Philip Morris U.S.A. to Standardize on SAP Apps

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

The New York-based subsidiary of Philip Morris Cos. said it plans to use SAP's suite to integrate its different systems under a single technology setup. In a wide-ranging infrastructure project announced two weeks ago, Philip Morris U.S.A. said it will add SAP's customer relationship management (CRM), human resources, procurement and materials and quality management applications.

Under the deal between the two companies, SAP will also develop customized applications for Philip Morris U.S.A. Ultimately, the cigarette maker wants to phase out its homegrown 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 complete, the expanded SAP system "will take us out of the software business," said a spokesman for Philip Morris U.S.A. 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 software and the need to convert huge amounts of existing data from Philip Morris U.S.A.'s current systems.

Philip Morris U.S.A. 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 software will serve as the company's 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 last fall the company invested in Walnut Creek, Calif.-based RetailersMarketXchange Inc. (RMX), an online marketplace aimed at convenience stores and other small businesses that have signed up with SAP rival Oracle Corp. as its supplier.

SAP is going to have to 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.

A Philip Morris U.S.A. spokesman said there have been no data interoperability problems internally between Oracle and applications.

Copyright © 2001 IDG Communications, Inc.

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