and their customers, partners, and suppliers has become a critical requirement for business success. Are you ready to compete in a global economy?  SAP Information Interchange OnDemand can help you connect, transact and collaborate better with your business network.
  6. 6. Enterprise Business Collaboration Challenges Despite investments in EDI and the advent of newer B2B marketplaces, an Aberdeen research study of 191 supply chain executives found that only 14% of respondents indicated that they could perform online trading partner collaboration1. At the same time, supply chain complexity is rising due to globalization. For the enterprise, this means working with more global suppliers, reaching out to more global customers, and dealing with truly global competitors. In a costconstrained business climate, companies are continuing their journey towards outsourced supply chains from a manufacturing and logistics standpoint. In such an environment, it has become difficult for companies to stay informed and in control of every stage of their supply chains. Businesses are now more reliant on their network of partners than ever before, and are being challenged by two major trends. Increasing Complexity of Business Networks - In most business networks today, the amount of data transferred between network partners has grown exponentially. Business processes now span companies, industries, and geographic boundaries as businesses reach out to new markets in the quest for continued growth. The increasing number of business partners as well as mergers and acquisitions on both the supply and buy side adds further complexity. IT and the business must establish interfaces to each of these partners and maintain them over time. Accelerated Speed of Business - The rapid pace of globalization and market changes provide only a short window of opportunity for adopting successful networking strategies. Companies that have operated for generations without competition are realizing that they must rapidly and dramatically transform their business strategies now if they want to retain existing customers and attract new ones. Shorter innovation cycles mean that new products and services are being introduced at more frequent intervals. Dynamic market conditions result in regular and sometimes unexpected changes in partner relationships. This accelerated cycle has an influence on the number of interfaces that must be established, maintained and eventually retired during the relationship lifecycle. Top Business Challenges Driving New Approaches to B2B Collaboration Rising logistics cost Rising raw materials/ manufacturing costs Rising complexity of managing an increasingly global business network Escalating customer service demands The need to consolidate B2B integration platforms and create a single B2B integration platform 0% 10% 20% 30% 40% 50% Percent of Respondents Figure 1: Multiple business challenges are driving global enterprises to examine new approaches to B2B collaboration with partner and customers. Source: Aberdeen Research, May 20112 SAP White Paper –The Changing Face of Business Networks 7
  7. 7. Addressing the B2B Collaboration Challenge WHAT INDUSTRY LEADERS ARE DOING According to Aberdeen Research, “best-in-class” companies lead the way in the percentage of transactions received electronically. A “best-in-class” company is defined as one that follows practices that are the best currently being employed and are superior to the industry average, resulting in the top industry performance. They share more information electronically with partners, especially critical transaction information such as purchase orders and payment status (by a factor of two to three times). Their suppliers are more likely to share electronic information such as purchase order acknowledgements, advance shipping notices, and invoices. In addition, 40% of the best-in-class are even willing to share some of their more sensitive information, such as manufacturing plans and release schedules. When asked about the top challenges that these companies are facing to improve integration and collaboration, 42% of companies cited rising logistics costs, 40% cited rising raw material and manufacturing costs, and 38% also cited the rising complexity of managing an increasingly global business network3. Getting a Handle on Costs A recent Forrester Research study asking participants to identify the main business drivers influencing the requirement to improve interactions with their external partners provides additional validation and confirms that cost is a key motivator. Forrester identified two closely related business drivers that tied for first place. 82% of respondents cited the need to reduce rising costs for the business, as well as the need to exchange electronic documents with business partners4. Why is cost a major issue? Manual document exchange is still prevalent in many firms, bringing higher operational costs. Moving to electronic documents saves both time and money. Point-topoint electronic business interfaces are expensive, with an estimated internal cost of $15,000 per partner interface. Most enterprises still have to exchange standard business documents with large numbers of trading partners via manual methods, including email. Aberdeen conducted a survey of over 191 supply chain executives where only 14% of responents indicated that they had the ability to perform onine trading partner collaboration5. While the need to exchange electronic documents with business partners is cost-related, enterprises achieve other benefits from doing business electronically. Electronic document exchanges enable enterprises to respond faster to changing business needs, reducing process cycle times. For example, using electronic documents in supply chain inventory scenarios can reduce cycle times resulting in cost savings. Other business issues that rank highly are the needs for real-time visibility into business processes, increased business agility, and better solutions for supporting compliance and risk management for B2B exchanges. Enterprises are finding it increasingly important to view an up-to-date status of particu- lar business transactions involving trading partners. Modern B2B tools can provide a web-based portal for tracking the status of B2B transactions as they flow between enterprises. Simplification and Consolidation Enterprises also face technical challenges when considering new B2B process exchange solutions. The most significant technical problem, affecting 66% of respondents, is the difficulty that organizations face when they have to integrate their inbound/outbound EDI transactions with other applications. The main reason for this is that so many organizations use separate tools for EDI integration and application / process integration. The second biggest issue is effectively responding to new business requests, which arises from difficulty in creating, testing, and implementing new partner or transaction sets. Other issues include difficulty in managing a partner community (especially as it grows), supporting smaller, non-EDI-capable partners, and the inability to support process improvement efforts. Companies that resist change and continue to operate at the status quo cannot keep pace with the speed of business today. In a highly competitive environment with ever-expanding global supply chains, businesses must increase the efficiency of their processes without impacting profitability. So how should enterprises address the issue of improving business process integration? How can organizations avoid the business and technical pitfalls sometimes associated with adopting a new way of operating?
  8. 8. Simpler and More Flexible B2B Collaboration with On-Demand Solutions in the Cloud A state-of-the-art on-demand B2B solution should include the capabilities of a business process management (BPM) solution with its collection of natively integrated business objects, empowering individual companies to optimize core operations and work together as a business network. A service-oriented B2B solution tightly integrated with backend systems facilitates improved collaboration, with active sharing of information among customers and partners. This solution provides all participants with increased visibility into processes, enabling partners to accelerate the pace of innovation. They can then take advantage of evolving business opportunities quickly, while improving operational efficiencies and reducing risk. By eliminating point-to-point interfaces with trading partners and reconfiguring IT systems to employ a cloud-based B2B solution for faster and easier adaptability, companies can service-enable enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (SCM) applications to function like web services that anyone in the network can use. This approach simplifies change management, integration, and information sharing with the partner network, as well as delivering cost benefits to the enterprise. The benefits to organizations that deploy B2B integration solutions extend beyond cost savings as illustrated in Figure 2. While the highest benefit, reduction in manual processing and administrative work, is cost-related, a large percentage of companies have made significant hard metrics improvements in other areas, including higher levels of customer satisfaction and increases in perfect order fulfillment. On-demand B2B solutions take a holistic approach to addressing application integration, process integration, and B2B integration using a common tool set which creates a level of network interface standardization. Not only does an on-demand solution provide a more flexible approach to integration, but it also reduces overall maintenance costs. Having a common infrastructure and standard interfaces for handling enterprise integration needs reduces maintenance efforts, as one vendor assumes the responsibility for ensuring the functional integration of all system components. Specialized legacy point-to-point B2B tools require labor-intensive integration work to obtain internal data and transform it to match the document type and format that meets the needs of each trading partner. New on-demand B2B solutions reduce this effort by using more productive integration techniques to support the transfer of data between internal applications. Top Benefits Derived from B2B Customer Collaboration Reduction in manual processing and administrative work Increased customer satisfaction Reduced data errors Increase in perfect order fulfillment percentage Reduction in costs to process a customer order 0% 10% 20% 30% 40% 50% 60% 70% 80% Percent of Respondents Figure 2: Benefits associated with B2B customer collaboration efforts include increases in customer satisfaction as well as operational cost savings. Source: Aberdeen Research 6 SAP White Paper –The Changing Face of Business Networks 9
  9. 9. REVOLUTIONIZING THE B2B NETWORK SAP Information Interchange OnDemand (IIOD) SAP Information Interchange OnDemand (IIOD) is a B2B integration solution that provides a simpler, more affordable way to connect with customers and suppliers for B2B e-commerce. Using pre-configured profiles, an enterprise can make changes within its supply chain without time- and resource-intensive point-to-point integration. Process collaboration allows trading partners to exchange richer data more frequently, increasing forecast accuracy, hastening planning velocity, improving workload balancing, and streamlining cash flow management. SAP IIOD is focused on deep integration with key enterprise applications and eliminates the need for multiple point-to-point links by moving business process translation to an integration cloud. SAP IIOD provides a consistent foundation that enables businesses to connect, transact, and collaborate with partners. While other B2B vendors with cloud-based offerings optionally translate between two trading partners for a fee, SAP IIOD does the translation as a core service. SAP Information Interchange OnDemand provides a B2B content engine, combined with a package of partner profiles. This combination enables a company to establish a connection with a business partner just once for each process—and instantly exchange related electronic documents, such as purchase orders, forecasts, invoices, and delivery notes, using existing SAP applications. Because the solution supports collaboration with partners for all types of materials, goods, and services—not only indirect goods—it can broaden the scope of a company’s B2B commerce initiatives for even greater return on investment. The SAP IIOD software content engine integrates directly with back-end SAP software using SAP NetWeaver Process Integration (PI) or other enterprise application integration (EAI) tools, translating documents into a universal meta format and then into the appropriate partner format. The content engine leverages pre-built partner profiles representing the business logic, formats, and protocols of specific trading partners for different business processes. The SAP IIOD interface architecture was developed using a unique, canonical approach to messaging. By definition, something which is canonical provides the simplest form possible, based on a consistent and standardized approach. Canonical messaging deploys a reusable interface that can communicate between different data formats and applications. All data in this messaging architecture, regardless of origin or format, The content repository allows SAP customers to integrate once and re-use standard interfaces across the Business Partner Network. CURRENT POINT-TO-POINT APPROACH B2B/EDI INTEGRATION 1.0 CENTRAL B2B CONTENT REPOSITORY: INTEGRATE ONCE B2B/EDI INTEGRATION 2.0 SAP IIOD • 3rd party integration for EDI • Not scalable • Need for internal resources SAP Information Interchange OnDemand • Faster implementation • Bigger flexibility • Lower TCO Figure 3: The canonical messaging approach used by SAP IIOD significantly reduces interface development time, simplifies interface asset management, and reduces integration and maintenance costs.
  10. 10. REVOLUTIONIZING THE B2B NETWORK conforms to a common set of definitions, enabling SAP IIOD to function as an intermediary between a source application and a target application. Consequently, the SAP IIOD solution can significantly reduce the operational complexity for enterprises that exchange information between multiple applications and multiple B2B partners. In contrast, older point-to-point messaging approaches require considerably more time and resources to deploy, since a unique data interface must be created for each new application exchange. Used appropriately, canonical messages will streamline application integration and SOA initiatives, and have the potential to substantially reduce integration development and maintenance costs.7 New SAP IIOD pre-built partner profiles can be purchased as relationships are established with new customers, suppliers, and logistics service providers. After activation by SAP the profiles , enable business to be conducted with them electronically. If SAP does not have a pre-built profile for a trading partner for a specific process, SAP will provide one. With SAP Information Interchange OnDemand, companies of all sizes gain full, flexible B2B functionality, quickly and cost-effectively, as well as the ability to scale operations up to millions of transactions per year through automation. The benefits are compelling: •• Reduced IT costs and business partner onboarding time: SAP IIOD eliminates the need for mapping tradingpartner formats and constantly investing in new time-and-material IT services to integrate with your value chain. Plus, you get well-defined inter- SAP White Paper –The Changing Face of Business Networks faces into your operating system environment. •• Increased business agility: SAP IIOD simplifies and streamlines the process of adding new trading partners, and making changes to partners and applications, to meet evolving business needs. •• Lower compliance risk: Now you can comply with any customer or partner B2B or EDI request without having to build point-to-point integration and stay compliant over time. SAP keeps partner profiles up-to-date for you. •• IT simplification: With no mappings to constantly manage and configure, SAP Information Interchange OnDemand frees up crucial IT resources currently under-utilized so they can be rechanneled to higher-value initiatives. 11
  11. 11. SHARPENING THE COMPETITIVE EDGE FOR ARTONI TRANSPORTI Customer Success—Artoni Transporti SAP Information Interchange OnDemand has been a catalyst in the transformation of Artoni Transporti S.p.A. from a regional European transportation company to a leader in global supply chain logistics. Established in Italy in 1933 to provide goods delivery, the company was an early adopter of information technology beginning in the 1970s. Artoni has always pursued a customercentered philosophy which has been fundamental to its growth and success. As the new millennium approached, Artoni observed the effects of globalization first-hand on the transportation industry. Many customers had expanded into international markets and adopted longer and more complex supply chains. The industry was changing quickly, and Artoni recognized that these customers would require a much higher level of service as they expanded globally. The company also knew that synergies could be achieved by integrating transport, warehouse management and international forwarding services into a single comprehensive logistics solution. As a result, Artoni Transporti became one of the first 3PL (third-party logistics) providers. The emergence of 3PL providers required a structured, highly collaborative approach among all of the players in the extended supply chain, with the goal of improving efficiencies and driving down costs. The entire process was supported by information technologies capable of facilitating communication with the customer, as well as integration between the various players in the extended logistics chain. The initial business-tobusiness network required the creation of point-to-point electronic interfaces to each partner, one at a time. This time and resource-intensive process took ten years to complete. While this was an im- portant development, Artoni realized that a point-to-point business network lacked flexibility and could never scale fast enough to provide the competitive advantages required for success in the global economy. Artoni Transporti sought a simpler and more efficient way to build a business collaboration network which took a standardized and repeatable approach to logistics management. The objective was clear: improve customer relations by enabling Artoni and its partners to more easily share growing volumes of information. This goal led to an evaluation of the SAP Information Interchange OnDemand (IIOD) solution in the context of the implementation of SAP Transportation Management. The SAP B2B content engine, combined with a package of pre-built partner profiles, eliminated the need for time-consuming point-to-point integration and standards enforcement. Leveraging the flexible and streamlined approach to business collaboration provided by SAP Artoni was , able to create a B2B network of 600 partners, customers, and suppliers in less than five months. “It used to take days, sometimes weeks, to add new partners to our network” says Artoni Director of Worldwide , Channel Partners, Giacomo Coppi. “With the SAP solution, the same process now only takes a few hours to accomplish.” Standardized interfaces from SAP enable Artoni to more readily exchange orders, invoices, and payments with global partners in the U.S., China, and Latin America. The solution has helped Artoni realize improved sales, customer service, and cash flow, while reducing operational costs. Customers, partners, and suppliers today expect more than just cost efficiencies from a logistics and transport service provider. With the SAP IIOD solution, Artoni Transporti can also deliver improved automated business processes that sharpen their competitive edge in the global marketplace. “It used to take days, sometimes weeks, to add new partners to our network. With the SAP solution, the same process now only takes a few hours to accomplish.” Giacomo Coppi, Director of Worldwide Channel Partners, Artoni Transporti
  12. 12. Conclusion In today’s dynamic e-commerce environment, businesses must have the necessary automated systems and processes in place to address supply chain complexity, accelerate the speed of business, and create a collaborative partner community. Manual approaches and legacy B2B technologies such as point-to-point EDI connections can no longer keep pace with the requirements for greater operational efficiency and lower cost. Cloud-based, on-demand B2B networks simplify the landscape by eliminating point-to-point integrations, easily enabling a rich content repository of partners, and facilitating the rapid growth of a process-integrated partner network. SAP Information Interchange OnDemand helps increase visibility and control over B2B transactions, optimizes decision making, and simplifies access to the transactional information outside the four walls of your business. SAP IIOD automates business transactions and eliminates manual and paper-based processes within your business network to deliver greater flexibility and efficiency. The result is dramatic cost savings, increased business agility, accelerated decision-making, and lower compliance risk—while providing a critical competitive edge for partners, customers, and suppliers. LEARN MORE Contact SAP today to learn how SAP Information Interchange OnDemand can help you connect, transact and collaborate better with your business network. More information is available at FOOTNOTES 1. Aberdeen Research: Strategies for Building an ROI Business Case, June 2011 2. Ibid 3. Ibid 4. Forrester Research, Inc.: The Future of EDI, Feb. 2011 5. Aberdeen Research: Strategies for Building an ROI Business Case, June 2011 6. Ibid 7. Gartner Group: How a Canonical Messaging Approach Can Help You Simplify and Reduce Interface Assets, May 2011 SAP White Paper –The Changing Face of Business Networks 13
  13. 13. Glossary of Acronyms and Terms B2B—Business-to-Business— describes commerce transactions between businesses BPM—Business Process Management—a holistic management approach focused on aligning all aspects of an organization with the wants and needs of its partners and customers Canonical messaging - A canonical message is an intermediary. An interface that employs canonical messaging transforms data from the format, structure and semantics native to the source application to that of the established canonical intermediary, and from the canonical intermediary into the format, structure and semantics that the target applications require. CRM—Customer Relationship Management—a business process for managing a company’s interactions with customers, clients and sales prospects EAI –Enterprise Application Integration - a framework that enables integration of systems and applications across the enterprise EDI—Electronic Data Interchange— the structured transmission of data between organizations by electronic means (from one computer system to another computer system) ERP—Enterprise Resource Planning— a business process which integrates internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, and customer relationship management IIOD—Information Interchange OnDemand—the leading cloud-based B2B solution from SAP SOA—Service-Oriented Architecture—a set of principles and methodologies for designing and developing software in the form of interoperable services
  14. 14. 50 xxx xxx (04/12) ©2012 SAP AG. All rights reserved. SAP R/3, SAP NetWeaver, Duet, PartnerEdge, ByDesign, , SAP BusinessObjects Explorer, StreamWork, SAP HANA, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and other countries. Business Objects and the Business Objects logo, BusinessObjects, Crystal Reports, Crystal Decisions, Web Intelligence, Xcelsius, and other Business Objects products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Business Objects Software Ltd. Business Objects is an SAP company. Sybase and Adaptive Server, iAnywhere, Sybase 365, SQL Anywhere, and other Sybase products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of Sybase Inc. Sybase is an SAP company. Crossgate, m@gic EDDY, B2B 360°, and B2B 360° Services are registered trademarks of Crossgate AG in Germany and other countries. Crossgate is an SAP company. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies (“SAP Group”) for informational purposes only, without representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP Group products and services are those that are set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.