By Alan Joch, Freelance Journalist in Francestown, New Hampshire

Combine rapidly changing business conditions, new complexities created by increased government regulations, and shrinking response times that reward only the most nimble companies: It’s no wonder that staying competitive is more difficult than ever for even the best-run organizations.

A growing number of companies have found a new weapon that goes beyond installing the right software, finding the right technology partner, or tapping the expertise of an experienced systems integrator. The answer combines all these important components. Even more important, rather than passively accepting solutions from outsiders, the customers themselves are actively driving which integrated applications should be built and what capabilities they should contain.

Known as customer-focused ecosystems, these comprehensive collaboration systems are spurring innovation to address critical business challenges. Technology researcher IDC calls customer-based ecosystems “win-win-win initiatives” that aid customers, vendors, and partners. The IDC report says these strategies “should be an integral part of a vendor’s ecosystem strategy.”

The value of SAP’s customer-focused ecosystems – which it calls industry value networks (IVNs) – centers on customer benefits. “Customers say these kinds of collaborations are absolutely necessary, and they’re looking to SAP to drive the efforts,” says Kerstin Tinter, SAP’s director of business development for public services industry solution management. “If customers want an end-to-end system, they need SAP to guide integration efforts with systems outside SAP.”

Key integration elements include common data models and common business processes developed jointly by customers, partners, and SAP, she says. “That way, the investment risk and the total cost of ownership is much lower for customers because the solutions are pre-integrated and pretested, and based on one platform – in this case, SAP NetWeaver. For customers, that is a very big value proposition.”

Clear value for customers
Ecosystems are valuable to customers for a number of reasons. First, because customers are actively involved in helping to craft solutions, the programs and processes developed by vendors and their partners will directly address specific business problems. Second, customers can gain a competitive advantage from the co-innovations that arise from these collaborations.

SAP has been a pioneer in creating formal ecosystems, dating back to its first IVN for banking, which premiered two years ago. The company now manages 13 IVNs for vertical industries: banking, chemicals, consumer products, high technology, automotive, aerospace and defense, retail, public sector, forest and paper, oil and gas, travel and logistics services, mining, and utilities.

The industry focus of each IVN helps participants identify the specific needs of each vertical market. For example, SAP and its customers and partners in the public sector IVN identified tax and revenue management as a key focus area. They’re now working to develop solutions to address a problem that plagues governments throughout the world: how to close the “tax gap.”

“Governments need to make sure that they are collecting all the revenues that they should be through better tax collection and disbursement processes,” Tinter says. “In many cases, public sector organizations still rely on manual processes or custom software for collecting taxes.”

The result is the poor quality control inherent in manual processes, along with high maintenance costs when organizations do not use commercial software. “When organizations have the right technology to become more efficient and close their tax gaps, they can offer better services to taxpayers. And that makes the whole collection and disbursement process better for all parties,” Tinter says.

Integrated solutions combine expertise
But developing the right solution requires a concerted effort that goes beyond what any single independent software vendor (ISV) or systems integrator can provide. The public sector ecosystem, launched in May 2006, collaborates with a number of thought-leading public sector agencies, including the United Kingdom’s HM Revenue & Customs, the Florida Department of Revenue in the United States, and the British Columbia Ministry of Small Business and Revenue in Canada. “These customers are helping us define the future of the solution and our road map. But we are also actively engaged in projects to improve their current situation,” Tinter explains.

Rounding out the IVN are seven ISVs including OpenText and Ruleburst; the system integrators Accenture, BearingPoint, Capgemini, and Deloitte; and technology partners Hewlett-Packard and Adobe.

The solution that the public sector IVN is building consists of a core offering based on the SAP Tax and Revenue Management for Public Sector package. Systems integrators tailor the solution to the specific needs of individual agencies, while the ISVs add complementary solutions to fill out the applications. For example, SAP’s partners are providing modules for tax compliance, auditing, and customs management.

The ability to tailor solutions to specific requirements is especially important because of the diversity of local tax regulations among public agencies. “Complying with local laws is a large challenge that the customers are facing because tax rules are always changing,” Tinter points out. “Every year, there are revisions, and customers need to make sure they are complying with those changes.”

In the future, the public sector IVN will also turn its resources to programs for improving public security. The ecosystem has begun to recruit a number of partners that can provide expertise in this area, Tinter says. The IVN has also started to design public sector enterprise services for service-oriented architecture (SOA) implementations. “We have invited our customers and partners to define the most important enterprise services they need in their daily business. The first services should arrive by the end of this year,” she notes.

Addressing the latest industry trends
For aerospace and defense, the IVN framework is formalizing collaborative relationships that had been developing innovations for years, says Magnus Bjorendahl, SAP industry solution manager for aerospace and defense. The IVN includes six ISVs, four systems integrators, and three customers.

Key projects for the group include solutions for performance-based logistics, which addresses an industry shift that is pushing suppliers to increase their product responsibility by attaining strict service levels for supply chain deliveries and system uptime. “If you don’t meet those levels, there are financial penalties; if you exceed them, you receive financial incentives,” Bjorendahl explains.

To profit from such contracts, aerospace and defense companies need applications to help them manage increased product responsibility and risk and meet the signed service agreement. The goal of the IVN is to build an SAP performance-based logistics platform (PBL), with the SAP NetWeaver technology platform and the SAP ERP application as the foundation. Partners, such as Dassian, MCA, and Meridium, contribute additional capabilities and integration. Once completed, the PBL platform will be a showcase solution for other customers seeking a way to better address performance-based contracting. It will also provide end-to-end documentation of all the various processes relating to logistics.

“Any single customer may not need all of the pieces that go into the entire framework, but because we are documenting what those processes look like, we can show customers how to configure the parts of the system most relevant to their needs,” Bjorendahl says.

Tracking arms traffic
A second project looks at compliance with International Traffic in Arms Regulations (ITAR), laws developed by the U.S. Department of Defense to control the proliferation of weapons systems and associated information. SAP’s existing solution for managing exports – the SAP GRC Global Trade Services application – helps assure that companies hold the proper export licenses.

A missing element that the IVN is creating covers the management of the technical data associated with these exports. “If you are collaborating with a foreign company for engineering work, for example, you need to have export licenses for technical drawings and other information, even if you don’t ship physical goods,” Bjorendahl explains. The risks for noncompliance can be severe, ranging as high as U.S.$100 million.

The IVN is working with NextLabs, which has developed a policy engine for controlling how restricted information is accessed and distributed. Organizations can then consistently apply the policies they create using the engine across e-mail and file servers and content management systems.

Through the joint work in the IVN, the export licenses held in SAP GTS Global Trade Services can be leveraged in the NextLabs policy engine to also ensure that technical documentation is distributed in accordance with ITAR restrictions. The NextLabs integration was recently certified for the SAP NetWeaver environment. Along with representatives from IBM’s services unit, the IVN is planning to build a composite application based to extend the current capabilities.

In a third co-innovation project, named Reality, SAP is working with Lockheed Martin to provide a solution for tagging and tracking items throughout the product life cycle – from manufacturing through scrapping – using globally unique serial numbers (IUIDs) and radio frequency identification technology. “Companies will have full traceability of where those UID parts are at any time,” Bjorendahl says.

Customer-led end-to-end solutions
By combining the expertise of SAP, its partners, and its customers, the IVN for oil and gas is providing integrated solutions that address the changing needs of the industry. “From the beginning, we brainstormed with customers through the SAP Oil & Gas Global Industry Advisory Council [GIAC],” says Dr. Holger Kisker, vice president for the SAP Industry Business Unit for Oil & Gas.

The council comprises 17 oil companies, including all major integrated oil companies plus large national and midsize market leaders, such as ConocoPhillips, Holly Corporation, Petrobras, Statoil, and Tesoro. “For SAP, these companies represent the needs of the industry,” Kisker says.

With the help of these organizations, SAP organized, under two broad headings, the topics customers would like to see SAP and its partners focus on. The digital oil field covers upstream activities, while the hydrocarbon supply chain focuses on important topics such as primary distribution, trading, manufacturing, distribution, marketing, and retailing, Kisker says.

ISVs participating in digital oil field collaborations are Accenture, LogicaCMG, Meridium, NRX, and Quorum. Integration solutions for digital oil field applications will cover a wide range of challenges, ranging from exploration and production to operational management concerns like health, safety, and environmental regulations.

ISVs developing hydrocarbon supply chain solutions within the IVN include Implico, KSS, TechniData, TriplePoint, and Vendavo. Their projects address the complexities and volatilities inherent in the industry’s supply chain, including the need for real-time financial valuations and efficient transportation and manufacturing strategies.

ISV members are joined by system integrators Accenture, Hewlett-Packard, and IBM to deliver business and solution consulting services as well as implementation expertise.

Two examples of the many IVN co-innovation projects underway are the solutions being developed with TriplePoint and KSS.
In the TriplePoint project, the GIAC for oil and gas discussed with SAP the need for an integrated commodity trading solution. A focus group was formed to discuss industry needs, prioritize requirements, scope the needed solution, and identify potential co-innovation partners. TriplePoint was selected, and the co-innovation project was launched, with Holly as the customer co-innovation lead and pilot.

The resulting solution delivers on SAP’s enterprise SOA strategy, being based on new enterprise services delivered with enhancement packages 2 and 3 of SAP’s enterprise services bundles. Furthermore, Accenture serves as the systems integration partner to deliver consulting and implementation services for the joint end-to-end solution. As part of the IVN collaboration activities, SAP is working closely with TriplePoint to align business and develop plans and to roll out the joint solution to the market and field resources (at the global SAP Oil & Gas field workshop).

Another co-innovation project involves the ISV KSS. A critical piece of the IVN planning phase is analyzing SAP’s portfolio for the industry and mapping it to the needs of the market. One area identified with customers is price management and optimization to support sales processes with fuel distributors and service stations. After comprehensive market analysis, SAP aligned with KSS, a leading solution provider in this area. Together, they scoped a new enterprise SOA solution and integrated it with SAP’s oil and gas downstream solution. The new solution, known as Rack Price, will be delivered at the end of this year. It has already attracted high interest in the industry, according to Kisker.

The oil and gas IVN does not involve just co-innovation projects; it also fosters collaboration among members. SAP is taking the IVN to a new level that supports multivendor collaboration – bringing additional ISVs together with systems integrators to explore co-innovation with several ISVs. In addition, GIAC member companies are taking on the role of customer advisors to steer and support the IVN strategy, development plans, and projects with dedicated partners.

Other key collaboration activities include Webex online meetings, which provide partners an opportunity to engage with each other and explore their respective solutions. The IVN for Oil & Gas Summit in October brought together IVN, ISV, and systems integration partners to promote network relationships and explore multipartner engagement opportunities, Kisker explains.

Finally, the Business Process Expert community for oil and gas will host roundtables as a channel to support co-innovation topics. Through these closed roundtables, SAP will invite IVN members to provide input to scope and prioritize new development projects and validate solution specifications.

Source: SAP INFO