SAP Lands Ford, Caterpillar

Following months of discussions, enterprise application software vendor SAP has signed a big deal with Ford and Caterpillar. Ford and Caterpillar partnered in 2001 to refine and speed up processes surrounding the delivery of service parts. Today, SAP announced that the companies will use elements of mySAP Supply Chain Management (SCM) and mySAP Customer Relationship Management (CRM) to manage the parts delivery piece of their respective businesses. It's a massive win for SAP. While terms weren't disclosed, financial analysts have speculated that the deal could be worth anywhere from $40 to $100 million. As analyst Karen Peterson of Gartner says, "The size of the deal, especially in today's economy, is awe-inspiring." Beyond financial terms, the deal also touches on many aspects of Ford and Caterpillar's operations. It'll encompass 15,000 dealers, 100,000 parts, 120 million order line-items, and a host of distribution centers. Peterson says that SAP hasn't had much traction in U.S. automotive up to this point, but that has clearly changed. As a result of the deal, she thinks that other influential original equipment manufacturers (OEMs) may rethink their approach to aspects of e-business. "The aftermarket has been served well with legacy systems," Peterson says. "OEMs and Tier One suppliers may now look to replace those systems with packaged apps. Other OEMs will be out there looking." And there is value in the proposition, she concludes. Ford and Caterpillar are looking at cost savings and efficiencies by eliminating some inventory at the dealer level, locating distribution centers closer to the point of use, and ramping up service revenue. But perhaps the most important custom of the system will be increasing customer loyalty and satisfaction, Peterson says.