Shared Strategies

The consumer goods industry is unique in that it is equally driven by multi-billion dollar enterprises and cutting-edge SMB firms. This month, CGT sat down with SAP's Ted Combs, Senior Industry Principal, Consumer Products, and Bob Frey, Industry Principal, Consumer Products who focuses on mid-market business development. Their combined insights and perspectives makes it quite apparent that the challenges faced by all companies in this industry, both large and small, are very similar.

What are some of SAP's larger customers thinking about from an IT perspective?   Any thoughts on the mid-market?

• Combs: The larger companies are struggling with major forces that most of us are familiar with such as the need for organic growth, product innovation, retailer leverage, compliance, etc. From an IT perspective, we see some interesting situations and trends. Some large prospects are still dealing with a complex and overgrown IT portfolio. In other words: too many disparate systems that don't talk to each other creating unnecessary complexity and overhead that tie up IT resources. On the other hand, the best-run companies already simplified their IT landscape, and are beginning to reinvest the freed up resources to create more flexible and innovative solutions to support the business.
• Frey: Mid-sized companies deal in the same macro-economic environment as large enterprise customers. When thinking about investing to respond to business challenges or accommodate future growth, mid-sized companies often must deal with limited financial and human resources. This constraint drives a need for solutions with fast tangible benefits and higher ROI. Moreover, mid-sized companies are looking for fast, simple business processes.

How can a service-oriented architecture extend and enhance collaborative processes and information exchange for both enterprise and mid-market companies?

• Frey: Services Oriented Architectures (SOAs) allow organizations to build upon existing systems while adding a dimension of flexibility and adaptability necessary to support innovation and change. Solutions developed using a SOA are open and not dependent on proprietary technology.
  In the context of extending and enhancing collaborative processes, using a SOA approach offers greater flexibility to innovate/change business processes. Application components can be reused and recombined to solve business requirements or experiment/innovate at a lower cost than conventional development methodologies. In addition, solutions using a SOA can be developed in-house with application vendors and with solution partners offering a broad portfolio of capability. This is especially true supporting machine-to-human interaction that is essential for collaborative processes.
• Combs: At SAP, we have taken the concept of SOA and developed a blueprint for a business-driven approach to SOA, termed Enterprise Services Architecture (ESA). ESA takes a step beyond SOA to marry the general concept of enterprise services with technology infrastructure and composite applications into a powerful, unified blueprint for business process flexibility and innovation.

I really don't think it is a question of whether or not ESA will be adopted, rather when and how. Companies that do not invest in an enterprise-ready platform and embrace ESA risk being left behind as they struggle to extend their information and processes for collaboration. There is no doubt that ESA is a necessary foundation for enabling improved collaboration and integration.

Technology investments are only going to be as successful as their supporting business processes.  How do consumer goods firms address this?

• Combs: Clearly everyone should agree that technology is simply an enabler. The trick is figuring out how to successfully implement the software. That requires a fresh perspective on adapting an organization's processes where justified, and taking full advantage of the opportunity to change rather than simply force the software to comply.
• Frey: At SAP, we strongly advocate that mid-sized companies adopt industry Best Practices. This approach makes the accumulated experience of 8,400+ SAP implementations at 2,800+ consumer products customers worldwide available to each customer. Industry Best Practices are pre-configured solutions for core business processes like order-to-cash and procure-to-pay with industry-specific functionality. Typically, these solutions are co-developed with an implementation partner with a rapid deployment methodology. The key benefits are rapid deployment of best-in-class performance at an affordable price point.
• Combs: In contrast to mid-sized accounts, large enterprise accounts have historically had the temperament, financial stability and human resources necessary to invest and develop proprietary business processes. In today's highly competitive environment, we see more and more large enterprise accounts assessing industry best practices as an option for their own needs. Large enterprise accounts typically want to preserve and enhance their unique capabilities and adopt best practices in a hybrid solution model.

How can SOA help the introduction of new products and services for large and small firms?

• Frey: New Product Development and Introduction (NPDI) drives growth for consumer goods companies. Innovation in the business processes employed to support the NPDI processes can accelerate time-to-market for new products/ services and allow a firm to win over the competition. NPDI touches virtually all business processes and application sets -- making NPDI a complex business process to automate and support with technology. This complexity makes support of NPDI with traditional development tools very challenging. NPDI can certainly benefit from an ESA platform. As we described earlier, ESA is ideal to support this requirement.

The key benefits from an ESA enabled NPDI solution are enhanced alignment of new product efforts with business strategy; better margins with project management tools; and better execution by integrating NPDI across the enterprise.

How can consumer goods executives facilitate the outsourcing of non-core functions or processes?

• Frey: Historically, outsourcing companies targeted mid-sized companies and select functional areas, but recently significant outsourcing deals by P&G and Unilever have put a spotlight on the value of outsourcing for all size firms. The rules of the game are changing; even large companies with proud histories must be open to new options in the current competitive market place.
• Combs: The best advice we can give is to start migrating to a business process platform that is supported by an ESA. This will offer the greatest flexibility to quickly develop in-house solutions, utilize composite applications, and outsource processes and solutions. IT organizations have a tremendous opportunity to become more innovative, responsive and flexible in a secure and scalable enterprise-ready environment.