Examining SAP Supplier InfoNet (Part 1)

In the early years at Spend Matters, I remember being impressed by the concept of Open Ratings, a vendor that sat between the software and content worlds. Open Ratings' solution attempted to predict whether or not a supplier would remain financially viable based on a combination of financial, credit and related inputs. Although their execution was not always perfect -- and they were held hostage by some of their content providers over third-party data until D&B, one of their major content sources, finally acquired them -- it is clear that Open Ratings was the pioneering solution voice in the supply chain risk management sector.

Today, the original vision of Open Ratings lives on in a new SAP solution, Supplier InfoNet, which takes the same premise of Open Ratings (i.e., combine multiple indicators, in this case operational, demographic, news, and financial data), and layers them on top of opt-in industry social networks built upon the sharing of aggregate data on a multiple tier level. By bringing in today's dynamics of social networking and information sharing (albeit in a controlled, secure manner) into the mix, SAP has taken the concept of Open Ratings to an entirely new level. You will learn more about the details in this multi-part series.

SAP's InfoNet is already in pilot deployment in some A&D and industrial manufacturing companies and, as the next verticals to pursue, SAP believes it is a logical fit with high tech, consumer goods, automotive, and oil and gas manufacturers. As a caveat, the solution fundamentally relies on a networked business model to provide value, so companies with supply bases dissimilar from the industries SAP currently pursues would find little or no immediate value from the network capabilities of the solution, until additional, more relevant, industry data pools are started.

The concept of data pooling across competitors and industries is certainly not new. Companies give trade data (receivables performance information) to providers like D&B, Equifax, Experian and Cortera as part of doing business. Yet data pooling of supplier performance metrics is a relatively new phenomenon, especially the standardization of KPIs across companies to create a baseline view of aggregate operational performance, and trending of a supplier based on a company's own thresholds of good or bad performance -- which is precisely what InfoNet does, but more on this later.

InfoNet has transitioned from a test/beta product inside SAP to a commercial offering in North America. But it's so new that the awareness of what it is capable of is not well known -- even inside SAP. At Sapphire we spoke with people on SAP's Spend Performance, Sourcing (including Supplier Management) and SRM teams who were only tangentially aware of how InfoNet actually worked.

But they (like us) were quite intrigued. Before Sapphire started, we sat down with David Charpie, VP of the Global Business Incubator at SAP (who runs the InfoNet project and has business/P&L ownership) and Vineet Seth, who is running product management and marketing for the offering, to take a detailed look. As part of our discussion, we spent over an hour on a live demonstration. We'll share the results of what we learned in this multi-part post, first covering some product background and later getting into how it actually works.

Charpie and Seth shared with Spend Matters that they see three major value propositions for Supplier InfoNet:

  1. First, it can help organizations benchmark their own supplier performance on a continuous basis in a manner that is anonymized for privacy -- something which should help drive participation, generate a neutral third party point of reference and remove privacy-based legal concerns
  2. Second, it can provide predictive indicators a few months in advance when something is amiss (operationally or financially) with a given supplier and could cause potential supply disruptions, providing, in theory, the maximum possible lead time to take action with the greatest degree of certainty
  3. Third, InfoNet provides visibility into a company's extended supply chain vendor performance, multiple tiers down

It is important to note that companies do not have to run SAP to use Supplier InfoNet -- one of the customers in the beta test is in fact an Oracle shop. SAP goes through an on-boarding process not dissimilar to a spend analysis data classification when loading customers in the InfoNet system. Surprisingly, InfoNet has not had a challenging time getting companies to share information based on the relationships they have with organizations. Relative to Open Ratings, Charpie suggests, "it is quite miraculous how responsive customers are to sharing their data...at the start of the program, companies who said 'we won't share data' were out-numbered more than two to one. Now it is the rare situation where a company feels exposed." In the early days of Open Ratings, this was not the case, Charpie observed.

As part of the InfoNet on-boarding effort, suppliers have the chance to challenge company-provided information (either basic company details or actual past performance data) to make sure the data is accurate. On the buy side, organizations aren't providing sourcing-related information to SAP as part of the InfoNet initiative. They're providing actual, systems-based supplier performance data that comes directly out of ERP/MRP. This sharing of information is a prerequisite to join the Supplier InfoNet network. SAP further enriches the structured information (more on the fields/types later) with unstructured and third party data (from free newsfeeds, blogs, articles to subscription-based and other premium content) to provide an even more holistic view of suppliers and to improve the predictive models. In Spend Matters view, InfoNet has gone significantly further than anything Open Ratings was ever able to accomplish based on its more limited ability to incorporate unstructured data, sentiment analysis (e.g., from articles) into a predictive scoring capability on a multi-tier level.

Stay tuned as we continue to investigate InfoNet in more detail.

Jason Busch and Thomas Kase

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