View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Technology
September 15, 1998

SAP CUTS OFF SUPPLY CHAIN VENDORS AT THE KNEES

By CBR Staff Writer

SAP AG’s move into supply chain automation is bad for the market and could squeeze all the leading players into the sidelines, analysts claimed this week at the German software giant’s user group conference in Los Angeles. According to several analysts ComputerWire spoke to, SAP’s move into the supply chain market, with the announcement of its Advanced Planning and Optimization (APO) module here Monday, could signal the beginning of the end for market leading vendors such as Manugistics Inc, i2 Technologies Inc and Synquest Inc. David Dobrin, an analyst with Cambridge, Massachusetts-based Benchmarking Partners said SAP’s move into the supply chain space was inevitable. SAP could see the companies were making a killing, it wasn’t going to be long before it developed a solution of its own. But he added: The real issue here is how SAP’s move will effect the other players, in particular, this is very bad news for Manugistics. Since SAP has being talking about entering the market, we’ve seen Manugistics’ stockpile fall to a sixth of what it used to be back in May. He said the fear of SAP cornering the market will create a lack of confidence in Manugistics, which in turn, would mean the company would gradually be unable to innovate, develop, or sell its software…SAP is cutting them off at the knees.

By Siobhan Kennedy

Alice Greene, president of analyst Industry Directions agreed: This is certainly bad news for Manugistics, she told ComputerWire, Like the other ERP vendors, SAP is slowly filling out its product suite. And the company’s motto is ‘If we can’t do it the best, we won’t do it at all.’ That’s good for SAP customers, but not too good for its competitors. Like Manugistics, SAP’s APO offering is designed to enable customers to make accurate and responsive supply chain and production plans, using information held within SAP or other ERP vendors’ manufacturing applications. Both analysts agreed that companies like Manugistics had a superior product, but with SAP entering the market many companies will be tempted down the software giant’s path in search of what they believe will be tighter integration with SAP’s R/3 ERP (enterprise resource planning) system. SAP is very clever, Greene continued, it knows the biggest impact of yesterday’s announcement will be to force customers into a waiting game. Rather than buy software from other supply chain vendors now, many users will delay the decision and play a wait and see game. And, knowing SAP customers, they’ll wait. They want an integrated solution. A spokesperson who didn’t wish to be named told ComputerWire: We’re pleased SAP has entered the market because it gives greater validation to our product. But he added that it was a kick in the teeth that Manugistics has spent two years co- developing a supply-chain interface with SAP for R/3 only for SAP to turn around and develop its own product. Having SAP in the market will make it much bigger, and on that front we’re pleased, but it will also make it a lot harder for us to compete for customers. But whatever the users decide, the other supply chain vendors will have to act quickly if they’re to keep SAP at bay. Manugistics is currently adding the finishing touches to its Manugistics 5.5 software, due next month, and the next version will be available in January. The company says it will include support for complex manufacturing environments, which should lure at least the discrete manufacturers away from SAP. Irving, Texas- based I2 will also add support for specialized environments with the launch, this week, of Rhythm 4.0. And SynQuest, in Atlanta, will release a new version of its Supply Chain Performance Series by the end of the year. The software will include new supply chain design, supply chain planning and demand planning applications. As well as enhancing their core products, analysts suspect the other supply chain vendors may try and align themselves more closely with other ERP vendors, notably Oracle Corp, who already has a relationship with i2. One of the biggest sticking points that persuaded SAP to go its own route was price, an SAP spokesperson told ComputerWire. Manugistics is a good company and it has good product offerings but they’re not totally integrated and they’re too expensive. He added that SAP customers had also told the German software giant that it was time it developed its own solution, rather than relying on third party vendors. SAP refused to be drawn on exact pricing for APO, although co-founder, co-chairman and CEO Hasso Plattner told an audience at a press conference here Sunday that it was likely SAP would charge per amount of time spent using the system, although he didn’t give any specific details. Manugistics typically charges per user and licenses cost around $50,000 a seat, making the average contract worth over $1m. One analyst speculated that SAP, might significantly reduce the charges for APO and offset that cost against the revenue generated by R/3. I’m not saying that’s what SAP will do, just if it wanted to wipe everyone out of the market that would definitely be one way of doing it, just look at Microsoft and Netscape.

Content from our partners
The growing cybersecurity threats facing retailers
How to integrate security into IT operations
How Kodak evolved to tackle seismic changes in the print industry and embrace digital revolution
Websites in our network
NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. Tech Monitor's research, insight and analysis examines the frontiers of digital transformation to help tech leaders navigate the future. Our Changelog newsletter delivers our best work to your inbox every week.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED
THANK YOU