From SAP to SaaS

Thomas R. Cutler reports on why SAP users are outsourcing ecommerce to software-as-a-service providers. Users of SAPÔÇÖs enterprise resource planning (ERP) systems are increasingly outsourcing their ecommerce solutions to SaaS (software as a service) vendors.  A successful example of this trend can be found at the EFD division of Nordson Corporation, which recently strengthened its customer service capabilities through the implementation of an SAP integrated B2B ecommerce pilot program developed by b2b2dot0.EFD is a leading manufacturer of precision dispensing systems for the application of controlled amounts of the adhesives, sealants, lubricants, and other assembly fluids used in manufacturing processes. Products include air-powered benchtop dispensers, low-maintenance dispense valves for automated production lines, precision dispense tips, and dispensing robots.EFD parent Nordson has two SAP systems, one for its US businesses and another for its international businesses. The ecommerce software used with its domestic SAP system was purchased from Haht Commerce ten years ago, but Haht has since discontinued further development and support for the software.ÔÇ£We are currently in the process of consolidating SAP systems and will be migrating the US SAP users to the International SAP system,ÔÇØ says NordsonÔÇÖs web developer, Jerry Berndobler. ÔÇ£We needed an ecommerce solution for the International SAP system so that the US businesses could continue providing ecommerce options to their domestic customers. Because the existing B2B ecommerce product currently used on our US system is no longer supported, it did not make sense to begin using it internationally. This drove us to begin searching for a new solution for our International system.ÔÇØBerndobler acknowledged that the biggest challenge Nordson faced was that there was no longer any support for the existing software. ÔÇ£We had a system that was ÔÇÿfrozenÔÇÖ and could not be easily upgraded or modified.ÔÇØFor Nordson, cost, time to implement, and available internal resources were issues in searching for a new ecommerce solution. The company evaluated several different options: building a solution in-house, using an SAP solution, using a third-party solution and then integrating it with SAP, and using an outsourced solution. After all evaluations were completed, the outsourced solution fit most closely with the companyÔÇÖs goals.ÔÇ£There are very few ecommerce options that are designed to work with SAP in the marketplace,ÔÇØ commented Shelly Peet, vice president and chief information officer for Nordson. ÔÇ£Since our original ecommerce solution search ten years ago, the market has consolidated.ÔÇØFor all but the simplest of SAP configurations, the SAP ecommerce solution requires a significant amount of time, and therefore cost, to realize. The technology stacks that have to be traversed to give the web user an efficient and friendly experience are many. Deep knowledge of functional and technical implementations of SAPÔÇÖs sales and distribution modules is required, as is an understanding of the technologies that make up secure and high-performing web applications. Business teams must also understand how the modules can be integrated with web services and have the merchandising skills to manage the configuration and display of a product catalog. Finally, the experience and skill sets to collaborate and communicate are required to determine which system should perform which function and store which data in order to give the web user the optimal ecommerce purchasing experience.There is no B2B ecommerce center of excellence in SAP. Each time an ecommerce problem requires a new solution, a new team of independent product experts must be assembled and start from scratch to resolve the issue, resulting in significant consulting bills.ÔÇ£There was a gap in the market since no one was extending SAP with easy-to-learn and easy-to-use ecommerce products,ÔÇØ explained Dr. Sam Bayer, chief executive officer and founder of b2b2dot0. ÔÇ£There were two choices: build a custom web site from scratch or heavily customize existing software products.ÔÇØ┬á Nordson found b2b2dot0ÔÇÖs solution quite unique according to Berndobler: ÔÇ£Two of the biggest differentiators were cost and time to implement. With all other solutions we evaluated, either costs were much greater (for hardware, software, and personnel/consulting time) or the implementation schedule was overly long or both.ÔÇØNordson began testing the application with a single division, EFD, and it plans to roll out the application as necessary to other divisions beginning in 2009. The initial cost savings have already been quite dramatic says Berndobler. ÔÇ£We have already achieved process efficiencies with our EFD division, especially in dealing with customers that are geographically dispersed. We expect to use the b2b2dot0 service to simplify our order taking process in Asia.ÔÇØAccording to EFD president Peter Lambert, ÔÇ£Within sixty days of starting this project we were processing orders from over 25 countries into our SAP system in real time. Our customers have been impressed with the websiteÔÇÖs convenience and ease of use, and consider it a major value-added service. Internally, we have gained tremendous efficiencies in the order management process.ÔÇØBayer expects a dramatic increase among SAP users to the outsourced ecommerce solutions because ÔÇ£the result is a configurable web platform for ecommerce that leverages best-in-class open-source technology and delivers it as software as a service. SAP users who believe that customer service matters must find solutions which give their customers the tools to do business effortlessly.ÔÇØSAP had a pretty good 2008 and a strong fourth quarter (increasing net profit to Ôé¼850 million over the previous yearÔÇÖs Ôé¼756 million.) This profitability exceeded analystsÔÇÖ estimates of Ôé¼747 million by close to 14 percent. Yet the company announced recently that it will lay off close to six percent of its workforce. There are at least three reasons for this decision. One is to trim costs. The public message given by SAP is that these layoffs will save Ôé¼350 million ($464 million) in 2010. With the unpredictable nature of business in 2009, it makes sense to be cautious. Another reason could be to get rid of dead wood. A downturn is always a great time to confront the bad hiring decisions made during earlier euphoric times. Every manager knows it is much easier to blame a poor economy when firing an employee than to deal head-on with their poor performance.┬á Finally, SAP may have decided to focus on the core. When business is good, the future looking bright and competition intense, SAP invested in products, markets and programs that could help grow the business. But now that times are uncertain, the conservative approach is to scale back to the core.┬á ÔÇ£B2B Internet sales has never been a real focus area for SAP; itÔÇÖs going to be even less so now that SAP is retrenching its investments,ÔÇØ asserts Bayer. ÔÇ£Fueled by the need to become more efficient in the order management process and less funding being available for big and long implementation projects, outsourced ecommerce SaaS solutions are defining the concept of innovation in tough economic times.ÔÇØ┬á