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SAP's Zencke on RFID, NetWeaver and upgrades

BOSTON -- On the eve of the one-year anniversary of NetWeaver, SAP's integration platform, company officials are traveling the U.S. to brief analysts on the quick evolution of the software.

A second release is due out in mid-2004, according to Peter Zencke, a member of the SAP executive board who briefed analysts here Monday on NetWeaver and SAP's strategy for new technologies such as radio-frequency identification (RFID) and upgrades.

In an interview with SearchSAP.com, Zencke discussed how NetWeaver relates to total cost of ownership, the confusion surrounding mySAP ERP, and the reasons RFID is so hot.

What kind of solutions do you plan to release? We will be releasing a technology layer, which is like the infrastructure...

for RFID. This piece is linked with the ERP supply chain execution layer, the warehouse management layer and the event management part of our supply chain solution. It's a solution which gives visibility of the different products a company may have and which distribution center and which gate the products and parts are at and which supplier and service provider has touched the product and pallet the last time.


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What about coming up with RFID standards. Are we there yet?
I think we have a fairly good set of standard requirements, and if we go through the first 500 customers adopting that, I think that's quite a significant amount of people. If they agree this is the way we should do it, then we create actually a de facto standard. And we are very much interested, and very much committed, to the open standards. Are you surprised by the privacy issues that are being raised in regard to RFID technology?
No, not at all. This is what I always told people. Don't go too much into the consumer area with this technology, because that's where the privacy issue comes from. If you are just tagging pallets, then there is no privacy issue. I think there has to be a general concern. There is some threat for people and that is the threat of the unknown. I think, if we would like to use technology in business, then we have to anticipate privacy concerns and not to create these concerns. Analysts are saying that the RFID chip is too expensive now. At what cost will the technology be beneficial for use?
It is something like 60 cents these days. We do have vendors that say the price is going down to 10 cents or 20 cents someday in the near future. So I think the cost equation is relative. Right now, the technology is ready for a high-value product. Where you could start today is with marking pallets. If you go down to the cases, and to the individual products, the technology is not cost-beneficial today. Our advice would be to start with the most obvious thing and try to get returns on the very high level, on the pallets, and with that experience then say when are you ready to go down to the next level as the prices go down. What did you learn from that customer meeting?
There was a big interest, mainly in retail -- to use it for their adaptive supply chain in the stores. Indeed, what we have done in Germany is to open up a so-called Future Store with key European retailers. The company, Metro, built a new store from scratch, with every technology you can think about, including RFID, just to get the experience of what works and what doesn't work, and which things are used by customers and which [things] customers don't like that much. The clear finding of these pilots was that it is really the inbound processes where RFID can be best utilized. It is more with the logistics execution, and the replenishment process. That's where the real efficiency is. What role has SAP played in the evolution of RFID technologies?
We have quite a nice history, including a research history that started four years ago out of our labs in Tokyo. [Japanese technologists] are quite advanced in this kind of mini-IT solution. So we became aware of this technology, and three years ago our first prototype solutions in the RFID environment were released for logistics. It received interest, but people thought it was way in the future. Then we started last year with our first pilot. Based on this pilot and the real evaluation of the technology, we had a customer meeting in March of this year to determine which business applications should be affected. Is there still confusion out there for customers looking at going to either Enterprise or mySAP ERP?
I think there still is some need for clarification. We had a customer meeting in the last two weeks, and there were customers that thought that, if they chose mySAP, then they would have to buy NetWeaver in addition. We were just surprised to hear this, and we reiterated that NetWeaver automatically comes with the mySAP solution.

So it's just that we have to make this visible to everybody. Those that are closer to SAP, they know this, but there are some rumors in the market. We have to educate our customer base about the real value proposition of SAP. The more we talk, the more we get real exciting feedback.

Do you think that customers are convinced right now that NetWeaver delivers ROI?
There are two models. One model is selling and positioning NetWeaver just as a technology platform. Then it's a technology product, which is competing in certain markets against other alternatives. But, today, we are not just selling technology; we are selling technology as part of the solution of SAP.

There is no additional price tag for NetWeaver just as the platform for the SAP customers running mySAP. If you're an R/3 customer, you can buy the NetWeaver platform, but you get the platform as part of the product offer if you go the mySAP (mySAP ERP or mySAP Business Suite) way.

Can you explain more about the next release of NetWeaver?
It is the latest and best of our platform components. They are assembled into one system environment where we have worked out, really, the synergies between the different components. We have eliminated double functions, so that if there's one logical function, then it resides once and only once in that system environment. It runs much more integrated now and, like in the application area, one of the focus areas is total cost of ownership, to make the implementation, the upgrade of NetWeaver, in a box.

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