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The Coca-Cola Co. is embarking on an ambitious project that involves getting its worldwide bottling franchises to adopt common business processes, using SAP's service-oriented architecture as the technology platform. That's a big win for SAP, which is looking to establish itself as a dominant player in SOA.
Coca-Cola gets most of its $18 billion a year in revenue from the franchise fees it earns from bottlers worldwide. They license the secret Coke recipe and others, including Sprite, Minute Maid, Odwalla, and Nestea, plus a number of brands not found in U.S. markets.
Together, Coca-Cola and its bottlers represent a $90 billion-a-year business and 10,000 product SKUs, said Gary Fayard, CFO of Coca-Cola, during a presentation at the company's Atlanta headquarters Monday morning. The company agreed to discuss the project with a group of reporters and analysts on the request of SAP, which is hosting its Sapphire customer conference in Atlanta this week.
Many of Coca-Cola's bottlers use various versions of SAP to automate finance, manufacturing, and administrative functions, but Coca-Cola wants them all using common business processes based on services. SAP's NetWeaver platform includes a repository of services that bottlers' in-house development teams and other software vendors can weave together to create processes, such as one that handles procure-to-pay, or the process that begins with procuring raw materials and ends with payment to suppliers. Coca-Cola thinks that commonality will make its supply chain more efficient and reduce costs.
SOA makes sense for establishing common processes because it's based on weaving together components rather than implementing big chunks of code, said Coca Cola executives. "That will allow bottlers to converge one step at a time, one process area at a time, one module at a time, at a time that's right for that bottler," said Coca-Cola CIO Jean-Michel Ares. "We can march across the bottling world incrementally."
While this is a solid SOA win for SAP, it's not necessarily going to drive sales of its mySAP ERP 2005 suite, which was released last year and is specifically designed for service-oriented architectures. Coca-Cola, in fact, just completed an upgrade to mySAP ERP 2004 over the weekend, although it eventually plans to upgrade to 2005. There are too many global complexities to warrant an upgrade to mySAP ERP 2005 at this time, Ares said. SAP has stated a goal to have 10,000 of its customers on mySAP ERP 2005 by the end of this year; it currently has about 2,000 customers using that latest version of its enterprise software suite.
What this means is that Coca-Cola, and any of its bottlers not yet upgrading to mySAP ERP 2005, will be limited in what they can do with services to create common business processes.
This story was modified April 26. In the original version of this article, a Coca-Cola VP said it spends $1 billion a year on IT for business interactions with its bottlers. Coca-Cola says that he gave an innaccurate figure but declined to disclose the correct number.