ERP is evolving as more companies extend systems beyond the enterprise, involving suppliers, partners and customers, in complex processes like supply chain.
SAP is hoping its SAP Business Network, unveiled in June at the SAP Sapphire conference and described as the "network of networks," can unify processes and businesses. A more interconnected economy has clear benefits such as improved collaboration, more efficient processes and better visibility, but there are questions about whether SAP Business Network, which combines three existing SAP networks, will be the one network to realize the vision.
The concept behind the SAP Business Network is sound, according to analysts, but SAP might be getting a little ahead of itself. The pieces that make up the network have yet to be fully knitted together, and, for it to succeed, the SAP Business Network will need to integrate with non-SAP business networks.
The SAP Business Network explained
SAP Business Network is not a new product offering, but a bundling of three existing SAP networks under one umbrella. They are as follows:
- SAP Ariba Network for procurement and supply chain;
- SAP Logistics Business Network (LBN) for transportation management and logistics; and
- SAP Asset Intelligence Network for manufacturing and other enterprise assets via IoT devices.
The business case for business networks is both clear and growing, said Richard Howells, SAP vice president of solution management for digital supply chain.
"It's obvious that there's a need for networked solutions, because the fact is that every company is dealing with lots of other companies at the moment," Howells said. "The [COVID-19] pandemic is highlighting the lack of visibility and the lack of collaboration, so we see business networks as a huge driver of improving business processes in this networked economy."
Processes don't stop at the walls of an enterprise -- they often stretch beyond it, he explained. For example, when an order is placed in procurement, the business process can touch on inventory planning, logistics and shipping, and payments.
"It's about unifying all the information from all the trading partners onto one network, which we're well on the way to," Howells said. "Then we're talking about cross-network business processes. Ultimately, it's about having the business data in one place."
Suppliers on the SAP Ariba Network, which today number around 6.7 million, have been moved to the SAP Business Network portal, he said. There is some overlap between companies that are on both the SAP Ariba Network and the SAP LBN (less so with the SAP Asset Intelligence Network), but how the businesses are using the network is changing.
"It's no longer just the purchasing or buying department, but you also need the maintenance department and the distribution department as part of the network," Howells explained. "There are different people within your company that may need to access the network now as we continue to broaden the scope of the network."
Missing pieces of a true business network
While the three existing networks now share a common interface, the work of integrating the networks together still lies ahead. Right now, the three networks remain siloed, but the roadmap is to have all three networks on one database and share the same vendor list, according to Howells.
Because the three networks don't share the same platform, the SAP Business Network doesn't meet the definition of a true network yet, said Christian Titze, research vice president at Gartner.
A business network has three interconnected layers, according to Titze. The first layer is the network itself, which connects three sub-ecosystems: upstream such as suppliers, contract manufacturers and co-packers; downstream such as distributors, retailers and customers; and services, such as third-party logistics, carriers and data from IoT devices.
The second layer is the applications layer, which includes ERP, planning and procurement. They are usually integrated with workflow in between. The third layer is intelligence, including business intelligence, analytics and AI, which provide analysis, insights, and predictions.
"[A business network] needs to have these three layers in one platform and the value comes with the more you leverage your applications -- both enterprise-centric and multi-enterprise -- not only for you, but your business partners, as well," he said. "SAP has everything, but in a portfolio, not on a platform."
SAP has Elastic Cloud Compute or S/4HANA for ERP, Integrated Business Planning or Advanced Planning and Optimizer for planning, SAP Ariba for sourcing and the LBN for logistics -- but they're not integrated together, according to Titze.
"When SAP tells you they are executing on the vision, it's PowerPoint, it's not reality. It will take some time," he said. "The applications are still supplier collaboration on the Ariba stack, carrier collaboration on the LBN stack, so it's still not clear yet. This is like a transformation journey, because they recognize they have everything, but everything is disconnected."
ERP evolving into network resource planning
The strategy behind SAP Business Network is solid, but it will require a lot of work from SAP and its business partners to be fully realized, according to Joshua Greenbaum, founder and principal at Enterprise Applications Consulting. However, it represents the future of enterprise network processes.
"All the valuable processes in an enterprise are going to start requiring that they traverse partners and customers, supply chains, logistics chains," he said. "There's a huge amount of complexity to the global business world and the best way to deal with it is in some form of a business network, where you leverage the many-to-many connections that can be afforded by that."
Of the enterprise software vendors, SAP is best positioned to pull off the business network vision, Greenbaum said. This starts with the SAP Ariba, which is currently the largest enterprise software business network, and includes the other products in its portfolio which can construct a true business network.
The important thing is that common ERP functions are extending beyond the four walls of the enterprise and, now, must include outside entities like suppliers and customers, he said. "There are a lot of ways in which what we used to think of as enterprise resource planning really becomes network resource planning."
There are also other business networks, and SAP will also need to adopt a heterogeneous approach for the SAP Business Network, Greenbaum said.
"SAP can't succeed as a business network vendor if it requires wall-to-wall SAP," he said. "If you're running Coupa or Kinaxis, you should be welcomed into the SAP Business Network -- that needs to be very explicitly stated. There's a certain amount of general maturity in the heterogeneity model that needs to be achieved in order for this to really work."
SAP pointed out that its LBN has already integrated with external networks, where partnerships include InstaFreight, UberFreight, Project 44 and Shippeo.
The concept of composability, or fitting pieces together from various vendors to form a network, makes sense, Titze said.
"This may be the way to go for some companies: You can use a business network for the network connectivity, then you might use supply chain collaboration from SAP Ariba, and with composability, you could use transportation from Descartes Global Logistics Network or Oracle Cloud Logistics," he said. "The idea is that you will have these services. That's not reality today, but it's the direction it's going."
Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.