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SAP Value Proposition for Sony Electronics, Inc. Enabling Sony Electronics’ Strategy

SAP Value Proposition for Sony Electronics, Inc. Enabling Sony Electronics’ Strategy. April, 2008. Statement of Confidentiality and Exceptions.

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SAP Value Proposition for Sony Electronics, Inc. Enabling Sony Electronics’ Strategy

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  1. SAP Value Proposition for Sony Electronics, Inc.Enabling Sony Electronics’ Strategy April, 2008

  2. Statement of Confidentiality and Exceptions The information and analysis contained herein are the confidential and proprietary materials of SAP AG. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express written permission of SAP AG. The information contained herein may be changed without prior notice. The furnishing of this document shall not be construed as an offer or as constituting a binding agreement on the part of SAP AG and/or its affiliated companies (“SAP”) to enter into any relationship. SAP provides this document as guidance only to illustrate estimated costs and benefits of the predicted delivery project. These materials may be based upon both information provided by the subject Company, information provided by other companies and assumptions that are subject to change. These materials present illustrations of potential performance and cost savings, and do not guaranty future results, performance or cost savings. The materials are provided solely for internal review and use by the subject Company. SAP makes no representation or warranties of any kind with respect to these materials, and SAP shall not be liable for errors or omissions with respect to these materials.

  3. Agenda Executive Summary – SAP Value Proposition SAP Background SAP Commitment to the High-Tech Industry Customer Success Stories

  4. SAP Analysis Approach Understanding of Industry Dynamics • Industry and solution resources • Product development resources • Management consulting resources with High-Tech industry experience Triangulated Approach to Deliver “Outside-in” Analysis Leveraging of Industry and SAP Benchmarks Analysis ofCompanyIssues • Industry best practices • SAP benchmarks and typical benefit ranges • Customer references • Analyst reports • Executive presentations • Industry research • Recent publications

  5. Executive Summary: Key Findings Source: Company website; SAP analysis

  6. Our Understanding of Sony Electronics’ Corporate Strategy • Maintain the leadership position in consumer electronics, broadcast and professional systems ,and information technology products • Help consumers get easy, ubiquitous access to entertainment and information anytime, anywhere – no matter whether the content comes from cable, satellite, terrestrial, packaged media or the Internet • Develop new audio-visual applications designed to personalize technology • Focus on building closer customer relationships like the launch of SonyStyle.com, a new information rich e-commerce site that offer a variety of commerce, content, community and connectivity options Drive Business Growth Enhancing Shareholder’s Value • Market products that capture the imaginations of consumers and enhance their lives in the process • Develop new technologies that reflect the networked convergence of audio, video and information technology • Continue investment in R&D to reinforce technology and market leadership in the consumer electronics market • Focus on new service offerings like ImageStation.com that helps consumers create, share and enjoy digital pictures and video Focus on Innovation • Focus on the fundamentals of the business to enhance the quality of products and services, and to manage the operating expenses effectively • Implement effective job rotations that enable employees to gain new experiences in a different workplace and nurture their capabilities to enhance the vitality of the organization • Continue to emphasize on a strong supply structure for better responsiveness to drive higher order fill rate • Streamline processes and improve reporting and analytics capabilities Pursue Operational Excellence Sources: Company website; SAP analysis

  7. Are You Ready to Move the Needle? Average Peer Worst Peer Best 4.9% Revenue Growth TTM, Dec 06 – Dec 07 Victor Sharp 12.9% -8.0% 22.7% SG&A Expenses as a % of Revenue Victor Samsung 33.0% 16.4% 5.4% Operating Margin1 Victor Samsung -0.8% 9.4% 56 days Days In Inventory (DII) Samsung Victor 75 days 26 days 53 days Days Sales Outstanding (DSO) Sharp Samsung 84 days 13 days What Moving the Needle Could Mean to a $6B company: • Every additional point in revenue growth ~ $3M in operating income • Every 1% reduction in SG&A expenses ~ $14M in incremental operating income • Every 1% improvement in operating margin~ $60M in incremental operating income • Every 1 day improvement in DII ~ $12M in free cash flow • Every 1 day improvement in DSO ~ $16M in free cash flow All financial figures are based on trailing twelve months (TTM) calculations Note 1: Operating Margin = (Revenue – Cost of Goods Sold – SG&A Expenses)/Revenue Sony Electronics peer group included in this comparison consists of Harman International, Panasonic, Samsung, Sharp and Victor Company of Japan Source: Peers’ Annual and Quarterly Reports; SAP analysis

  8. Peer Analysis: SG&A Expenses and Operating Margin Key Observations SG&A Expenses (% of Revenue, TTM December 07) • Changing customer demands and emergence of latest technologies drive a variation in services requirement, providing new opportunities to effectively service customers • Increased efficiency of reporting, consolidation and analytics would help Sony Electronics achieve operational excellence • Further, streamlined processes and integrated systems in billing and collections would reduce overhead costs and improve margins • Going forward, the company also needs to enable global visibility to the flow of goods & information and take advantage of trade preference agreements to drive margin expansion • Potential areas of opportunity: • Service Management • Adobe Interactive Forms • Business Intelligence • Order-to-Cash Management • Global Trade Services Management Every 1% reduction in SG&A expenses ~ $13.6M1in incremental operating income Operating Margin (% of Revenue, TTM December 07) Every 1% improvement in operating margin ~ $60.0M1 in incremental operating income All financial figures are based on trailing twelve months (TTM) calculations Note 1: Calculations done assuming average performance level on the chosen metrics Source: Peers’ Annual and Quarterly Reports; SAP analysis

  9. Peer Analysis: Days Sales Outstanding DSO Key Observations (Days, TTM December 07) • Reduction in DSO is critical for improvement in free cash flow and to optimize working capital requirement • Accurate and on-time billing will improve collections, reduce disputes and thereby receivables • Lack of process automation and end-to-end visibility often impacts DSO performance • Accurate and timely information leads to reduced reconciliations and better management of the billing/collections process; resulting in quicker payment and a reduction in DSO • Potential area of opportunity: • Order-to-Cash Management Samsung Victor Closing this gap would translate into ~ $16.4M1 in free cash flow Harman Average Panasonic Sharp All financial figures are based on trailing twelve months (TTM) calculations Note 1: Calculations done assuming average performance level on the chosen metrics Source: Peers’ Annual and Quarterly Reports; SAP Analysis

  10. Key Opportunities to Support Sony Electronics’ Strategy Key Strategic Goals Key Opportunities Key Value Drivers • Maximize cash flow and reduce DSO through improved billing, receivables, collections, payments, and treasury management • Reduce working capital needs • Reduce volumes of uncollectible cash • Improve data integrity and reporting & analysis • Improve visibility to customer information Order-to-Cash Management Drive Business Growth • Improve cost structure through streamlined service operations • Reduce warranty costs with less out of policy payments & increased supplier recovery • Analyze service contracts and quotations to determine changes in contract range Service Management Focus on Innovation Global Trade Services Management • Reduction in non-compliance related penalties • Adapt quickly to changing regulatory requirements • Avoid fines for dealing with denied parties • Take advantage of trade preference agreements Adobe Interactive Forms • Eliminate paper forms with on-line and off-line forms • Reduce paper forms and need for storage / retrieval • Deliver clear personalized communication and improve customer documentation Pursue Operational Excellence Business Intelligence • Reduce IT Development Costs mainly in query development and data modeling • Increase BI user productivity • Reduce support costs mainly in BI performance specialist, BI tech admin

  11. Sony Electronics’ Estimated Annual Benefits are between $28.6M – $47.3M and One Time Benefits between $17.6M – $26.5M $28.6 M $47.3 M Potential Annual Benefits: Conservative Estimate Likely Scenario $17.6 M $26.5 M Potential One-time Benefits: One-time benefit $17.4 M $26.2 M $0.2 M $0.3 M Note: Analysis is directional in nature; Access to specific pain points and data will be required to develop more accurate estimates Source: Peers’ Annual and Quarterly Reports; VE benchmarks; SAP analysis

  12. Common Business Platform to Link Corporate Goals with Regional and Divisional Execution • Comply with Sarbanes Oxley and safety legislations • Enable aggregation of data, business processes and spend • Enable enterprise visibility of programs and customers • Enable flexibility for strategic options (acquisitions and partnerships) • Enable business performance improvement • Enterprise performance visibility and analytics • Executive reporting and key performance metrics dashboard • Provide IT Transformation Platform Sony Electronics Corporation Future Acquisitions& Partnerships • Foundation for future business growth • Single face to the customer • End-to-end employee, program and client visibility • Harmonize data and reporting across businesses • Leverage processes across businesses • Enterprise shared services: Portal content and applications • Ability to make resource decisions across businesses • Improve new solutions R&D and launch process • Ability to integrate new business models Common Sony Electronics Business Platform • Functionality to improve: • Order-to-Cash Management • Service Management • Global Trade Services Management • Adobe Interactive Forms • Business Intelligence • Improve process efficiencies • Gain competitive advantage leveraging best available technology Div 1 Div 2 Div 3 Div 4

  13. SAP Value Proposition for Sony Electronics • High Tech Industry Standard • 20+ years of industry experience • Leading business applications in High Tech specific processes to enable rapid time to volume and profitable growth • 2100+ High Tech Customers Globally • 1500+ dedicated implementation resources Speed To Tangible Benefits • Significant one-time and annual benefits using SAP solutions, with potential for further benefits • Leverage standardized, industry-specific processes • Leverage experienced resources and extensive partner ecosystem • Deliver a platform that is scalable for growth 360o Visibility Enabling Sony Electronics’ Growth 360o Visibility 360o Visibility Mitigate Business Risks • Financial strength of SAP • Industry specific solution • Easily integrate mergers and acquisitions • Leverage substantial R&D investment • Strategic partnership, executive commitment • Regulatory compliance Lower Total Cost Of Ownership • Leverage pre-built functionality and best practices • Proven upgrade path • Leverage existing IT investments via SAP NetWeaverarchitecture • Reduce legacy systems & interfaces, solution scalability • Deliver platform for future system rationalization 360o Visibility

  14. Next Steps – Value Engineering Process

  15. Agenda Executive Summary – SAP Value Proposition SAP Background Customer Success Stories SAP Commitment to the High-Tech Industry

  16. Summary of SAP Today SAP AG in 2007 revenues: €10.25 billion • More than 43,000 companies run SAP software • Providing more than 25 industry solutions • 43,772 SAP employees (December, 2007) 12 million users in 120+ countries team with us to… • Integrate their business processes • Extend their competitive capabilities • Get a better return on investment at a lower total cost of ownership Unique partner ecosystem • More than 3,850 partners • Overall more than 180,000 SAP partner certificates

  17. SAP’s Performance in the Last 10 Years CAGR total revenues: 10% 43,861 CAGR operating income*: 13% 39,355 35,873 10,205 32,205 9,402 29,610 28,797 28,410 8,513 7,514 7,413 24,178 7,341 7,025 20,975 19,308 2,735 6,265 2,705 2,410 5,110 2,086 4,316 1,880 1,688 1,471 1,244 901 796 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Revenue Employees Operating Income*

  18. SAP is Well Positioned for Growth • Trusted business partnerfor 43,000+ companies – the largest installed base in the enterprise software sector • Deep vertical expertise with strategic solutions for more than 25 industries • Great innovation powerwith 12,951 developers • Largest ecosystem in the industry system integrators, ISVs, OEMs, resellers,partners • One of the top brands globally#34 according to BusinessWeek

  19. The SAP Advantage • Undisputed global market leader • Large enterprises • Midmarket • Business user applications • Rich and balanced portfolio of business opportunities • Across all geographies • Across all industries • Natively integrated product portfolio • For business process excellence • For business performance optimization Double SAP’s Addressable Market

  20. Agenda Executive Summary – SAP Value Proposition SAP Background SAP Commitment to the High-Tech Industry Customer Success Stories

  21. SAP Leadership in the High Tech Industry Note: Number of OEM customers includes EMS Providers that are SAP customers

  22. SAP High Tech Customers – Leaders in the High Tech Ecosystem

  23. SAP * Implementation not yet complete Outsource Manufacturing SAP: Successful at Many High Tech Companies Top 10 SemiconductorManufacturer

  24. SAP Delivers Value Supply Chain Management “We implemented SAP SCM across our entire global supply chain, and we are already realizing the benefits. SAP SCM allows us to keep a very close look at our entire supply chain.” ChannelManagement “For the first time, we have worldwide visibility to channel inventory and sales in one system… we feel we are one step closer to effectively and efficiently managing our sales channels.” “The real economic value to nVIDIAis our ability to know the status of our inventory and to be able to make reasonable promises to our customers as to the availability of inventory.” BusinessIntelligence “(SAP) allows management to run the company in a more professional way (with) reliable, up-to-date, and quick information on how the company is doing." NewProductIntroduction “(SAP) shortens the amount of time it takes to move from the engineering and design stage to actually having the product ready for the customer." Compliance “If we don’t meet compliance regulations, we can lose export privileges… which represents roughly 50% of our company’s revenue. SAP GTS helps us meet these regulations.”

  25. Great Brands… Great Relationships

  26. Agenda Executive Summary – SAP Value Proposition SAP Background SAP Commitment to the High-Tech Industry Customer Success Stories

  27. Flash Electronics Implements SAP ERP Founded in 1994, Flash Electronics rapidly grew into one of world's premier electronics manufacturing service (EMS) providers serving a dynamic list of OEMs. Flash Electronics, Inc., headquartered in Silicon Valley, CA, has five manufacturing sites in the United States and China. All sites are ISO 9002, BABT and TUV certified.

  28. Flash Electronics Implements SAP ERP “SAP enables us to do things more efficiently, with a high level of accuracy. With SAP we are able to work more closely with our partners and increase the service levels to our customers.” Bob Dean, President, Flash Electronics

  29. HP Implemented SAP SCM HP is a technology solutions provider to consumers, businesses and institutions globally. The company's offerings span IT infrastructure, personal computing and access devices, global services and imaging and printing. For the four fiscal quarters ended April 30, 2004, HP revenue totaled $76.8 billion.

  30. HP Implemented SAP SCM “The global deployment of SAP SCM throughout HP is helping us to operate more efficiently in increasingly complex and competitive environments.” Craig Flower, VP & CIO Hewlett-Packard Co.

  31. LSI Logic Implements SAP SCM LSI Logic Corporation is a leading designer and manufacturer of communications, consumer and storage semiconductors for applications that access, interconnect and store data, voice and video.

  32. LSI Logic Implements SAP SCM

  33. NVIDIA Implements SAP SCM, SEM and NetWeaver NVIDIA Corporation is a market leader in visual computing technology dedicated to creating products that enhance the interactive experience on consumer and professional computing platforms. They are the fastest semiconductor company to reach $2B in revenues. NVIDIA employs 1900 people worldwide.

  34. NVIDIA Implements SAP SCM, SEM and NetWeaver “We could not have supported our growth without SAP. SAP enables us to do things more efficiently, to determine the right mix of product to build and to link Sales, Ops and Finance. SAP enables us to understand what is going on, while there is still time to do something about it.” Joe Sura,VP of Information Technology,nVidia

  35. palmOne Implemented SAP SCM palmOne, Inc. delivers what matters most to customers -- whether a single consumer or company of thousands -- enabling users to improve their personal lives and professional productivity through mobile devices and solutions. Revenues $250M (2004E)

  36. palmOne Implemented SAP SCM “We share a common vision with SAP — that providing people with mobile and wireless access to corporate information will enable them to be more productive and effective.” Carl YankowskiCEOPalm

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