Columbus (3) found that within the customer service arena, one CRM capability in particular demonstrated the greatest impact on profit improvement -- customer service execution.

Integration into Overall Marketing Strategy

SAP seeks to improve global campaigns' effectiveness at generating qualified sales leads, and to do so at lower cost per lead and greater speed over the Internet. To accomplish this SAP conducts an internal evaluation of its Marketing practices and uncovers the following problems during one of its marketing audits:

Regions often choose irrelevant communication tactics for the campaign goal or target customer and these tactics often end up on specific countries' websites.

Regions may sequence communications and target interactions ineffectively.

Regions often fail to share best practices across borders, leading to repetition of common mistakes.

Regions may experience difficulty translating campaign themes into local marketing messages, leading to globally inconsistent messages.

Moreover, Central Internet Marketing finds that regional groups spend time and resources planning their own campaign strategies, with some groups conducting effective, efficient campaigns and others using ineffective campaign designs and messages. As a result of its internal evaluation, SAP executives conclude that the firm's current process for executing global campaigns allows for wasted resources and would prove more globally effective if Central Internet Marketing provided local marketing groups with standardized campaign planning tools.

As a result of these many challenges, SAP's Central Internet Marketing determines that standardizing many campaign processes could allow regional internet marketing groups to improve overall campaign quality, performance, and efficiency, leading to lower campaign costs and better ROI. As a first step toward standardizing these processes, Central Internet Marketing surveys regional groups' biggest challenges with regard to executing campaigns.

Next, Central Internet Marketing works with regional marketing representatives to identify leading regional and industry marketing practices for overcoming these challenges. Central Internet Marketing leverages these findings to create campaign execution guidance tools or campaign architectures and other campaign facilitation tools. Once Central Internet Marketing refines the tools, it then houses the architectures, along with the tools, in a central, internal portal to ensure that regional groups around the world are able to conveniently access the adaptation toolkits. Thus the campaign guidance tools not only facilitate and standardize more effective campaign execution, but standardize planning to ensure more efficient marketing spend. Figure 4 shows the process by which SAP Central Internet Marketing accomplishes this level of coordination.

Figure 4: Coordination of SAP Central Internet Marketing Across Regions

Source: LWC Research (14)

After seeking and leveraging regional input, SAP creates core campaign architectures -- decision trees that regional groups use to inform application of global campaigns to their markets by guiding their communications channel selection. The architectures establish standard procedures with embedded best practices for regions to follow in order to ensure consistency in design and adaptation, leading to improved performance and more efficient use of marketing resources. The architectures guide marketing groups to choose the type and sequence of marketing communications based on campaign circumstances and target customer interactions. Figure 5 shows an SAP go-to-market architecture that is common across geographic and product regions. The construction of these architectures is the foundation of how the company completes integrated marketing strategies.

Figure 5: SAP's Approach to Creating Go-to-Market Architectures

Source: LWC Research (14)

Technical Infrastructure Required

SAP understandably has moved aggressively in the direction of adopting their own Services-Oriented Architecture (SOA) of SAP NetWeaver. The basis of SOA architectures is the ability to integrate disparate systems together and provide the integration and coordination across the extended internal and external network of suppliers, buyers, and customers. SAP has actively promoted their NetWeaver platform specifically in this area, and their adoption internally is focused on how to ensure the content on their websites, internal Intranets, product brochures and all other forms of communication are consistent. Further, SAP looks to use their SOA platform to streamline their entire marketing and customer strategies. The move toward customer-driven communications processes requires the ability to build and adapt channel-specific, product-specific, and customer-specific order flows quickly without an army of developers creating custom code.

Figure 6, Services Oriented Architecture Hierarchical Model.

Services Oriented Architecture Hierarchical Model

Source: LWC Research (18)

Role-based and contextual personalization is where the Internet-based strategies reside in this model. Notice the depth of integration necessary to make any Internet-based strategy work successfully. While this model is worthy of an entire paper unto itself, the gist of it is that for any Internet strategy to be successful, there needs to be a very strong level of coordination and synchronization across all systems of record and content.

Data Acquisition, Management and Use

What is emerging from SAP's approach to handle data acquisition, data management and its...

The approach SAP is taking specifically focuses on Enterprise Content Management (ECM).
Figure 1, ECM Framework, defines the it architecture that SAP is relying on in conjunction with its multi-layered model for handling their SOA platform.

Figure 1: Enterprise Content Management Architecture

Source: (Murphy 4)

The core building blocks of this framework include the presentation and client layers, where web-based applications aligned with the needs of all departments in SAP and specifically those serving customers. The need for synchronization across Platform, Storage and Infrastructure and Integration areas of this framework dictate the speed and accuracy of responses to all users of the system. Thinking of this framework as the foundation that the specific processes that all divisions of SAP must with to serve customer needs.

Evaluation of Goals

The following table shows the key metrics that SAP uses in evaluating the performance of its Internet and Integrated Marketing Strategies globally.

Areas of Measurement

Baseline: What is Measured

SAPs' Accomplishments

Company-specific

Project costs and expenses

Use as a baseline for defining ROI

Number of orders per year

Determine configuration's impact on inventory turns

Current software inventory and costs

Software Inventory turn savings

Customer Data

Lifetime cost per customer; avg. deal size by customer

Sales

Order cycle time

Order cycle times reduction of 35% or more recorded with mftrs contacted

Cost of Sales

Days Sales Outstanding reduction from 55 to 23 days on average

Cross-sell and up-sell revenue

Increase of 46% on aggregate

Average sales price per order

Increase from 7% to 29%

Quote and Order

Average costs to complete an order

91% reduction in cost per order

Special Pricing Requests

Over 92% ROI on automating Special Pricing Requests

Bad or incomplete orders

Incomplete order reductions of 30%

Customer Service

Number of customer complaints

89% reduction in cost of simple requests

Revenue lost to churn

69% when cross-selling is used with quote-to-order

Number of calls on order status

Median level of 15,000 per week to 200

Warranty and Returns

Reduction in warranty cost on customized products

14% reduction at a minimum

Labor cost reductions

Decrease order re-work from 18% to 1%

Social and regulatory issues

Foremost in SAP's efforts to maintain compliance with regulatory requirements is the need to stay in compliance with the many government initiatives in the nations its serves globally. The Sarbanes-Oxley Act of 2002 is by far the most taxing and time consuming for the company to stay in compliance with and has become the most major regulatory issue the company is facing.

Four sections of Sarbanes-Oxley affect SAP specifically:

Section 302: Corporate Responsibility for Financial Reports. Requires that firms audit, verify, and take corrective action to make sure that their financial data has a high level of accuracy and transactions are ACID-compliant.

Section 404: Management Assessment of Internal Controls. By far the most well-known of the sections in the SOX Act, section 404 calls for support for internal controls that are auditable by a third party. This section gets the most focus because it's pushed most often by accounting firms that sell auditing services. What's most interesting about Section 404 is the fact that liability for reporting accuracy also carries forward to outsourcers who are contracted to complete this work.

Section 409: Real-Time Issuer Disclosures. This section defines how quickly a company has to report a material event to the public on a rapid and current basis. Many analyst firms say that the rule is 72 hours or less, and define a material event as any task that has a lasting financial impact on a firm. There's considerable debate about just what is and isn't a material event today -- and the fact that synchronization between databases is at the heart of reporting material events throughout a company.

Section 802: Criminal Penalties for Altering Documents. Focusing on the requirement of retaining records and defining policies for archiving data, this section has the hardest impact on it, and what's most interesting about this specific area of the Act is that it's not prescriptive, just instructive. This is a major difference for any it team working on SOX compliance -- the Act itself doesn't tell you how to do this, but what level needs to be done.

Strengths, Weaknesses, Opportunities and Threats

SAP has been successfully been able to extend an initial strength in their core order management and ERP applications into an entire series of application areas including Customer Relationship Management (CRM), Supply Chain Management (SCM0, Supplier Relationship Management (SRM), and many other application areas that are collectively known as the ERP extensions marketplace as defined by AMR Research. The following are the key strengths, weaknesses, opportunities and threats that SAP faces in 2007 and going forward:

Strengths

The acknowledged market leader in enterprise applications. As many manufacturing and services companies alike seek to…