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Pricing Methodology – Choices?

SAP Case Study: Pricing and Packaging Strategies Improving Customer TCO by moving from Components to Suites Richard Yim Director, Product Marketing “Powered by SAP NetWeaver” Program. SAP NetWeaver – Platform for Changing Times. The Decision – Suite vs. Components.

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Pricing Methodology – Choices?

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  1. SAP Case Study:Pricing and Packaging Strategies Improving Customer TCO by moving from Components to SuitesRichard YimDirector, Product Marketing“Powered by SAP NetWeaver” Program

  2. SAP NetWeaver – Platform for Changing Times The Decision – Suite vs. Components Pricing Methodology – Choices? Pricing for Software Partners…….the ISV model

  3. SAP NETWEAVEROpen Integration & Application Platform Platform for Changing Times

  4. Change mgmtand processbuild time(incl. IT) Product lifecycles Processexecution time THE PREREQUISITE FOR FUTURE GROWTH FUTURE GROWTH DEPENDS ON YOUR ABILITY TO CHANGE Years Months Weeks Days Hours Minutes 1900s 1920s 1940s 1960s 1980s 1990s 2000s Source: Gartner Inc.

  5. Turning Revolution Into Evolution Business Requirements Adaptiveprocesses Enterprise Services Architecture SAP NetWeaver Web Services  Extend Scalable processes 3-Tier Client/Server R/3 Basis Client/server Replace X Integrated processes Mainframe Arch. ABAP Mainframe Technology Advances

  6. SAP NETWEAVERPlatform for Changing Times The Packaging Decision….Suites or Components

  7. CONSOLIDATE COMPOSE OUT-TASK INSOURCE SCALE INVENT RETIRE BUSINESS IS NOT A ONE WAY STREET NEW I.T. CAPABILITIES REQUIRED FOR THIS EVOLUTION COREFocus: Differentiation CONTEXTFocus: Productivity INNOVATION STANDARD-IZATION MissionCriticalActivities INVENTION COMMODI-TIZATION Enabling Activities Courtesy to G. Moore’s “Living on the fault line”

  8. ENABLING A NEW ROLE FOR I.T. FROM INFORMATION TO PROCESS INNOVATION Information Technology Process InnovationTechnology UI UI UI Composite Application Functionalcomponents SAP NetWeaver DB DB • Function automation • Heavy duty programming • Database, messaging • Multiple closed app platforms • Inflexibility, high TCO • Process innovation • Model-driven development • Composites, services • One open composition platform • Flexibility, business value

  9. PLATFORM FOR BUSINESS PROCESS INNOVATION A BUSINESS PROCESS PLATFORM EMERGES THATCOMBINES APPS FUNCTIONALITY AND TECHNOLOGY Custom composites COMPOSITEAPPS DRIVEPROCESS SAP and Partner xApps SAP composites ENTERPRISESERVICES SAP NetWeaver BUSINESSPROCESSPLATFORM EnterpriseServicesRepository Partner &Custom services SAP EnterpriseServices Businesspartner Legacy 3rd party

  10. Where SAP is today with NetWeaver? 1000 NetWeaver reference Customers

  11. SAP NETWEAVERIN 2004 5 Key Learnings that drive pricing

  12. Flexibility is keyfor growth and survival Web services provide flexibility,but are not enough A business process platformemerges and providesEnterprise Services A huge eco-systemdevelops around it Evolving business needs require tighter component integration: Pricing and Distribution Strategies for NetWeaver? • Usage based pricing to promote adoption • Integration engines licensed only when needed • Departure from component-based pricing toward perceived-value pricing • Suites reduce complexity of integrating required components • JP Morgan coins “Applistructure” model….what does that mean for customers?

  13. Large customers tend to need the same things SAP CUSTOMERS’ MOST WANTED SCENARIOS Better analytics& reporting Custom AppDevelopment PortalCockpits Web servicesenablement ManageMaster Data A2A and B2Bintegration hubs Build a know- ledge network CompositeApplications ExtendingR/3

  14. SAP NetWeaver™ PEOPLE INTEGRATION Multichannel access Portal Collaboration INFORMATION INTEGRATION Bus. Intelligence Knowledge Mgmt Master Data Mgmt Composite Application Framework Life Cycle Mgmt PROCESS INTEGRATION Integration Broker BusinessProcess Mgmt APPLICATION PLATFORM J2EE ABAP Hardware, OS and DB Abstraction SAP NETWEAVER 2004 Open Integration andApplication Platform • 1IntegratedPlatformSynchronized releases • 1 FoundationWeb AS 6.40 • 1 PackageCoherent, rapidinstallation process • 1 Set of scenariosIntegrated components • Available to all customers

  15. SAP NetWeaver Powers mySAP Business SuiteAdaptive Business SAP NetWeaver™ mySAPSRM mySAPSCM PEOPLE INTEGRATION Multichannel accessPortal Collaboration Strategic Sourcing INFORMATION INTEGRATION Knowledge MgmtBusiness Intelligence Master Data Mgmt PROCESS INTEGRATION Integration BrokerBusiness Process Mgmt Demand/ Source of Supply SupplierEvaluation APPLICATION PLATFORM J2EE ABAPDB and OS Abstraction SRMBackbone SCMBackbone 3rd partySolution SAP R/3

  16. POWERING ALL SAP SOLUTIONS mySAP ERP, mySAP Business Suite, SAP xApps, … mySAP ERP 2004 mySAP SRM 2004 SAP xApp Product Definition

  17. SAP NETWEAVEROpen Integration & Application Platform Pricing MethodologyChoices

  18. Factors Affecting SAP NetWeaver Pricing Objectives Costs SAP’s Market Profile Legal Constraints Pricing Plan Competitors Customer Attitudes Potential Competitors Differentials

  19. Price Setting for new Products 1. Competitor Prices And prices of alternatives High Price Low Price No profit atthis price 2. Costs or Business Model No demand at thisprice 3. Customer assessment of unique Product features vs. platform Components $ Tools $ engines $ Business Processes IT Scenarios $

  20. SAP Install BaseMarket Share“Applistructure” Perceived-Value Pricing Method More value than alternatives Identify Customer Value Drivers (Differentiation, Innovation drivers) Customer Decision-Making Process <Price Sensitivity> SAP Customers ISV Community SI Community • SAP must deliver value promised • Customer must perceive value Costs<not discussedhere> Influencing Factors • As platform for SAP Applications • No Charge for mySAP Suites • $$ 3rd party or external integration • $$ Legacy SAP Systems (R/3) • $$ Runtime for ISVs Alternative Platforms or components Pricing for a Business Process Platform? Objective Demand costs Competition Method Final Price

  21. SAP NETWEAVER PRICING IN 2004 THE 3 WAYS TO LICENSE SAP NETWEAVER • As part of the mySAP named user license • Extend and integrate mySAP solutions For new and existing mySAP customers A) • Through separate NetWeaver users • Extend and integrate R/3 based solutions For R/3 customers,who choose to notupgrade to mySAP B) • Processor-based option • Covers technology platform only Runtime for stand-alone developmentor 3rd party software C)

  22. SAP NETWEAVER PRICING IN 2004 C) STANDALONE OR 3rd PARTY DEVELOPMENT Non-SAP Any Enterprise Portal Business Intelligence Mobile Infrastructure Web Application Server Developer/ProfessionalNetWeaver design time SAP NetWeaver eXchange Infrastructure Master Data Mgmt 3rd Party Adapters Internal integration External integration Firewall SAP NetWeaver runtime use right included in CPU license Requires extra SAP NetWeaver licenses (engine & user pricing)

  23. So…..did the packaging and pricing strategy work?

  24. 281% ROI43% TCO Red. 586% ROI 308% ROI 25% TCO Red. 453% ROI 362% ROI Move Customers to Sustainable Cost Structure REDUCE TCO AND ENABLE INNOVATION on NetWeaver and TCO… “The business case for SAP NetWeaver: lower total cost of ownership” “It is possible that as much as 25% of the cost of new infrastructure technologies purchased each year can be eliminated by deploying SAP NetWeaver.” on NetWeaver and TCO… • “A SAP survey of 200 customers found that SAP deployment reduced costs in three areas:integration through the use of NetWeaver components, consolidation of the IT landscape and the implementation of best practices using product functionality.” Source:

  25. Demand for SAP NetWeaver ‘04 Thousandsof Customers with existing releases of SAP NetWeaver components Mass-ShipmentNOW AMR Report, May 2004: “SAP NetWeaver: Not if, but when” JP Morgan, September 24, 2004: “Best positioned for rise of Applistructure” EverySAP Solution will be built on SAP NetWeaver Morgan Stanley Survey : “33% of SAP customers are planning a NetWeaver projects in next 12 months” Hundreds of Ramp-Up customers - demand exceeds supply

  26. Strong Partner Community ADDING MORE VALUE TO SAP NETWEAVER Poweredby SAPNetWeaver Partner coderunning onSAP NetWeaver P N Certifiedfor SAPNetWeaver Partner solutionintegrated withSAP NetWeaver P N SAPService &TechnologyPartners

  27. è Public Web: www.sap.com SAP Partners: www.sap.com/partners/ è Related SAP Education Training Opportunities http://www.sap.com/education/ http://www.sap.com/partnerportal/education/ Further Information

  28. Questions? Q&A

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