Within the Catena-X automotive industry consortium
When I first heard of SAP’s “automotive alliance” over a year ago, I was suspicious: was it just a shrewd back door to a discussion centered on the product about Ariba?
But then I became intrigued. On a podcast with my retired colleague Den Howlett, SAP CEO Christian Klein spoke passionately about the initiative. Although I sometimes had difficult exchanges with Klein, it is a framework to which I am very attentive.
Then we have this mysterious press release from March 2021, Catena-X Automotive Network is picking up speed. I say “mysterious” because there is some vagueness here, for example: “The Catena-X pilot projects focus on five application areas which have been jointly defined.” Why would I be interested in a mysterious press release? When was the last time you saw these types of businesses come together?
The founders of the partner network are BMW AG, Deutsche Telekom AG, Robert Bosch GmbH, SAP SE, Siemens AG and ZF Friedrichshafen AG.
Other companies have joined the initiative, including Mercedes-Benz AG, BASF SE, Henkel AG & Co. KGaA, Schaeffler AG, German Edge Cloud GmbH & Co. KG, ISTOS GmbH, SupplyOn AG, German Aerospace Center (DLR ), Fraunhofer -Gesellschaft zur Förderung der angewandten Forschung eV and ARENA2036, as well as several small and medium-sized enterprises (SMEs).
Yes, it does have a decidedly German flavor, at least at first, but these types of alliances aren’t typical. Then you see:
The Automotive Alliance will operate under the name Catena-X Automotive Network (Catena-X). As an implementation-oriented network and to help ensure openness and neutrality, Catena-X plans to organize itself as a registered association in Germany.
Openness, neutrality and … business software?
Openness and neutrality – not what you typically see with enterprise software vendors. I think the future of ERP is not the back office, but the vertical backbone. This is why industrial consortia built on open standards really catch my attention:
Catena-X sees itself as an expandable ecosystem in which automotive manufacturers and suppliers, dealer associations and OEMs, including application, platform and infrastructure providers, can all participate equally. The aim of the association is to create a uniform standard for sharing information and data throughout the automotive value chain..
But in the summer / fall, the PR machine around Catena-X fell silent – although the Catena-X website had news (and a board list). Where did the fall Klein update hint at in the podcast? Has Catena-X gained momentum or, perhaps, got caught up in regulatory bureaucracy or supply chain distractions during a pandemic? I decided to find out.
Soon I found myself videoconferencing with Hagen Heubach, Global Vice President, Industry Business Unit Automotive at SAP and Board Member of the Catena-X Automotive Network. As Heubach told me, pandemic supply chain pressures, including the infamous chip shortage, are the sparks that ignited Catena-X:
The automotive industry is in the midst of a transition. There is a huge upheaval, with the semiconductor crisis – our shortage of chips and our shortage of raw materials. These are key elements that we are trying to resolve with the automotive alliance.
Heubach leads SAP solutions for automotive and mobility globally. But this is not a vendor specific problem to be solved. It is also not something an automaker can solve by refusing to cooperate with other heavyweights. Heubach:
I have been involved from day one in Catena-X. When we launched it, we spoke to the major players in the industry … We found out very clearly, “Hey, there’s so much more value along the value chain or the business chain. supply, which is still buried. And we have so much more potential for optimization, if we all go from a traditional peer-to-peer connection to a network-based approach. ‘
Of course, this means secure, neutral and interoperable data exchange. As Heubach said, no one will share data if your network is unreliable – and you should always be in control of your data. Then the use cases can be built:
So, we tackle real-world use cases, such as parts, traceability, demand capacity, quality management, sustainability – and bring them together with the sovereign cloud of data.
Catena-X, the organization, was officially launched in May 2021, with an alliance of eight automotive partners.
At the heart of it all is a movement that says, “Hey, we are all committed to this fundamental concept of data sovereignty, fostering data exchange and transparency throughout the automotive value chain. “
The plan is to extend this membership in the value chain, beyond initial industry adopters, to mobility service providers, IT providers and OEMs:
If we all come together and join forces, building that network in the right use cases, then we really have a win-win situation.
Momentum is building. At the time of our November conference, Catena-X had 62 members, far beyond Germany. The German government also contributes to the financing of Catena-X; open source is a major design principle.
We are building important parts within Catena-X as open source components … We have founded an open project of the Eclipse Foundation, where several companies are building. SAP is now integrated into it; Siemens integrates its two systems, BMW, Porsche and so on.
As always, the proof is in the results, not in the press releases. When can we expect a tangible product?
The first POCs and MVPs are here. We plan to be operational by the first quarter of 2022. The first real use cases; the first points of proof are there. We are also approaching this from the SAP side with our portfolio, early needs and use cases. Above all, we will prepare our customers for the future, so that they are ready for Catena-X.
The first one standing? A use case of traceability, nicknamed “Traceability of materials of the logistics company network”, with some additional modules, dealing with the tracking of parts and the reuse of parts. “It’s a pretty compelling use case,” says Heubach.
My take – give me industry consortia on proprietary platforms
For those who don’t take this effort seriously due to its low profile, it’s time to reconsider. I expect SAP to push the promotional side of Catena-X forward in the new year as projects go live.
I’m not exactly an Ariba fanboy. For those who still think that this is a Trojan-marketing-network-business, I can only tell you that Heubach didn’t use the word Ariba once, and he only mentioned S / 4HANA only a few times. Over the past year, to drive the advancement of their corporate network, SAP has used an epic and cringe-worthy slogan, “the network of networks.” But: this does not mean that SAP is wrong about the future of industrial networks. Catena-X, with its push for open standards, members who may or may not run SAP software, and competitors turning into cooperators as they tackle obstacles in the industry – which has the makings of it. a great story.
Of course, there is also a big product advantage for SAP. Heubach tells me that SAP intends to tie S / 4HANA to the Catena-X platform, so automotive customers can integrate these open source components. It’s instructive how much you can accomplish for your own clients – when you define a larger mission. Heubach believes this is our future: expecting a supplier platform to bring an industry together is a legacy thought.
Along the way, the ERP changes. The future of ERP as a back office recording system is bleak. The future of ERP as the operational backbone of your industry – this is where ERP gets interesting.
Blockchain fans may protest that I’m rubbing it here, but I think it’s important to note that Catena-X is not built on the blockchain. Blockchain Krishnas would have us believe that in order to provide an enduring (supposedly) trust between industry value chains, this blockchain would be a revolutionary force here, technological evidence.
This misguided thinking has led to a ridiculous and overly prolonged cycle of hype. It took us away from the real point: these industry problems aren’t meant to be solved with wonder-tech, but by people (and companies) working together in bold and innovative ways. The technology used will be the one that best suits the tool. Maybe it’s the blockchain (or other distributed ledgers), and maybe not.
I won’t go into all the technical details here, but Heubach says they needed a data architecture that provides all participants with a different level of network trust and data control:
Data is stored where it should be, in ERP systems, in data lakes. What you are doing is simply giving each other access rights to share and activate data on a corporate network.
A key element is Gaia-X, the International Data Spaces (IDS) standard. The current configuration gives participants granular control over data access rights, controls that they can continuously adjust. Heubach does not rule out the use of blockchain in the future, but this was not taken into account in this initial use case.
I can think of other industries that could benefit from this kind of push – industries where the stakes are high and SAP’s footprint is large. Healthcare comes to mind, with the same thorny issues of sovereignty and data privacy, against the backdrop of massive transformation. The Heubach team received requests from other verticals. He does not see why these same approaches could not possibly be adapted elsewhere. Now this would be a refreshing break from all the generic gossip we hear from vendors about “industrial clouds”. For now, Heubach knows they have to prove this model:
It’s so much more of a joint [partnership], which you can create if you follow an ecosystem approach, rather than following a locked-in, single-platform approach. This is not the type of style that we are looking for. Everything must be open to be interoperable. This is the key.
Give me more of this type of project anytime.