Transform Procurement with Integrated Processes

Transform Procurement with Integrated Processes Dr. Marcell Vollmer, CPO, SAP SE #SAPPHIRENOW Public

SAP at a Glance

2015 outlook and path to 2020 Run Simple, simple wins Fast cloud growth, growing highly predictable revenue and operating profit Across 25 industries In 180 countries 2020 ambition 253,000 customers 70+ million cloud users 40+ million on-premise users 74,400+ employees 17.6B revenue full year 2014 (IFRS) 2015 guidance 1.95B to 2.05B Cloud subs (constant currency) 8% to 10% Cloud and software (constant currency) 5.6B to 5.9B Operating profit (constant currency) ambition 3.5B to 3.6B Cloud subs 21B to 22B Total revenue 65% to 70% Support + cloud subs share of revenue 6.3B to 7B Operating profit 7.5B to 8B Cloud subs 26B to 28B Total revenue 70% to 75% Support + cloud subs share of revenue 8B to 9B Operating profit 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 4 Public 4

Future Trends and Innovations in Procurement

Changing business environment increases pressure on companies Economic volatility Volatility in markets Decreased stock valuation Slow economic growth High expense ratio Increasing globalization Expansion into new markets Global process standardization International supply chains Increased off- and near-shoring Greater risk Supply chain disruption Financial risk and fraud Commodity risk More competition Pricing pressures New sources of competition Decreased budgets and spending Regulatory changes Increasing disclosure requirements Country-specific regulations Industry-specific disclosures Accelerating technological change Changing business models Faster innovation cycles Expanding partnerships and channels Use of Big Data for decisions 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 6

Accelerating technological change Business landscape transformation: 2020 is increasingly digital and networked Last 2 years Next 2 years 90% of the world data has been generated 1 40% growth in adoption of business networks 2 End of 2020 By 2020 In 2020 212B things will be connected 3 9B mobile users in the world 4 51% of workloads processed in the cloud 1 ScienceDaily. ScienceDaily, 22 May 2013. 2 Technology Adoption Report: Business Networks, Ardent Partners, 2014. 3 Internet of Things (IoT) 2013 to 2020 Market Analysis: Billions of Things, Trillions of Dollars, IDC, 2013. 4 Statista, 2014. 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 7

Future trends for procurement 3 trends in the market from service to function 1 Value creation for supporting business functions procurement as business value enabler Value creation is more important than procurement savings, which are not hitting the bottom line. Focus on implementing new innovations to deliver business value and drive transition to sourcing services instead of goods. 2 Digital economy business networks to revolutionize sourcing for procurement Use cloud networks to link various platforms and consolidate spend while achieving real-time collaboration. Enable the function to harness the power of predictive analytics to be first to get competitive market insights and drive better business decisions. Use network and analytics to improve working capital and reduce transactional costs by end-to-end process automation including public cross-industry procurement catalog and marketplaces. 3 Use of shared services concepts sourcing factory Rely on intelligent managed service concepts including centralized category management to discover untapped spend (like for small countries) and to increase compliance. 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 8

Future Trends and Innovations in Procurement 1 Value creation for supporting business functions procurement as business value enabler 2015 SAP SE or an SAP affiliate company. All rights reserved. Internal Public 9

Future trends and innovations in procurement Business value enabler value creation The role of a buyer will change significantly as procurement transitions from goods to services. Buyers will be asked to provide solutions to the business and implement new (supplier) innovations that align with strategic objectives and deliver business value. Services Warehouses 3D printing Services not goods Automated ordering Product creation Value creation is more important than procurement savings, which are often not hitting the bottom line. A buyer role needs to advise the business and be a valued partner to focus on strategic sourcing decisions rather than ordering goods or services. Systems will connect to order automatically and monitor status; delivery will be fully automated. 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 10 Public 10

Future trends and innovations in procurement 2 Digital economy business networks to revolutionize sourcing for procurement 2015 SAP SE or an SAP affiliate company. All rights reserved. Internal Public 11

Evolution of procurement towards a strategic function How to explain best business networks in a digital economy? Ariba Network will be the B2B network of the future. Ariba Network combines: Business network spend distribution The social media capabilities of -like shopping marketplace End-to-end automation for all transactions Global capital and operational spending for the Global 2000 are distributed across different categories. SAP s business networks can help companies address all of the spend categories. Source: Spend Categories for Global Top 2000 7% Travel and expenses 46% Contingent labor and services 26% Direct and supply chain 21% Indirect and MRO Transitioning to a fully integrated and automated PO-to-invoice process will be a must in the future to reduce transactional costs and free up resources to focus on value-adding activities in the end-to-end process. 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 12

Evolution of procurement towards a strategic function CPO and CFO value proposition on Ariba Network and catalog of catalogs CPO value Spend Will be utilized to a high extent to realize additional savings (margin impact) PO Increase in overall productivity for procurement to automate purchase orders 100% Compliance and capturing of all information and knowledge on the network Ariba Network provides benefits for both CPO to leverage purchasing power and reduce transactional costs Ariba cloud-based solutions for goods Fieldglass for services Concur for travel CFO to reduce transactional costs by invoice automation SAP can sell to both CPO and CFO! Probably CFO can support getting budget for CPO as he or she benefits with real-cost savings business case Transaction automation on the combined network of Ariba (an SAP company), Fieldglass (an SAP company), and Concur (now part of SAP CFO value Automation Increase in invoice automation within short timeframe SAP: +50% in 12 months Productivity Increase in overall productivity for procurement SAP: +20% in 18 months Invoicing Reduction in procurement costs using cloud solutions from Ariba and the Ariba Network (from 11.5 to 6.7 per invoice) Example: SAP 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 13

Example: purchase order invoice automation and Run Simple Automation of invoice to pay eliminate manual, no value-adding tasks Transitioning to a fully integrated and automated PO-to-invoice process will be a must in the future to reduce transactional costs and free up resources to focus on value-adding activities in the end-to-end process. Manual paper-based process from purchase order to invoice Purchase order to invoice fully automated on Ariba Network Invoice creation in a system Printing Mail, shipping Scanning Manual data entry Purchase order creation and invoice data Purchase order data conversion in invoice Invoice management will change from a paper-based invoice-handling process with manual data entry on two screens to a networked automated invoice solution without manual process steps. Almost all invoices today are getting created by a system (ERP, Word, Excel, and others). Invoice gets printed and mailed. Before the receiving company had to open the envelope, scan the invoice, and either enter the data manually or try to capture the information using an OCR system. 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 14

Sourcing factory Utilize organizational capabilities Intelligent managed organizational concepts are required to manage untapped spend areas or serve very small countries in a compliant way. A sourcing factory model captive or as managed (outsourced) service will expand the reach of procurement organizations in the future. Problem: Strategic spend is managed by global categories or on regional level with strategic and preferred suppliers. Tail spend and spend for small countries (tier 3 countries) are not or partly managed, which leads to missed savings opportunity and noncompliance risk. Solution: Sourcing factory model is an answer to better manage not globally or regionally covered spend. Managed by Global Categories Spend to be shifted to preferred suppliers or into captive / managed service Option 1: Captive Shared Service or Center of Expertise concept Option 2: Oursourced / Managed Services High automation (spot buy, spot quote, esourcing) Sourcing on business networks or based on global supply database to ensure fast and compliant processing of non-strategic spend 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 16

SAP s Evolution of Procurement from Service to Function

Evolution of procurement at SAP towards a strategic function The transformation journey towards Run Simple and business value enabler role Operational Tactical Strategic partner Regional purchasing Procurement operations Global categories Organization Globalization category management Change management People development Business partner leadership People Development and change management SAP SRM 5.0 SAP SRM 7.02 Cloud Processes and systems E2E, P2P, and cloud systems; networks; mobile Today 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 18

Source-to-Pay @ SAP Implementation of a globalized category management organization CPO and business owner for Source-to-Pay Use purchasing power and achieve sustainable savings across all geographies Source-to-purchase Strategic and tactical procurement Purchase Operational procurement Pay Accounts payable and travel and expenses Deliver best-in-class procurement processes and highest possible service levels to internal customers Services Source-to-pay strategy group IT Marketing Facility Mobile Procurement solutions excellence team Request, order, and receive goods and services Perform invoice processing and payment Execute closing and reconciliation Execute pretrip, on trip, and expense entry; auditing Mitigate risk to SAP Be a fair partner to our suppliers > 3.8 billion Spend FY 2014 >710,000 Annual invoices >970,000 Trips 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 19

Evolution of SAP s procurement function Organization source-to-pay, people development and change, processes and systems: cloud only Organization and people Globalization category management Source to purchase Strategic and tactical procurement Purchase Operational procurement Pay Accounts payable and travel and expenses Processes and systems E2E, P2P, and cloud systems; networks; mobile Ariba for goods, Fieldglass for services, and Concur for travel 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 20

Run Simple: real-life examples from GPO @ SAP Ease of use and optimized user interfaces for procurement, analytics, and travel Catalog ordering with Ariba Network Spot Buy (ebay) live ebay-like shopping New SAP Fiori launchpad for approvals live Easy-to-use app Old SRM catalog Old workflows Tablet access enabled NEW catalog with Ariba Network Spot Buy ebay integration (live in U.S. since November) Improve to Run Simple Tablet or smartphone access enabled SAP Fiori launchpad: approval app and desktop version available for all workflows, like shopping cart, shopping cart tracking, access SAP Fiori launchpad Innovate new ideas to Run Simple 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 22

Ariba cloud solutions Strategic and tactical procurement Source to purchase (Strategic and tactical procurement) Ariba Spend Visibility Ariba Supplier Information and Performance Management Ariba Sourcing Procurement dashboards are key to manage the procure-to-pay process and to define sourcing strategies. Rely on the supplier management program on Ariba (SIPM) and implement preferred supplier strategy to consolidate and optimize spend allocation. Utilize purchasing power and highly standardized and automated e- sourcing solution; benefit from e- auctions. Service procurement Catalog Ariba Contract Management Use cloud-based technology to procure and manage the non-employee workforce, incl. contingent workers and services such as statement of work (SOW) projects, offshore labor, and independent contractors. Access Ariba s new catalog for a Google-fast and ebay-like shopping experience. Procurement integrated CMS solution eliminates paper and ink from the creation, execution, and management of any type of contractual agreement. 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 23

Run Simple: real-life examples from Source-to-Pay @ SAP Ease of use and optimized user interfaces for spend visibility on SAP HANA Before After PO and non-po spend aggregated PO spend BW Non- PO spend ERP ERP SRM ERP ERP SRM 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 24

Achievements: source-to-pay automation, business networks, and shared services Streamline entire source-to-pay process Achievements: facts and figures Utilize economies of scale and control through shared services Cut costs through automated data extraction and process automation Create workforce efficiency through streamlined processes including mobile approvals Reduce errors at the source Improve working capital management through better visibility into cash requirements Optimize cash discount utilization including dynamic discounting 3 months Implementation time 268,000 Documents transmitted 20% Productivity gain >4,000 Suppliers on Ariba Network 50% Increase in automation <1B Purchase order value sourced 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 25

Key take-aways on transforming procurement Run Simple and get linked are key success factors for the future Transform to Run Simple Get linked to stay relevant Transform organization to fit future needs Develop people and manage change Implement end-to-end processes and cloud systems to automate transactional processes Use the power of social, supplier, and business networks to get innovations and to deliver solutions to the lines of business 2015 SAP SE or an SAP affiliate company. All rights reserved. Public 26