As explained in Applications Giants Bolster Their Pricing Management Capabilities in retail, pricing and profit optimization are analytic applications that analyze demand patterns and optimize pricing by each stock-keeping unit (SKU) by selling location in order to optimize revenue and gross margins. In a bid to meet the growing demands of the price management market, SAP has entered another partnership, this time with Vendavo. The benefits SAP will gain from this partnership are similar to those previously held by SAP—which have often resulted SAP acquiring its partner. Past partnerships-turned-acquisition have included TopTier and TopManage for a portal and small business applications, respectively (see SAP Acquires TopTier to Further Broaden Its Horizons); A2i for product content management (PCM) and master data management (MDM) capabilities, see SAP Bolsters NetWeaver's MDM Capabilities; Part Four: SAP and A2i); and Lighthammer to deliver enhanced connectivity between the plant floor and the enterprise (see Has SAP Nailed the Plant Level Leadership with Lighthammer?).
Part Three of the Applications Giants Bolster Their Pricing Management Capabilities series.
Vendavo has long been a strategic marketing and development partner of SAP. It has an industry-centric pricing product, which is delivered as an SAP xApp-like composite application. Consequently, the SAP and Vendavo product roadmaps are jointly developed and synchronized, and both vendors are collaborating with customers to avoid duplicating effort and overlapping functionality, and to provide more seamless integration.
Through this partnership, SAP immediately gains workflow-based price execution capabilities, and both vendors have plans to jointly expand into price optimization. In addition to remedying the performance and scalability of embedded Vendavo solutions (currently, the 32-bit Vendavo product architecture limits the historical data size that customers can import to evaluate the transactions' profit) there are other improvements reportedly in the works. For example, the ability to handle multiple pricing waterfall definitions for different business units, in a single instance of product, is also being improved.
Furthermore, a high percentage of Vendavo clients are also SAP clients, which should help SAP manage their expectations. Additionally, the improved price execution functionality should make SAP more competitive in non-SAP environments too. SAP has a solid native price execution functionality for administering prices once they are determined, but has no optimization functionality and only limited enforcement capabilities.
For an extensive discussion of the issue of pricing management see The Case for Pricing Management and The Rise of Price Management.
Also see The Retail Battleground for Pricing Management for further discussion of the justification for pursuing the acquisition strategy.
Although the price enforcement functionality is largely based on analytics and workflow, which are both provided by the SAP NetWeaver stack, developing the pricing know-how seemed apparently daunting even to the mighty SAP. Reseller deals are unusual for SAP, which usually prefers to develop its intellectual property in-house. The only similar deal that comes to mind would be the agreement with Virsa for the US Sarbanes-Oxley Act compliant software (see Joining the Sarbanes-Oxley Bandwagon; Meeting the Needs of Small and Medium Businesses). It might be interesting to note that SAP has just recently acquired Virsa.
SAP has repeatedly stated that when its customers ask it to incorporate new functionality into its product suite, the vendor will consider making partnerships or acquisitions to meet these needs. Although that approach might sometimes conflict with its strategy to attract a vast independent software vendor (ISV) development community within the NetWeaver environment, it is nonetheless quite clear that SAP is dedicating a significant amount of resources to the NetWeaver concept, since what drives SAP is the desire to sell NetWeaver licenses, and its portal and integration technology.
But, the competition is not going to sit still and wait for Vendavo and SAP to deliver their algorithmic price optimization capabilities, especially for specialty chemicals customers whose needs are growing in this area. There are many competitors out there, but only some have broader price management solutions that do not require harrowing customizations and claim to have credible customers in the chemical industry. Of these are PROS Pricing Solutions, pVelocity, Metreo, and Zilliant.
Part Three of the Applications Giants Bolster Their Pricing Management Capabilities series.
Vendavo has long been a strategic marketing and development partner of SAP. It has an industry-centric pricing product, which is delivered as an SAP xApp-like composite application. Consequently, the SAP and Vendavo product roadmaps are jointly developed and synchronized, and both vendors are collaborating with customers to avoid duplicating effort and overlapping functionality, and to provide more seamless integration.
Through this partnership, SAP immediately gains workflow-based price execution capabilities, and both vendors have plans to jointly expand into price optimization. In addition to remedying the performance and scalability of embedded Vendavo solutions (currently, the 32-bit Vendavo product architecture limits the historical data size that customers can import to evaluate the transactions' profit) there are other improvements reportedly in the works. For example, the ability to handle multiple pricing waterfall definitions for different business units, in a single instance of product, is also being improved.
Furthermore, a high percentage of Vendavo clients are also SAP clients, which should help SAP manage their expectations. Additionally, the improved price execution functionality should make SAP more competitive in non-SAP environments too. SAP has a solid native price execution functionality for administering prices once they are determined, but has no optimization functionality and only limited enforcement capabilities.
For an extensive discussion of the issue of pricing management see The Case for Pricing Management and The Rise of Price Management.
Also see The Retail Battleground for Pricing Management for further discussion of the justification for pursuing the acquisition strategy.
Although the price enforcement functionality is largely based on analytics and workflow, which are both provided by the SAP NetWeaver stack, developing the pricing know-how seemed apparently daunting even to the mighty SAP. Reseller deals are unusual for SAP, which usually prefers to develop its intellectual property in-house. The only similar deal that comes to mind would be the agreement with Virsa for the US Sarbanes-Oxley Act compliant software (see Joining the Sarbanes-Oxley Bandwagon; Meeting the Needs of Small and Medium Businesses). It might be interesting to note that SAP has just recently acquired Virsa.
SAP has repeatedly stated that when its customers ask it to incorporate new functionality into its product suite, the vendor will consider making partnerships or acquisitions to meet these needs. Although that approach might sometimes conflict with its strategy to attract a vast independent software vendor (ISV) development community within the NetWeaver environment, it is nonetheless quite clear that SAP is dedicating a significant amount of resources to the NetWeaver concept, since what drives SAP is the desire to sell NetWeaver licenses, and its portal and integration technology.
But, the competition is not going to sit still and wait for Vendavo and SAP to deliver their algorithmic price optimization capabilities, especially for specialty chemicals customers whose needs are growing in this area. There are many competitors out there, but only some have broader price management solutions that do not require harrowing customizations and claim to have credible customers in the chemical industry. Of these are PROS Pricing Solutions, pVelocity, Metreo, and Zilliant.
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