Philip Morris U.S.A. standardizing on SAP applications

Cigarette maker Philip Morris U.S.A., which is already a big user of SAP AG's enterprise resource planning applications in its manufacturing plants, is now turning to new Web-enabled versions of the software for use throughout its internal business operations.

The New York-based subsidiary of Philip Morris Companies Inc. said it plans to use SAP's mySAP.com suite to integrate its different systems under a single technology setup. In a wide-ranging project that was announced last week, Philip Morris U.S.A. is due to add SAP's customer relationship management (CRM), human resources, procurement and materials and quality management applications.

SAP also will develop customized applications for Philip Morris U.S.A. under the deal between the two companies. Ultimately, the cigarette maker wants to phase out its legacy systems and connect its supply chain, CRM and e-business operations together via a single Web-based user interface in an effort to improve sales and marketing efforts.

When it's completed, the expanded SAP system "will take us out of the software business," a Philip Morris U.S.A. spokesman said. The multimillion-dollar implementation is in the testing phase now, he added, but the company isn't disclosing its schedule for deploying the new applications.

The spokesman said there are complex issues that could affect the duration of the project, such as the relative newness of the mySAP.com software and the need to convert huge amounts of existing data from Philip Morris U.S.A.'s current systems.

Philip Morris has already sunk hundreds of millions of dollars into the SAP applications that are running in its plants, said Dave Boulanger, an analyst at AMR Research Inc. in Boston. The new project should allow the cigarette maker to further leverage that investment, he added, predicting that the mySAP.com software will serve as its e-commerce backbone for the next five to 10 years.

Joshua Greenbaum, an analyst at Enterprise Applications Consulting in Daly City, Calif., said Philip Morris U.S.A. also has a major Internet initiative under way that's aimed at streamlining its business-to-business dealings. An interesting twist, he added, is that the company last fall invested in Concord, Calif.-based RetailersMarketXchange Inc. (RMX), an online marketplace aimed at convenience stores and other small businesses that has signed up with SAP rival Oracle Corp. as its software supplier.

SAP is going to have make it easy for Philip Morris U.S.A. to connect its order-management, product delivery and CRM applications to Oracle's software for powering business-to-business exchanges, Greenbaum said. "They've got to make sure there are no bottlenecks," he said, noting that many of the users of the RMX exchange are gas stations that aren't going to want to hash out complex data translation issues between SAP and Oracle software.

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