I’ve just returned from SAP’s 2013 SAPPhire China user conference; with more than 17,000 attendees, it’s still the largest SAP event on the planet. The vendor has recently launched new offerings, like HANA enterprise cloud and extended ERP solutions for new industries; it has also extended its China strategy by announcing SAP Anywhere, a bundle of cloud-enabled mobile CRM services, which it has just begun piloting here.
At the event, clients presented their feedback on SAP services, particularly rapid deployment solution (RDS) services. Ever since their launch two years ago, SAP has extended RDS services to more than 150 software applications. The RDS concept aims to provide everything out of one box; clients buy a bundle of application and implementation services. RDS services have brought tangible benefits to clients that want to quickly start their SAP journey or begin with pilot implementations before going for a full-scale rollout.
However, RDS does not apply to all SAP application implementations; it primarily depends on the client usage scenario. Forrester believes that RDS will not be an attractive choice in a few instances:
Large enterprises using SAP core ERP systems as a mission-critical application. Large enterprises normally make huge investments in these projects. Their primary focus is not on saving time or money; instead, their top priority is ensuring that the project is a complete success and that all functionality is rock-solid: well-developed and thoroughly tested. RDS services, which can cover up to 80% of ERP system functionality, may not be the best choice in this scenario. We’ve seen this happen in China and Southeast Asia time and time again over the past two years.
Chinese manufacturers are repositioning. They’re willing to invest more in improving their core competencies, like R&D and design capabilities, by using outsourcing providers that have successfully served foreign peer companies in the same industry. They must dedicate all their resources — including internal IT systems and solutions like ERP — to meeting this goal.
We recently published a case study on Tagal, a joint venture of ThyssenKrupp Steel Europe and Angang Steel in China. The company was finding it difficult to face up to new business challenges; not only was its infrastructure aging, but its original outsourcing services agreement was constraining business development.
To solve these problems, Tagal changed its sourcing strategy and successfully migrated its ERP system to an Itanium x86 platform to accelerate business processes. The resulting ERP efficiencies enabled employees to process orders and reports twice as fast as before. This has improved Tagal’s relationships with its customers, which are some of the world’s largest automakers. Tagal also reduced its total cost of ownership by 20% in the first nine months alone, primarily due to the simplified sourcing strategy.
How did Tagal achieve these tangible outcomes? It redesigned its service contract and employed three key principles when re-evaluating vendors:
Modifying sourcing governance. Tagal drew on lessons that it learned from 10 years of outsourcing. Its new service provider contract contains more penalty terms; for instance, the provider now must refund the outsourcing fee in any month in which it does not fix two system errors within an agreed time period.
The classic work of Chinese historical fiction “Romance Of Three Kingdoms” describes the history of China after the Han dynasty. This work focuses on three power blocks that fought against each other in an attempt to be the dominant kingdom. After my discussions with many users and vendors at the OpenStack Summit 2013, I see an analogy between these three kingdoms and the evolution of the IaaS market in China as I described it in my report “PaaS Market Dynamics In China, 2012 To 2017” early this year.
Three categories of players are emerging in public cloud market in China, and similar to the Three Kingdoms, these players will fight against each other and collaborate at the same time, accelerating both the adoption and the maturing of cloud solutions in Chinese market.
State of Shu: Amazon Web Services. The king of Shu was the descendant of Han dynasty before the era of the Three Kingdoms; because of his “royal blood,” he had many supporters and followers to fight against the other two kingdoms.
Amazon.com is in a similar situation: It has very good reputation among architects and developers in China. However, Amazon’s promotion activities are lagging. Amazon is trying to expand its cloud territory into Chinese market by building a data center in Beijing and recruiting local personnel. However, its relationship with the government is not as good as Microsoft’s, and Amazon’s ambition to launch AWS in China has been slowed down due to local regulations.
State of Wu: Microsoft Windows Azure and its alliances. The state of Wu is competitive because it has the natural advantage of the Yangtze River, helping it defend against invasion and expand its territory.