A Project Report on
“Cloud Procurement� Submitted in partial fulfillment of requirement for the award of the degree of Master of Business Administration
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Certificate
This is to certify that the project report on “Cloud Procurement� conducted at Hubwoo submitted in partial fulfillment of requirement for the award of the degree of Master of Business Administration
XYZ Institution Guide Signature & Seal of Head of Institution
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Acknowledgement It is said that the world is something different on the paper and in reality. And this something I realized in eight weeks of my summer training program. The knowledge that I gained from the text is useful only if we implement it in practical life. The project was one such experience where I got to implement what I had read in books. The project “Cloud Procurement� has been very extensive. I am feeling very overwhelmed and privileged to present the report that is my first work in the corporate world. Many people contributed to this project and it gives me immense pleasure to express my deepest gratitude to all those who gave me constructive suggestion, guidance and support. In particular, I would like to thank Mr. XYZ (MD, Intersources India Pvt. Ltd.) for giving me the opportunity to do my summer training project in his esteemed organization and also for his encouragement and support through out my tenure. I have a great pleasure in thanking all the faculty members as well for their generous help in this project. Finally, I would like to thank all the writers and authors whose work has been mentioned and referred to in this project.
Urvashi Taneja
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Declaration
I hereby declare that the Project Report conducted at Intersousces India Pvt. Ltd./Hubwoo submitted in partial fulfillment for the requirement of the degree of MASTER OF BUSINESS ADMINISTRATION To XYZ University, New Delhi has been carried out by me. This project report is an authentic record of my work carried out under the guidance of Mr. XYZ (Industry Guide) and Mr. XYZ (Institution Guide). It is further declared that the report has not been submitted for the award of any other degree/ diploma/ fellowship.
Place:__________ Date:__________
XYZ
Executive Summary 4
This project enlightens on the increasing trend of ‘Cloud Procurement’. The report involves the study of the Intersources/Hubwoo’s cloud procurement solutions. During the training period, I worked with the team on their major customers. The scope of my project involves the trends in cloud computing the intended uses and reasons for adopting and implementing cloud-based solutions. I have tried to bring out the importance of adopting Cloud Computing for the companies existing in the market. Business models and the IT solutions that make them possible have become more complex in recent years. With the introduction of cloud computing, these complexities will become even greater. In order to manage this new environment, a higher degree of collaboration will be required across numerous parties – internal, cloud computing vendors, partners, suppliers, and customers. In addition to increased complexity, there are many unique challenges associated with cloud computing. In a recent survey one of IT executives with cloud computing initiatives underway, the most commonly cited challenges included security, visibility, control and managing service level agreements (SLAs) etc. In this report I have covered the steps that can be undertaken to mitigate these challenges and improve the overall success of your cloud computing solutions.
About the Company Intersources India Pvt. Ltd is a part of the Hubwoo group of companies. Hubwoo is a global leader of On Demand electronic procurement solutions, services answer supplier relationship management. Intersources provide e-sourcing and e-procurement services to organizations worldwide. Its services include technology advice; spend data management, sourcing, and contract and supplier performance management, as well as solutions implementation and configuration, and change and adoption management. Intersources was found in 2003 and as of August 2007, Intersources operates as a subsidiary of Hubwoo, which is a France based company.
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Hubwoo is a provider for on-demand supplier relationship management solutions, which allow the Company’s clients, such as Dow Chemicals, Honeywell, Hershey, EDF, Nokia and Shell, to automate purchase and procurement processes, connect with suppliers, access customized electronic catalogs and execute electronic transactions. The Company manages a Business to Business E Procurement Community. Hubwoo has technological partnerships with SAP and IBM. The company also has offices in Belgium, United Kingdom, Germany, Netherlands, Houston, Chicago, Philippines, and India.
Chapter 1 – Introduction and Objectives
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1.1 Introduction to Cloud Procurement The main objective of a company’s IT organization should be the enablement of business activities that create true and measurable value. This is achieved through orchestrating and streamlining business processes. As simple as this may sound, making this happen has become very complicated. Managing a business and the technologies that keep it running is very complex. As a result, companies tend to have a narrow specialization built on their core competencies. This means it is necessary to have many partner organizations, both business and IT, in order to deliver end-toend services or products that are valuable to customers. This is generally referred to as a “business ecosystem”. Business ecosystems are not new and have existed since mankind first began trading. Since the advent of the computer and telecommunications, companies have been using IT to manage these relationships and to integrate business processes along with information flows. The previous three IT waves used for integration were centralized computing, distributed computing (client/server), and networked computing. The fourth wave, which may include some or all of the previous three waves, is cloud computing or cloud procurement. What is Cloud? •
Cloud : The Universe of all Web Services
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Definition A cloud is a pool of virtualized computer resources. A cloud can: • Host a variety of different workloads, including batch-style back-end jobs and interactive, User-facing applications. • Allow workloads to be deployed and scaled-out quickly through the rapid provisioning of Virtual machines or physical machines. • Support redundant, self-recovering, highly scalable programming models that allow workloads to recover from many unavoidable hardware/software failures. • Monitor resource use in real time to enable rebalancing of allocations when needed. A cloud is more than a collection of computer resources because a Cloud provides a mechanism to manage those resources. Management includes provisioning, change requests, reimaging, workload rebalancing, deprovisioning, and monitoring
Procurement is the acquisition of appropriate goods and/or services at the best possible total cost of ownership to meet the needs of the purchaser in terms of quality and quantity, time, and location.
What is "Cloud computing"? Cloud computing is using the internet to access someone else's software running on Someone else's hardware in someone else's data center. It is a style of computing in which IT-related capabilities are provided “as a service”, allowing users to access technology-enabled services from the Internet ("in the cloud") without knowledge of, expertise with, or control over the technology infrastructure that supports them. An emerging computing paradigm where data and services reside in massively scalable data centers and can be ubiquitously accessed from any connected devices over the internet. Cloud
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computing environments support grid computing by quickly providing physical and virtual servers on which the grid applications can run. •
IaaS - Infrastructure as a Service. This is the idea that someone can provide the technical infrastructure for your application such that you don't have to worry about specifying what kind of hardware you want or what is the machine name of the servers you are running on? Infrastructure is provided to a given specification, and you can use it without having to worry about owning specific machines. In essence you can rent someone else's hardware by the minute, hour or month.
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PaaS - Platform as a Service. This is the idea that someone can provide the hardware (as in IaaS) plus a certain amount of application software - such as integration into a common set of programming functions or databases as a foundation upon which you can build your application. Salesforce.com offers Force.com - which comes with not only the infrastructure bit but also a programming language, and the ability to leverage the Sales force application hooks to add on to what already exists - or to build something completely new. It's a platform - hardware plus some non-functional software.
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SaaS - Software as a Service. This is the idea that someone can offer you a hosted set of software (running on a platform and infrastructure) that you don't own but pay for some element of utilization - by the user, or some other kind of consumption basis. Here you don't have to do any development or programming, but you may need to come in and configure the (very flexible, configurable and sometimes customizable) software. You don't have to purchase anything. You just pay for what you use.
These are the 3 most common "aaS" options you'll see. They aren't the only ones though. As this industry matures, many more kinds of aaS options are coming on line. They all fall under the "cloud computing" category, and share the same basic features, as a result: •
You don't have to worry about buying anything
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You pay for what you use
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You aren't on the hook to operate it
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Why cloud computing? Cloud Architectures address key difficulties surrounding large-scale data processing. In traditional data processing problems faced are: 1. Cost 2. Scalability 3. Flexibility 4. Availability 5. Portability 6. Collaboration 7. Enable new stuff that we couldn't do before! Clouds - the next evolution of hosting
Cloud Architectures solve such difficulties.
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Applications built on Cloud Architectures run in-the-cloud where the physical location of the infrastructure is determined by the provider. They take advantage of simple APIs of Internetaccessible services that scale on demand, that are industrial-strength, where the complex reliability and scalability logic of the underlying services remains implemented and hidden inside-the-cloud. The usage of resources in Cloud Architectures is as needed, sometimes ephemeral or seasonal, thereby providing the highest utilization and optimum bang for the buck.
1.2 Introduction to Hubwoo - A Global Expert in Cloud Procurement Solutions and Services - Cloud Procurement to Deliver a Competitive Edge Hubwoo is a global leader of cloud procurement solutions and services, powered by SAP速 software.
With operations internationally, and the first SAP速 global BPO partnership dedicated
to procurement, Hubwoo provides a fully integrated suite of purchasing tools and services, delivered as-a-service to companies. No large upfront capital investments are needed. Companies simply pay a subscription fee to use our world-class solutions via the cloud giving them a competitive edge with lower total cost of ownership, less risk, faster time to value and an accelerated return on their technology investment. 11
Since 1999, Hubwoo has continued to expand its global reach with a focus on complementing and accelerating SAP procurement applications, to provide best in class solutions via the cloud. With our global footprint, Hubwoo is able to provide organizations worldwide with a complete source to payment solution suite, along with a supplier collaboration hub of over 70,000 active suppliers, and the in-depth services and support needed for successful roll-out and adoption of your sourcing and procurement programs. Hubwoo’s cloud procurement solutions deliver the benefits of technology in the form of a service, enabling procurement and finance departments of companies worldwide to strengthen their performance and drive efficiencies and cost savings by focusing on the strategic mission of supplier relationship management while improving efficiencies of the entire source to pay process. Companies gain the benefits of world class solutions without the costly upfront capital expenditures of traditional software.
Services provided by Hubwoo
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Sourcing eSource via the Cloud - Negotiate Your Savings With a single application, all of your global sourcing activity - across multiple departments - can be managed from your desktop. By managing all sourcing projects within Hubwoo’s eSource, you track the entire portfolio of savings opportunities in a consistent and disciplined process, resulting in cost savings and increased efficiencies. eSource provides executives a view of all current activity, progress, problem areas and savings to-date – at any time. eSource, powered by SAP® software, enables you to better manage the entire sourcing process including collaborative project management, standardized RFx and auction creation, online bidding, bid evaluation and optimization, awarding and supplier performance management. Hubwoo’s powerful sourcing solutions along our in-depth sourcing services can help you maximize savings through fast, flexible and sustainable sourcing.
Spend Analysis eAnalyze via the Cloud - Identify Your Savings and Manage Supply Risk
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eAnalyze, powered by SAP® software and powered by SAP NetWeaver®, is the start of a complete source-to-payment process, beginning with insight into your spend, with a roadmap to transform your sourcing functions. It provides easy-to-use analytics to identify spend, drive sourcing strategy, highlight non-compliance and manage supplier risk. Hubwoo’s sourcing services team can help you identify savings opportunities from heterogeneous sources to better rationalize your supply base and increase compliance enterprisewide.
Contract Management eContract via the Cloud - Apply Your Savings Poor contract management and lack of centralization result in high business risk, redundant contracts, excessive number of supplier relationships and missed opportunity for supplier aggregation and volume discount potential. It can also mean missed contract expirations or automatic renewals, which promote maverick, spend and result in lack of visibility. eContract, powered by SAP® software, gives you complete visibility into your contracts enterprise-wide, providing a centralized, electronic database of all contract types. Our solution supports a repeatable process for contract authoring, including best practices and legal standards, and a library of pre-approved legal clauses and templates that result in shorter negotiations, less risk and auditable corporate compliance.
Procurement eBuy via the Cloud - Realize Your Savings Taking Control of Procure-to-Pay for Bottom-line Profitability Hubwoo's eBuy solution, powered by SAP® software, can play a key role in improving your purchasing processes through automation of requisitions and purchase orders for goods and services, streamlined supplier collaboration through a centralized hub, and improved employee compliance with preferred supplier contracts. eBuy provides organizations with the critical spend data and best practices needed for leveraged and sustained improvements. In-Depth Procurement Services 14
Hubwoo's expert procurement services team will focus on your procurement performance impact beyond technical deployment. With our team of subject matter experts, you can expect rapid implementation and adoption enterprise-wide for an accelerated savings and faster time to value. We can get your suppliers onboarded quickly with a full range of connectivity options - whether it is locally or across the globe- with over 17 language capabilities. Managing Spend for Continuous Profitability with eBuy Hubwoo's Cloud Procurement eBuy solution includes the standard functionalities of SAP速 SRM in addition to powerful Cloud Procurement features developed by Hubwoo. Multiple Procurement Processes Supported for Greater Spend Capture eBuy supports multiple procurement processes which enables maximum spend to be driven through the eBuy platform. The standard processes include: Catalog Based Requisitions, Free Form Entry, Plan Driven Procurement, Quick Quote (through Hubwoo's EasyOrder), Complex Sourcing (through Hubwoo's eSourcing) as well as Services Based Procurement.
Content Management eContent via the Cloud - Manage Your Content Through a Single Point of Integration eContent is an easy-to-use catalog and content solution that automates purchasing processes, increases procurement adoption and ensures that goods and services are purchased from contracted suppliers. Using a single point of integration, buyers and suppliers can distribute approved goods and services content across the organization for efficient management of catalog content, pricing and processes across all trading partners. The intuitive catalog search engine enables the buyer end-users to search multiple supplier catalogs simultaneously, empowering the buyer end-user to generate contact compliant orders and decrease the level of maverick buying.
Invoice Management eInvoice via the Cloud - Ensure Compliance 15
Designed for buyers and suppliers to manage the invoicing processes together. eInvoice generates, transacts and validates invoices electronically within a standardized, secure and legally-compliant framework via eConnect, our Supplier Collaboration Hub. Hubwoo generates the legal e invoices on behalf of the supplier. The integrity of the electronic invoice and the authenticity of the origin are secured by using qualified digital signatures. The system complies with multiple government regulations and supports cross-border transactions. Designed for buyers and suppliers to manage the invoicing processes together. eInvoice generates, transacts and validates invoices electronically within a standardized, secure and legally-compliant framework via eConnect, our Supplier Collaboration Hub. Hubwoo generates the legal electronic invoices on behalf of the supplier. The integrity of the electronic invoice and the authenticity of the origin are secured by using qualified digital signatures. The system complies with multiple government regulations and supports cross-border transactions. Ensuring Compliance By automating the invoice process and leveraging the functionalities of eConnect, customers gain visibility into the invoice and payment processing cycles to minimize errors and drive efficiency and regulatory compliance.
Econnect eConnect via the Cloud - Accelerate Your Savings eConnect, Hubwoo’s Supplier Collaboration Hub solution, streamlines the connection to your global supplier community for integrated and transparent business document exchange. It allows a flexible electronic exchange – from order to invoice – between your trading partners with diverse document standards and technical implementation frameworks Companies need only to maintain a single transaction interface in order to communicate with their suppliers. Connecting Buyers with Suppliers eConnect will minimize your efforts with pre-configured connections to your global trading partner community for integrated and transparent business document exchange, while maximizing the automation for acceleration of the number of suppliers and catalogs you communicate with for greater visibility and increased spend under management. 16
Mission Statement of Hubwoo •
To be the world-leading Enterprise Supply Network
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Providing Buyers and Suppliers A best-of-breed trading platform And on-demand solutions to enable The Real Time Enterprise
Hubwoo enables the company’s Indirect Supply Chain.
Partners of Hubwoo Partnered with the Industry Best
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SAP AG
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Hubwoo is the first On-Demand electronic purchasing solutions provider leveraging the SAP® BusinessObjectsTM Spend Performance Management, E-Sourcing, Contract Lifecycle Management (CLM) and Supplier Relationship Management (SAP SRM) applications to offer SAP solution-enabled BPO services for the full source-to-pay scope. Hubwoo has signed a global agreement with SAP AG, which involves cooperation in the area of sales, solution design and support. The “BPO Services Powered by SAP” program helps Hubwoo in the effective and standardized use of current SAP solutions delivery. Including close collaboration and certification, the program reduces major risks associated with the outsourcing of business processes. It also helps cut operating and migration process costs. Hubwoo´s in-depth solutions and services – powered by SAP® software - enable purchasing organizations to concentrate on their strategic mission of supplier relationship management while automating their transactional activities with an auditable and integrated suite of tools, processes and services. This offering is delivered On-Demand for many value-adds including lower total cost of ownership (TCO), faster time to value and an accelerated return on your technology investment.
IBM
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IBM recognized the need to provide clients with appropriate technology alternatives that support their goal of maximizing the value they receive from procurement. IBM's collaboration with Hubwoo enables clients to take advantage of On-Demand procurement technologies as well as benefit from cost effective procurement services that leverage IBM's proven sourcing and category expertise. To cover the wide and varied customer needs in the procurement outsourcing process, IBM decided to extend its offering with On-Demand technologies. Hubwoo, the global expert for source to pay solutions delivered On-Demand, has been selected by IBM as a preferred partner for strengthening its procurement outsourcing offering. IBM Procurement Services facilitates the transformation of procurement operations through their award-winning Managed Business Process Services offering. IBM brings sourcing leverage by managing the largest spend of any procurement services provider, over $48 Billion of spend, in order to maximize savings for customers. Hubwoo provides the full SaaS (Software as a Service) technologies for the end-to-end Sourceto-Pay process: Spend Analysis, Sourcing, Contract Management, Procurement, Invoice Management, Supplier Collaboration hub, Content Management and supplier connectivity. In addition, Hubwoo delivers all of the required global services to implement the solutions, provide appropriate Change Management and support users for a broader, sustained adoption. The Hubwoo solution provides a rapid technology deployment model for a wide range of customer opportunities. By bringing the offerings together, the Hubwoo and IBM partnership provides a compelling solution in the market to address key procurement challenges including Spend Management, Sourcing Leverage, and Process Efficiency and Control.
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This alliance is a natural supplement to the current BPO agreements between SAP and both IBM and Hubwoo. Hubwoo brings to this new partnership a critical value-add with an in-depth expertise of source-to-pay technology delivered as-a-service (SaaS), while IBM manages the overall outsourcing process for procurement organizations of key customers.
Competitive Advantage 21
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The biggest B2B network
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Impressive list of referenceable customers
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Global Presence
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Partnerships: SAP and IBM
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Quality and Speed of deployment
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Cost advantages over client-hosted solutions
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Complete “Source-to-Pay” solution
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Sound Financials
Hubwoo offers a wide array of training expertise that can match the requirements, existing abilities, goals and budgets of its customers. Hubwoo offers standard training packages that have been developed through extensive interaction with customers and user feedback. Hubwoo also offers customized training programs that are targeted toward the unique needs of an individual organization or department. Hubwoo's training programs are available either in person or are remotely delivered. Hubwoo's training expertise can help organizations realize more fully the following benefits: •
Speed organizational roll-out of solutions
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Boost overall company-wide adoption rate
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Build internal expertise and knowledge
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Develop repeatable, best practice, business processes
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Maximize solution ROI
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Boost collaboration with internal and external stakeholders
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Reduce errors and mistakes
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Leverage solution functionality and tools
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1.3 Objectives of the Study The objectives of the research conducted under the Summer Internship Program (in Hubwoo) are as under: •
To understand the concept of Cloud Procurement and draw out its importance.
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To learn about the services offered and solutions provided by Hubwoo and study how Hubwoo has incorporated the concept of cloud procurement into its system.
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To list the issues and challenges faced by companies and to determine the steps for the successful implementation and working of a cloud.
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Chapter 2 - Review of Literature Can’t Decide Between an On-Premise Procurement Suite and a Cloud Model? You Don’t Have To… Hubwoo’s Hybrid Approach Brings Procurement to the Cloud Rinus Strydom Chief Marketing OfficerHubwoo Reproduced from the Jul 2010 issue of SAPinsider As business leaders plan SAP deployments, they encounter new phrases seemingly every month: on-premise, on-demand, software-as-a-service, multi-tenant, public cloud, private cloud, and more. With all these buzzwords, what is really important in the world of enterprise procurement solutions? The answer is time to value. Increase Net Income by 45% Lower IT costs and guaranteed service levels are certainly important cloud computing benefits to consider in any technology implementation. But when it comes to procurement projects, time to value and realized bottom- line savings are paramount. Procurement savings are the fastest way to affect net income. Per a 2009 benchmarking study, corporations can experience a 45% increase in net income on average by decreasing external spend by 5%. Conversely, focusing efforts on a 5% increase in revenue would increase net income by only 5%. Procurement via the Cloud: The Best of Both On-Premise and On-Demand Worlds Now that you recognize the importance of procurement savings, how do you decide whether to implement an SAP procurement suite on-premise or to subscribe to a cloud model? You may already have significant on-premise investments and projects underway. The good news is that it is not an either/or situation. Hubwoo, a SAP business process outsourcing (BPO) partner in the area of procurement, offers a hybrid approach to cloud procurement services. Compared to doing one or the other — implementing an on-premise suite or subscribing to a cloud model — this combined approach 24
Hubwoo’s Hybrid Approach Brings Procurement to the Cloud
has significant benefits, including immediate cost savings opportunities, while following a holistic SAP technology strategy. For example, customers can run SAP Supplier Relationship Management (SAP SRM) on-premise and subscribe to a supplier network, supplier, catalog content management, and other SAP modules via a cloud model. Hubwoo’s electronic Hub, which enables integration-as-a-service for business transactions as well as master data across heterogeneous systems, streamlines all of these hybrid components to operate as an integrated, source-to-pay business process, powered by SAP software (see Figure).
Unique Cloud Procurement Offerings Hubwoo operates a suite of procurement solutions based on SAP Business Objects Spend Performance Management, SAP E-Sourcing, SAP Contract Lifecycle Management, and SAP SRM. Complementary cloud technologies include a supplier network, an automated content management and search solution, and an electronic invoice management solution compliant with country-specific legal requirements. Services such as strategy, implementation, sourcing, supplier enablement, and buyer and supplier support services ensure clients’ success. 25
Chapter 3 – Research Methodology
Methodology adopted for the present project is that we are trying to study the concept of Cloud Procurement and the impact it has on the performance of a company. In the process of the study I have made extensive research to find out the benefits of Cloud Computing and the steps for the success of a cloud. I have made use of the following type of the data: SECONDARY DATA The secondary data are those that have already been collected by someone else and have already passed through the statistical process. It has been collected from Internet, books, journals, and newspapers. In the present study I have only made use of secondary data published in the broachers, web site, and the corporate communications released from time to time by Hubwoo. RESEARCH DESIGN The research is primarily exploratory in nature. The source of information is secondary.
LIMITATION The present project has made use of only the secondary sources of data so it contains the limitations that come with secondary data. The accuracy of the present project depends on the information available from the data sources used.
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Chapter 4 - Analysis and Interpretation
4.1 Hubwoo’s Annual Financial Results 2009
2009 Full Year revenue of €34.6M, up 9% as compared to 2008
Major turnaround on EBITDA profitability: 2009 EBITDA positive at €2.7M
2009 Key Results:
(Audited figures) Paris – 30th March 2010
35 30 25 20 15 10 5 0 -5 -10
2008 2009 variation
revenue
Net Earnings
Cash
Interpretation 27
Revenues 2009 revenue was €34.6 million, up 9% as compared to 2008. Growth was achieved from the recurring and highly predictable SaaS(**) component of revenue, which was up 15% compared to 2008. 2009 services revenue was down 9% from 2008, mainly due to a lower ratio of Services to SaaS in those contracts signed in 2009 and, as mentioned in previous announcements, to the delay in signature of several other large contracts. The supplier revenue component within SaaS, which is strongly dependent on the global economy and buyers’ level of spending in goods and services, was down 5% year over year, at €7.4 million. Profitability Following continued efforts in cost optimization, restructuring of specific areas of the business and reallocation of resources in those areas capable to deliver stronger growth and profitability, EBITDA in 2009 showed a dramatic improvement from negative -€4.6 million in 2008 to positive €2.7 million in 2009. Estimates on EBITDA for Q1 2010 confirm a positive trend and the achievement of a solid and stable cost base on which Hubwoo can build for future growth. Goodwill In accordance with IFRS, a goodwill impairment test has been conducted by analyzing the market and its growth potential and by evaluating the company’s fair market value. Since the fair value is higher than the book value, no goodwill depreciation has been accounted for. Cash flow and balance sheet In 2009, the company‘s operating cash flow was €1.1 million (against -€3 million in 2008). Total investments amounted to €1.7 million, encompassing network and infrastructure upgrades, the deployment of the new eAnalyze spend analysis solution, based on SAP Business Objects TM Spend Performance Management, and the first phases of the SAP SRM 7.0 upgrade. With the capital increase of €4.6 million, Hubwoo finished the year with net cash of €3.5 million (against €1.8 million in 2008)
4.2 Q1 Results 2010 28
Q1 2010 Revenue of €8.6M
Exceptional level of first year SaaS* bookings in Q1 2010, exceeded 80% of first year SaaS bookings of the entire 2009
Q1 2009
Q4 2009
Q1 2010
9.1
8.5
8.6
-0.05
0.01
SaaS
7
6.9
6.9
-0.01
0
Services
2.1
1.6
1.7
-0.19
0.06
in € millionQ1
Consolidated Revenue
% Q1 Change 2010 / 2009 (**)
% Change Q1 2010 / Q4 2009 (**)
(Q1 2010 Figures Unaudited) Paris – 29th April 2010 – Hubwoo (Euronext: HBW.NX) in accordance with the “Directive Transparence” financial disclosure requirements.
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10 9 8 7 6 5 4 3 2 1 0 -1
Q1 2009 Q4 2009 Q1 2010 % Q1 change 2010/2009 %change Q1 2010/Q4 2009 CR*
SaaS
Services
(*consolidated revenue) Interpretation Q1 2010 revenues showed improvement compared to Q4 2009 (+1%), with the services component up 6%, reflecting improved market conditions for both new customers implementations as well as for incremental services to existing customers. Three new large North American customers have signed with Hubwoo over the quarter, contributing fundamentally to an exceptional level of first year SaaS order intake, equivalent to over 80% of total first year SaaS bookings for the entire 2009. The impact of these bookings are not reflected in Q1 revenues but given Hubwoo’s subscription model are expected to provide recurring revenue over several years. Sales activity on services was successful in both the Americas and Europe – due to large services engagements on spend analysis, sourcing, procurement, and supplier enablement projects - with total services bookings equalling 50% of entire 2009 services revenues.
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Greg Mark, Hubwoo CEO commented: “We are pleased to announce both a top line growth in revenues over Q4’09 and an increased positive EBITDA performance allowing us to fund the growth in our business. The significant new bookings in Q1 show strong market demand for our cloud procurement solutions as well as improving global economic conditions. Our go-to-market strategy encompassing a complete source to pay suite, powered by SAP software, delivered fast as a service requiring a minimal capital investment is paying off as Q1 bookings and our future pipeline show strong demand for multi-module contracts. Overall, we continue to be pleased with the financial turnaround the company is making and we look forward to continued growth and success in 2010.�
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4.3 Cashflows under ‘Cloud’ and ‘On premise’
Interpretation 32
Cashflow analysis of Cloud vs. On-Premise models Given the current global economic conditions, organizations are naturally looking at ways to reduce costs and improve cash flow. Recent studies have shown that the top three opportunities for cost savings are: 1. Purchasing Material Costs 2. Capital Expenditures 3. Inventories Fortune 500 industry leaders have known this for years and have focused on purchasing costs for the past 5-10 years, effectively driving profits up through streamlined costs and processes. Many of us are already into cloud computing without being aware. When you host a website or use Gmail or Hotmail, you are using a server owned and operated by a vendor. And your data — in this case, your web pages or email — is resident on the vendors' machines. Actually, your data is somewhere in the internet "cloud". Most vendors today charge by actual usage. •
Cloud Provides Low Risk
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Cloud results in Lower Total Cost of Ownership (4 to 5x less)
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Cloud provides lower risk with net savings as early as 3 months.
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On-Premise comes with high risk and delayed ROI, with average returns in the second year or later.
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Lower costs through sharing of infrastructure and excess capacity.
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Faster time to market with services and functionality. Significant market opportunity exists for cloud providers within small businesses. According to a research conducted by Hosting .com, 34% of small business respondents believe Cloud Computing will evolve to impact their business in the next 12 months. 40% were unsure, which service providers can use as an opportunity to effectively engage, educate and build solutions that provide tangible benefits for small businesses.
4.4 Why Sourcing? 33
Interpretation With a single application, all of the global sourcing activity - across multiple departments - can be managed from the customer’s desktop. By managing all sourcing projects within Hubwoo’s eSource, The Aberdeen Group tracked the entire portfolio of savings opportunities in a consistent and disciplined process, resulting in cost savings and increased efficiencies. By adopting esourcing approach the Aberdeen Group has: Reduced supply cost by 45% 34
Increased spend under management by 30% 5-25% savings per category Savings in weeks Realized a saving of 8.5 % Improve supplier management and collaboration by 27% However, sustainable sourcing processes and compliance tools are critical for ongoing savings.
4.5 What is the impact of eProcurement on performance?
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Performance Area 60 50 Spend under management (in %)
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percentage of maverick spend (in %) Requitions - to - order - costs ($)
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Requitions - to - order cycle time (days)
20 10 0 Before
After
Interpretation •
The realized savings are tangible and well-known.
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User adoption and supplier enablement go hand-in-hand with success.
Procurement enables and finance organizations to focus on the business of increasing spend under management and delivering cost savings to the bottom line using an integrated suite of cloud procurement technologies, services, and best practices. 36
Cloud Procurement solutions will increase spend visibility, accelerate your spend under management and deliver faster time to value with implementation typically deployed in less than a few months. Best Practices: 1.
Process compliance through simplicity.
2.
Corporate mandates on use and demand management.
3.
Focus on extensive supplier enablement.
4.6 The Benefits of Spend Analysis or why Spend Analysis?
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% increase 100 90 80 70 60 50 40 30 20 10 0
sourcing savings Spend under management contract compliance
Maverik Spend
contract compliance
Spend under management
sourcing savings
Maverik Spend
Source: Aberdeen Group
Interpretation According to the research conducted by the Aberdeen Group, enterprises credit, on average the above shown incremental benefits, i.e.: 93% increase in sourcing savings 40% increase in spend under management 31% increase in contract compliance & 16% increase in Marvik Spend Spend analysis Maximize Savings, Reduce Supplier Risk Gain full spend visibility Automate data capture from disparate systems Accurate and trustworthy data Enriched supplier and spend data Reduce supplier risk Pin-point single supplier dependencies 38
Identify vulnerable and non-viable suppliers Establish supply risk mitigation priorities Rapidly identify savings opportunities Find and act on savings potential Pro-actively monitor contract compliance Increase spend under management Set up performance goals Incorporate external market conditions Collaborate effectively to act on insights
4.7 Why Contract Life Cycle Management?
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Interpretation •
CLM offers savings and corporate risk management value
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Centralized technology and processes are keys to success. 40
Contract terms and conditions govern trading partner relationship and form the basis for managing performance. To achieve full compliance, contracts must be circulated, applied and monitored across the organization.
Best Practices: 1.
First consolidate an enterprise contract repository
2.
Define a library of repeatable and legal-approved clauses
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Eliminate evergreen contracts
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Centralize oversight of contract management
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Establish and measure Key Performance Indicators (KPI)
4.8 What are the Obstacles that you foresee in Monitoring Cloud Related Services?
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Interpretation According to a research conducted by NEUSTAR WEBMATRICS, in which they asked all the respondents that what according to them are the obstacles which they foresee in monitoring cloud related services, 65% of the respondents said Security vulnerabilities, 49% said lack of visibility etc.. Security vulnerabilities – A person can not be sure that everyone is adhering to the appropriate security and data privacy standards. Lack of visibility – It is not defined that how can a person look ‘under the hood’ of his cloud solution providers to see what they are really doing and ensure a seamless and appropriate user experience. Overall lack of control – It is not known that what a person should be doing to address the shifting of internal resources to external services providers and demonstrate to management that a distributed cloud computing solution can work properly. 42
Lack of unified SLAs – A person cannot define SLAs across multiple parties and properly monitor them – especially when there are areas of overlap. Lack of accountability – The mechanisms to enforce SLAs, contractual commitments, and best practices for all cloud providers and partners is lacking. Business collaboration – it is not clear that how should anyone handle the soft issues and politics inherent when multiple organizations are trying to work together? Unique API requirements – A user is not aware of what are the integration challenges between all parties, and how should he design the APIs to work in this complex environment? To a large degree, none of these challenges are new to IT organizations. They have, however, become compounded by the decrease in control and centralization. Reliance on partners means clearly defining the division of responsibilities, defining minimally acceptable performance, and effectively monitoring to ensure that all parties are doing that which they promised. The last area, monitoring, can often separate success from failure. A lack of monitoring can result in delays, poor performance, excessive costs, and dissatisfied customers.
Chapter 5 – Results and Findings Cloud Focus on Your Company's Core Competencies. Cloud solutions are externally hosted and
managed applications, with content and services delivered over the internet and flexible subscription-based pricing models. Cloud computing has following benefits: 43
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Limitless flexibility. By being able to use millions of different pieces of software and databases and combine them into customized services, users will be better able to find the answers they need, share their ideas, and enjoy online games, video, and virtual worlds.
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Better reliability and security. No longer will users need to worry about the hard drive on their computers crashing or their laptops being stolen.
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Enhanced collaboration. By enabling online sharing of information and applications, the Cloud provides new ways for working (and playing) together.
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Portability. The ability of users to access the data and tools they need anywhere they can connect to the Internet.
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Simpler devices. Since both their data and the software they use are in the Cloud, users don’t need a powerful computer to use it. A cell phone, a PDA, a personal video recorder, an online game console, their cars, even sensors built into their clothing could be their interface.
The paradox is that complexity has grown, in part, as a response to customers’ desire for simplicity and excellence. As customers apply expectations developed from using best-inbreed solutions, regardless of the industry, use, or provider, their demands grow. In addition, switching costs in the online world are low, and a customer is just as likely to defect to a competitor because of quality of experience as they are because of quality of product. A customer wants to have a seamless, end-to-end experience. They also want it done now. To pull this all off, a higher level of collaboration between multiple parties is required.
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The current challenge facing companies is how to satisfy increasing customer demand in a world in which they no longer own critical business and IT components and have limited visibility into cloud/ecosystem partners. Meeting these increased demands will require a similar level of effort and investment in collaboration tools for cloud computing as occurred with centralized, server and client computing. A company faces the following complexities while monitoring a cloud: Security vulnerabilities – A person can not be sure that everyone is adhering to the appropriate security and data privacy standards. Lack of visibility – It is not defined that how can a person look ‘under the hood’ of his cloud solution providers to see what they are really doing and ensure a seamless and appropriate user experience.
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Overall lack of control – It is not known that what a person should be doing to address the shifting of internal resources to external services providers and demonstrate to management that a distributed cloud computing solution can work properly. Lack of unified SLAs – A person cannot define SLAs across multiple parties and properly monitor them – especially when there are areas of overlap. Lack of accountability – The mechanisms to enforce SLAs, contractual commitments, and best practices for all cloud providers and partners is lacking. Business collaboration – it is not clear that how should anyone handle the soft issues and politics inherent when multiple organizations are trying to work together? Unique API requirements – A user is not aware of what are the integration challenges between all parties, and how should he design the APIs to work in this complex environment?
Chapter 6 – Suggestions
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There are serious challenges to successfully setting up and managing an effective cloud solution, but they are not insurmountable. Through a thorough review of best practices based on successful deployments – both for cloud computing and the earlier computing paradigms – seven keys to success have been identified. Following these will help mitigate the challenges described above, create an excellent customer experience, and deliver true business value.
Seven Steps for Success of a cloud 1. Define cloud computing objectives and benefits As with all technology initiatives, cloud computing objectives should be directly linked to business objectives. Typical goals and benefits sought from cloud computing include reduced costs, increased flexibility and speed, and improved customer experiences. The objectives must be clearly understood by everyone involved, both on the business and technology side, if a cloud computing initiative is to succeed. Otherwise, a small disconnect early on will amplify itself throughout the process, resulting in failure. Measurable, quantifiable objectives are best in order to reduce subjectivity. Some examples of potential goals that can be quantified include: • Reduce annual hardware costs from $X to $Y over Z years • Improve customer satisfaction rates X% over 3 years, as determined through customer surveys • Increase online revenue by X% over last year • Speed up development and implementation cycles by X% 2. Build the right partnerships to meet your objectives Once your objectives have been defined, they can be used as part of your decision-making criteria for the partner selection process. As an example, if the primary objective is cost reduction, the partner selection criteria would look very different than decision criteria built around a world-class customer service objective. Based on your technology requirements, the various components of each partner’s solution should be identified at a high level.
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These requirements can then be used to determine what will be kept in-house, and what components will be given to partners. Outsourced components can either be hosted in a shared environment or a dedicated environment. For example, many companies utilize web servers housed by third party vendors. This allows them to quickly scale when there is increased web traffic and to ensure that the latest security patches are in place. Depending on the requirements, these web servers may be shared between multiple companies or dedicated to a single one. Finally, there are many cloud computing vendors and technologies out there. It is important to look at all potential partners in terms of technology and process integration, ability to collaborate, history and references, and long-term prospects. This last point is especially important. There are many new cloud computing entrants, and a lot of them may not be in business next year. It would be wasteful to invest a lot of time and effort into a partnership that may soon cease to exist. 3. Identify and delineate areas of control across the ecosystem A company dependent on cloud computing solutions, along with their vendors and partners, each has individual areas for which they are responsible. These areas of control may have overlaps, and each one needs to be clearly defined – including areas of control and dependency within the organization. Once the ecosystem of partners has been built, it is time to further define and finalize areas of control across all partners. This may involve the partners speaking directly with each other. As part of defining the boundaries, the handoffs and escalation procedures should also be defined. For example, your ecommerce site may rely on a third party SaaS solution for completion of the purchase transaction. While your customers only see your brand and hold you responsible for a failed transaction, the reality is that there are multiple parties and technologies involved. By defining areas of control for each step in the process, it is easier to identify who is responsible when there is a mistake or an opportunity for improvement. Overall, this will result in better customer experiences and work relationships between cloud computing partners. 4. Agree on comprehensive SLAs Once the areas of control have been finalized, agreeing upon acceptable performance thresholds is critical. Sharing control requires a high level of visibility and trust. Each party, including the 48
end customer, needs to be confident that the others are doing what is expected of them. Service Level Agreements (SLAs) allow you to define and agree upon acceptable levels of performance. Establishing SLAs is especially important at points of integration where clear ownership is hard to define. The most common SLA measurement is uptime. Other SLAs often measured include website response time, mean-time-to repair, and web service failure rates. In addition to the standard SLA metrics, more tailored ones should also be defined based on the business objectives and business processes. 5. Implement a monitoring and reporting solution to improve customer experience After SLAs have been identified, measuring performance against them is the next step. Utilizing a third party monitoring solution to track SLA performance across the cloud infrastructure increases trust and visibility. An objective, third party monitoring solution means each party can trust the numbers and be confident that individual areas of control are being properly managed. The data also allows for proper analysis and identification of the root of a problem (i.e. with which partner does the issue lie) and as a result, speedy resolution. The chart below details the challenges posed with cloud solutions, and identifies areas to monitor that address each of these challenges. For each item that is monitored, clear targets should be defined and evaluated, and corrective actions taken where necessary. These thresholds should be reached before customers notice the problem or before there is a significant impact on business or IT performance.
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A monitoring solution that adequately addresses all of the challenges needs to be unbiased as well as sophisticated. Integrated monitoring across all the cloud solution participants creates even greater complexity. Therefore, it often makes sense for the company that provides the overall cloud computing service (as well as that company’s customers) to use a third party monitoring solution. When comprehensive monitoring is in place, effective collaboration is possible and performance is optimized. Collaboration must take place between internal resources, cloud computing vendors, business partners, suppliers and customers. This requires timely reporting on all items that are monitored. 6. Develop a communications plan to increase collaboration An effective cloud computing strategy must include a comprehensive communications plan that is timely and actionable across all members of the ecosystem. The plan needs to include parameters, thresholds, audiences, channels, and timings. Effective communication is bidirectional, so a company using cloud computing solutions should be willing to share relevant, 50
internal information with others. Bi-directional communication also helps with visualizing and analyzing the end-to-end business processes. A key objective of cloud computing monitoring should be the early identification and resolution of potential problems, achieved by effective communication and reporting across the ecosystem. At a minimum, an external performance monitoring solution allows problems to be quickly identified, analyzed, and resolved, before the customer is impacted. Ideally, if the areas of control have been properly thought through, the monitoring data will identify where the problem lies, and provide secure, sophisticated tools for communication so the right partner is made aware of the issue and is able to resolve it quickly. In addition, timely communication on SLA performance is very important since it is central to managing activities across all areas of control. A third party, external monitoring service for global SLA oversight should be considered so that all parties are confident the information they are receiving is correct and unbiased. This level of trust is central to a comprehensive cloud monitoring strategy that manages complexity and improves the customer experience. With this level of communication, clear and decisive actions can be taken to reduce mean-timeto-repair and improve customer satisfaction. Typical actions include: Analyzing and resolving performance issues; Upgrading and modifying the existing cloud solution; And developing long-term cloud computing strategies. With mission critical applications and business processes now operating in the cloud, fast and coordinated action is more important than ever. 7. Adapt the cloud computing solution as your objectives change Lastly, any good cloud computing solution is by definition a dynamic one. Customers’ demands, product offerings, technologies, and business requirements are always changing. A properly formulated cloud computing strategy needs to anticipate and adjust to these changes. This includes determining the proper balance between the three cloud computing models – internal, dedicated external, and shared external clouds – and the integration with internal systems and applications. A part of the fix may require integrating multiple cloud computing services into a hybrid solution. This should become easier as global cloud computing standards are defined and 51
embraced. The cloud computing solutions should be thought of in similar terms to Service Oriented Architectures (SOA). A given technology component, business process step, or data flow can be unplugged and replaced with another. Effective monitoring will indicate when an existing solution may be starting to “fail�, where to focus attention to fix the problems, and provide the necessary information to find new partners when needed. Note- It is important to note that while the seven steps are presented in a linear fashion, many of them will be undertaken in parallel. For example, SLAs (step 4) will begin to be defined as part of the negotiations when building the right partnerships (step 2). As with any complex undertaking, it is important to have the appropriate program management in place to see this effort through to successful completion.
Chapter 7 - Conclusions 52
Cloud computing is the latest wave in how IT is used to create business value. The use of clouds, both internal and external, will grow considerably in the near future. Because of the increased dependency on external parties, the business and IT complexity associated with these solutions is greater than with previous IT waves. Cloud Focus on Your Company's Core Competencies. Cloud solutions are externally hosted and managed applications, with content and services delivered over the internet and flexible subscription-based pricing models. Cloud computing has the potential to reduce the cost and complexity of doing both routine computing tasks and computationally intensive research problems. By providing far more computing power at lower cost, Cloud computing could enable researchers to tackle hitherto impossible challenges in genome research, environmental modeling, analysis of living systems, and dozens of other fields. Furthermore, by enabling large distributed research teams to more effectively share data and computing resources, Cloud computing will facilitate the kind of multidisciplinary research needed to better understand ecosystems, global climate change, ocean currents, and other complex phenomena. Hubwoo's cloud solutions are delivered in true multi-tenant application architecture and shared services delivery model that supports multiple customers from a single platform. This model delivers the greatest economies of scale and fastest time to value for customers. The seven steps outlined in this paper can help you better manage this increased complexity. Underpinning these steps, performance monitoring can provide the information needed to effectively manage a cloud solution. For every parameter monitored, clear thresholds and SLAs need to be defined. Additionally, monitoring reports and alerts need to be communicated and actionable. An external monitoring solution should also be considered as a means to build trust between parties and enforce SLAs A comprehensive performance monitoring solution addresses problems before they become noticeable. It adapts as business requirements change. Overall, monitoring provides the data and 53
analysis that allows an IT organization to deploy business enabling cloud solutions, which create true and measurable value. Hubwoo’s cloud procurement solutions deliver the benefits of technology in the form of a service, enabling procurement and finance departments of companies worldwide to strengthen their performance and drive efficiencies and cost savings by focusing on the strategic mission of supplier relationship management while improving efficiencies of the entire source to pay process. Companies gain the benefits of world class solutions without the costly upfront capital expenditures of traditional software.
Chapter 8 – Limitations The project “Cloud Procurement” suffers from the following limitations: 54
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The present project has made use of only the secondary sources of data so it contains the limitations that come with secondary data. The accuracy of the present project depends on the information available from the data sources used.
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The project had to be completed under a time constraint (2 months), which was a little short to understand all the intricacies related to such a wide concept (i.e. Cloud Procurement).
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The topic Cloud Procurement is such a wide concept that even otherwise also it was very difficult to study and record all the intricacies.
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A research is always dependent on the expertise of the researcher, which is lacking a bit in this project.
Bibliography
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Intersources - www.intersources.net
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Forrester Research - www.forresterresearch.com
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Aberdeen Research - www.aberdeenresearch.com
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Hubwoo’s Website - www.hubwoo.com
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www.webmetrics.com
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www.neustar.biz
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www.hosting.com
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www.toolbox.com
Annexure Case Study 56
Company – Carl Zeiss • Global Fortune 500® Company • Industry: Optical and opto-electronics manufacturing • 2007 Revenues: € 2.6 Billion Euros • Employees: over 12,200 • HQ in Oberkochen, Germany; offices in 30 countries with representation in over 100 countries
Challenge • Insufficient procurement system lacked automation, required significant maintenance, and caused administrative burden on central procurement. Needed automation for critical group-wide global expansion initiative. The Company Carl Zeiss is a global leader in the optical and opto-electronic industries, manufacturing a variety of optical and related products, for use in the medical equipment, industrial, and lifestyle industries. Carl Zeiss’ products include microscopes, precision measuring systems, eyeglass lenses and frames, camera lenses, surveying equipment, and riflescope lenses. Other products include industrial measurement equipment and lenses used in planetariums and astronomical instruments. Carl Zeiss has production centers in Europe, North America, Central America and Asia with headquarters in Oberkochen, Germany. In 2007, Carl Zeiss SMT AG received the Innovation Award in the German Industry for its immersion optics. www.carlzeiss.com
The Objectives • Carl Zeiss needed a procure-to-pay solution to automate their business processes that included procurement, robust catalogs and content, and the ability to execute electronic transactions through a central hub. • Rapid implementation was critical, with seamless integration to current SAP® ERP application. 57
• Improve spend under management for increased contract and regulatory compliance to drive cost savings to the bottom line. • Decentralize procurement for reduction of administrative tasks of central procurement while empowering each business unit. • Detailed workflow process with response to meet regulatory requirements. • User-friendly platform with streamlined content for increased usability and compliance globally across subsidiaries. The SOLUTION On-Demand eProcurement, Content Management and Supplier Collaboration Hub • eBuy - online requisitioning and procurement for automation of procurement processes. • eConnect - collaboration hub for fast, secure exchange of electronic documents for buyers and suppliers, from order to invoice. • eContent - creation and support of supplier catalogs with sophisticated search capability. • SAPConnect - seamless integration to SAP Xi platform to connect buyers to their collaboration hub. • Easy Order - RFP tool for purchasing of items not found in electronic catalogs. • Hubwoo Services - customized detailed workflow with automated response for secure document tracking. Carl Zeiss chose Hubwoo because of their understanding of the Company’s business needs and processes, their e-Procurement expertise, and their SAP application focus and deep product and integration knowledge. Hubwoo’s On-Demand solutions provided an electronic procure-to-pay system within 5 months that included the standard functionalities of SAP® SRM in addition to robust features developed by Hubwoo such as searchable content and a streamlined supplier collaboration hub. Hubwoo’s solutions gave Carl Zeiss the automation and efficiency needed to meet their critical global expansion initiative, and their proprietary technology complements Carl Zeiss’ current internal SAP application, adding tremendous value and accelerated ROI. Hubwoo Services provided Carl Zeiss with a detailed document workflow to meet stringent country regulations. In addition, Hubwoo manages the applications on an ongoing basis, including all patches and upgrades, allowing Carl Zeiss to focus on core
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competencies and avoid costly additional headcount for specific technical skills and application management. The Results Hubwoo’s solutions integrated seamlessly with Carl Zeiss’ backend application, automating and optimizing their internal and external business processes. As a result, transaction costs have been lowered and contract compliance has increased for greater cost savings. In addition, decentralization of the procurement process has empowered each business unit while relieving the central procurement department of administrative tasks, giving them more time for core competencies such as price negotiations. The Future Carl Zeiss plans to expand their On-Demand eProcurement solution to several more countries in Europe and the Americas. They are implementing a multi-supplier catalog in English to support this expansion to the America’s, and encourage user adoption in all subsidiaries for continued global expansion and greater contract compliance.
“We needed a cost-effective procurement solution that could be deployed quickly to meet our global expansion plans. Hubwoo understood our business needs and processes, delivering an On Demand SRM solution that integrated seamlessly with our internal SAP® ERP application, giving us the automation and efficiency needed for global expansion.” Werner Kalbfuß Vice President Corporate Purchasing Carl Zeiss
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