This document provides a business case for implementing a Channel Financing solution using SAP's Enterprise Service Oriented Architecture (SOA). The proposed solution would provide integrated commercial and financial solutions to support banks in financing supplier and distribution channels. It describes the benefits to dealers, suppliers, manufacturers, and banks. The implementation strategy involves developing the solution in two phases, using relevant SAP modules. The solution would generate revenue from license fees, implementation, support, and annual maintenance contracts.

1. BUSINESS CASE
CHANNEL FINANCING USING SOA
by: Partho H. Chakraborty

2. Business Case: CHANNEL FINANCING USING SOA
TABLE OF CONTENTS
INTRODUCTION /BACKGROUND .................................................................................................................. 4
BANKS INVOLVED ................................................................................................................................................ 4
OVERVIEW ........................................................................................................................................................... 4
VISION ................................................................................................................................................................. 4
OBJECTIVES ......................................................................................................................................................... 4
SITUATIONAL ASSESSMENT AND PROBLEM STATEMENT.................................................................. 5
CURRENT SITUATION ........................................................................................................................................... 5
PROBLEM ............................................................................................................................................................. 5
OPPORTUNITY ...................................................................................................................................................... 5
IMPLEMENTATION STRATEGY .................................................................................................................... 6
PROJECT TITLE ..................................................................................................................................................... 6
TARGET BENEFITS FOR ALL THE CHANNEL MEMBERS .......................................................................................... 6
Benefits to Dealers/Distributors ..................................................................................................................... 6
Benefits to Supplier ........................................................................................................................................ 6
Benefits to Manufacturer / Principal customer .............................................................................................. 7
Benefits to Bank.............................................................................................................................................. 7
OUTPUT................................................................................................................................................................. 8
PHASE 1: .............................................................................................................................................................. 8
PHASE 2: .............................................................................................................................................................. 8
SAP AND INTELLIGROUP ................................................................................................................................ 8
MODULES INVOLVED IN PROJECT .............................................................................................................. 9
SAP ENTERPRISE SERVICE ORIENTED ARCHITECTURE (SOA) ......................................................... 9
INTRODUCTION .................................................................................................................................................... 9
ROLE OF SOA IN CHANNEL FINANCING PROCESS.............................................................................................. 10
SPECIFYING COMPOSITE APPLICATION .............................................................................................................. 11
DESIGNING COMPOSITE APPLICATION ............................................................................................................... 12
DEVELOPING COMPOSITE APPLICATION ............................................................................................................ 12
CONFIGURING COMPOSITE APPLICATION .......................................................................................................... 12
TRANSPORTING & PACKAGING COMPOSITE APPLICATION ................................................................................ 12
ARCHITECTURE LAYERS -- TECHNOLOGY COMPONENTS ................................................................................. 12
WORK PLAN ...................................................................................................................................................... 13
SALES................................................................................................................................................................... 13
TARGET CUSTOMERS ......................................................................................................................................... 13
SAP BUSINESS SUITE......................................................................................................................................... 13
MARKET SIZE .................................................................................................................................................... 14
SAVINGS/EARNINGS VIS-À-VIS INVESTMENT FROM THE CUSTOMER................................................................... 14
SAP REVENUE COMMITMENT THAT THEY WILL GET US .................................................................................... 14
TYPICAL IMPLEMENTATION SIZE & DURATION .................................................................................................. 14
FINANCIALS ...................................................................................................................................................... 15
Author: Partho H. Chakraborty 2

3. Business Case: CHANNEL FINANCING USING SOA
Resources required: (For setting up the in-house box) ............................................................................... 15
HW, SW required ......................................................................................................................................... 15
Duration to build .......................................................................................................................................... 15
Ongoing costs ............................................................................................................................................... 15
Other Costs .................................................................................................................................................. 16
Costing Summary ......................................................................................................................................... 16
REVENUE ............................................................................................................................................................ 16
ANNUAL MAINTENANCE CONTRACT (AMC) ..................................................................................................... 17
ROYALTY ........................................................................................................................................................... 17
UPGRADE REVENUE ........................................................................................................................................... 17
Benefits derived ............................................................................................................................................ 17
Value Addition .............................................................................................................................................. 17
PROJECT MANAGEMENT FRAMEWORK ................................................................................................. 18
GOVERNANCE .................................................................................................................................................... 18
QUALITY MANAGEMENT .................................................................................................................................... 18
PROJECT RESPONSIBILITY .......................................................................................................................... 18
Author: Partho H. Chakraborty 3

4. Business Case: CHANNEL FINANCING USING SOA
Introduction /Background
SAP has an integrated suite of products catering to various domains such as
Manufacturing, Logistics, Discreet Manufacturing, Banking, Insurance, etc.
In banking one of the requirements of banks are to finance the Supply Chain called
as Channel Financing. Channel Financing covers both the legs of financing. The first
leg covers payments to vendors and the second leg covers the payments to the
dealers.
Channel Financing covers the end-to-end financing in this supply chain factoring a lot
of components such as limits, regulations, crystallization of bills, documents, net
banking, etc.
Banks involved
Two Banks (AXIS Bank and SBI) have shown interest towards this project. We are
going to develop a prototype and showcase it to the Banks.
Overview
Vision
To provide a solution on SAP for Channel Financing process.
Objectives
 The core objective of Channel Finance is to provide integrated
commercial and financial solutions to the supply and distribution
channels of a given industry.
 To draw out the end-to-process of Channel Financing.
 To map it to the existing SAP Landscape. This means taking
modules working on diverse applications, including SAP, and
integrating them all using SOA, to have Channel Financing in
place.
Author: Partho H. Chakraborty 4

5. Business Case: CHANNEL FINANCING USING SOA
 To fill up the missing links or White Spaces in SAP in this
Process with Composites to be developed by Intelligroup.
 To allocate resources to work on this project.
Situational assessment and problem statement
Current situation
Banks are currently using the “conventional lending” method, but this method is not
concerned about suppliers & dealers’ financing activity. Here, independent activity is
focused upon and the lending is backed by collaterals.
Problem
The conventional lending method leads to weak financials of the supplier or the
dealers may adversely affect the top & bottom line of the financed firm (Company)
due to reasons like delay in supply, non-availability of credit, and delay in receipt of
payment.
Opportunity
Channel Financing involves financing supplier, manufacturing unit, buyer
(distribution unit) – entire supply chain mostly discounting bills.
It extends market determined credit to supplier (vendor) & dealer (distributor). It
meets funds required for purchase & sales besides production. It helps in
sustaining seamless business flow and avoids working capital related difficulties.
Channel financing opens up manifold opportunities due to which the banks can
make conscious efforts at popularizing this credit delivery mechanism.
Most banks require Channel Financing in full if not in parts; i.e. some specific
modules such as Dispute Management, Net Banking, etc.
Note: This solution can be given to NBFC’s also
Author: Partho H. Chakraborty 5

6. Business Case: CHANNEL FINANCING USING SOA
Implementation Strategy
Project title
Channel Financing Using SOA.
Target Benefits for all the channel members
Benefits to Dealers/Distributors
a) Steady and cheaper source of Working Capital financing.
b) Channel partners can increase Sales through higher purchasing power.
c) Clean facility up to certain limits.
d) Simplicity of documentation and approval procedures.
e) High service and delivery standards compared to current neighborhood
Banker / Moneylender.
f) Channel partners may be able to increase profitability by availing of cash
discounts from Corporate.
Benefits to Supplier
a) This involves the liquidity position by availing finance at cheaper rate based on
the credit assessment of manufacturer.
b) There is no risk of non-payment by the buyer (manufacturer).
c) No documentation or formality.
d) Cost effective due to finer rate of interest.
Author: Partho H. Chakraborty 6

7. Business Case: CHANNEL FINANCING USING SOA
e) Supplier saves time & human resources for receivable management.
Benefits to Manufacturer / Principal customer
a) Pre sale working capital requirement shall come down.
b) Assured availability of Working Capital finance to their channel partners at
lower than current cost of credit.
c) Corporate can use Channel Finance as a marketing tool and strengthen their
relationship / reward loyalty of their Channel Partners.
d) Release of funds from the Balance Sheet resulting in improvement in financial
Ratios.
e) Conversion of Balance Sheet into an Off Balance Sheet liability.
f) Greater efficiencies in the Corporate’ receivable management and cash
management process.
g) Ability to introduce payment discipline with their Channel Partners.
h) Firm can concentrate more on their core competence i.e., area of production &
marketing their products besides saving time & cost involved in arranging
creditors.
Benefits to Bank
a) Bank will have increased data & customer base.
b) Bank can understand purchaser profile and payment history of borrower.
c) Simple monitoring of end use.
d) Risk is diversified & credit exposure norms are better observed.
e) In case of liquidity crisis these bills can be rediscounted with RBI.
Author: Partho H. Chakraborty 7

8. Business Case: CHANNEL FINANCING USING SOA
f) Easy tracking for performance of banks at each leg of the channel financing.
g) Need not to retrieve data and report from heterogeneous application
Output
Robust tested Channel Financing solution which will be the part of overall Cash
Management.
Phase 1:
Cash Management
Collection
Payments
Liquidity
Trade Finance
Channel Financing
Phase 2:
a) Net Banking
b) Mobile Alerts
SAP and Intelligroup
a) SAP will take us to various banks to market this product.
b) Marketing will be handled by Intelligroup.
c) License fee will be given to SAP.
d) Intelligroup gets:
i. Implementation revenue.
ii. Support process revenue.
Author: Partho H. Chakraborty 8

9. Business Case: CHANNEL FINANCING USING SOA
iii. Annual Maintenance Contract (AMC).
iv. Royalty for any process / objects developed by Intelligroup.
Modules involved in project
a) BCA: Customer Account Management.
b) FS-CMS: Collateral Management.
c) FS-CML: Loan Management / Risk Assessment.
d) FSCM: Dispute Management.
e) RBD: Reserve for Bad Debts.
f) GRC: Governance and Risk compliance.
SAP Enterprise Service Oriented Architecture (SOA)
Introduction
Enterprise SOA revolutionizes the design of business applications, enabling
the rapid composition of business solutions. With enterprise SOA, you can
encapsulate business logic and expose it as enterprise services -- smaller
functionality components that can be reassembled quickly to form new
Author: Partho H. Chakraborty 9

10. Business Case: CHANNEL FINANCING USING SOA
innovative business solutions that meet changing business requirements.
Based on SAP Net Weaver’s SOA platform, enterprise SOA provides you with
business and industry-specific context views through enterprise services and
safeguards scalability, robustness, and governance for your IT. Enterprise
SOA is therefore your blueprint for an adaptable, flexible, and open IT
architecture for developing services-based, enterprise-scale business
solutions.
Role of SOA in Channel Financing Process
i. To create new applications on top of existing enterprise solutions.
ii. To automate new or existing business processes.
iii. To increase the value of your current systems.
iv. To achieve greater flexibility while controlling technology costs.
v. To deploy innovative solutions to extend our business partner networks.
vi. To improve our ability to link other applications to SAP solutions through
SOA.
The Main Use of SOA is “Enterprise service bus”, where it will work as a
communication channel like spoke and hub as shown in below diagram:
 Designing services via an ESB paradigm makes services modeled
according to a harmonized data model before implementation takes place.
This is called Outside-in approach, as the model that is developed outside
an application context is afterwards propagated to the application systems
for implementation.
 This approach will eventually result in no or only few data mapping
requirements on the ESB as the semantically data model is harmonized
Author: Partho H. Chakraborty 10

11. Business Case: CHANNEL FINANCING USING SOA
across various provider and consumer applications based on a commonly
shared service model.
 This is in fact one of the main differentiating factors between a classical
EAI and an ESB approach: EAI will heavily depend on data transformations
(mappings) on the middleware component; in a service oriented
architecture, the ESB ideally does not perform tremendous amounts of
data mappings ESB ideally does not perform tremendous amounts of data
mappings.
Here is the process of building this composite solution, explaining all the artifacts
from the Channel Financing Process:
Specifying Composite Application
• Define the Business Process
• Define the Process User Roles
• Define the Process Steps and Define the User Interfaces
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12. Business Case: CHANNEL FINANCING USING SOA
Designing Composite Application
• Service Identification
• Service Decomposition
• Service Mapping
• Defining the Business Objects
• Designing the Process for NTW BPM
Developing Composite Application
• Developing the Service Layer
Service Provision Layer
• Developing the User Interface Layer
• Developing the Process Layer
• Integrating in Enterprise Portal
Configuring Composite Application
• Configuring CAF
• Configuring Enterprise Portal
Transporting & Packaging Composite Application
Transporting CE (UI, BPM, CAF), EP artifacts.
Architecture layers -- Technology Components
Portal / Internet access point - NTW EP
Composite - NTW CE (UI, CAF, BPM)
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13. Business Case: CHANNEL FINANCING USING SOA
Service Provisioning - IS-Banking and other Backend applications,
Service Bus and Repository - PI / SOA Middleware / ESR
Work plan
i. Map end to end Business process to SAP.
ii. Test the entire Business process end to end.
iii. Customize NPAS to Indian scenario.
iv. Design/Develop the GUI (Graphical User Interface)
v. Go To market Strategy – PPT & Brochures
vi. Training
Note: i & vi have been completed. We are now working on ii to v. In v the PPT
is ready, we have to fine tune it and develop the brochures
A sample of NPA’s to be developed is embedded below:
C:ParthoIntelli
NPAs.xls
Sales
Target Customers: It can be targeted to Banks and NBFC’s.. Most of the Banks
are potential customers but NBFC will not need the end to end scenario as the
bouquet of products/services is limited on this front.
SAP Business Suite: The customer does not require the full business suite.
They can take only those modules that required. For example if the customer has all
the required modules excepting CML, then the customer can go for CML only.
New customers would get ECC 6.0, but if the customer is already running on an older
SAP version, it is better to have ECC 6.0 with EHP 4.0 (entry level to Business suite)
Here the user will take IS-Banking and GRC, which comes with ECC 6.0.
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14. Business Case: CHANNEL FINANCING USING SOA
The customer would have to take User Licenses. We would need to hard sell to
SAP to get a fine price for the License Costs.
Market Size: The market size is global. We can take this solution to probably each
and every bank in the world. This can be target to any geographical location. Once
being tested successfully in India, we can release the country version by adding
country specific features as well as regulatory provisions.
Asia and Africa are soft targets and we can pick up good business here.
Savings/Earnings vis-à-vis investment from the customer
a. By consolidating all the functions under one head banks save on time, improve
efficiency and can respond to customer very fast as they know under what
transaction the customer is interacting with them. By having access to all the
relevant information in one place, the bank is better place to take critical
decisions on the risk to take on any of its clients and this being dynamic and
net based, the access to this information is available to the decision makers
and stakeholders from multiple places and not just the intranet.
b. As the entire business process can be mapped, the same business users
under Cash Management can monitor the transactions, thus saving on
manpower. Good for analysis and will be planning.
c. Banks earn from commissions and penalties such as limit burst, cheque
bounce, etc. Can design reports/queries that can access information from
multiple databases/applications now. This ensures better control on Revenues
and helps plug leakages. Proper use or event triggered messages and
transactions will ensure better compliance and incomes.
SAP Revenue Commitment that they will get us: This has not been
quantified. SAP wants to take this product globally as another solution offering. We
need to factor with SAP of being the natural choice of implementing this solution and
having the first right of refusal in case we cannot handle any specific project.
We also need to factor with SAP on marketing other SAP solutions and implementing
it such as a customer may want us to implement a HR Solution, which is not linked to
Channel Financing.
Typical implementation size & Duration: 4 functional and 4 Technical
Consultants. It would take maximum 6 months as for a complete End-to-End
implementation of Channel Finance.
Author: Partho H. Chakraborty 14

15. Business Case: CHANNEL FINANCING USING SOA
Note: From a functional perspective, 6 months is OK as an average timeline for any
implementation. The solution combinations are many. Mainly eSOA and patching
legacy systems together with some part of SAP Banking & the other Modules;
implementing the whole of IS Banking and other parts of SAP, etc. A full blown IS
banking implementation will take close to a year. Blueprinting itself will take 3 months
at least in this case. Any other combination of solution will take approximately 6
months.
Financials
Resources required: (For setting up the in-house box)
Field of expertise Level Resources Man Months
Functional Senior Consultant FICO
(configuration F4
and 1 4
solution testing) FICO F3, 2 4
(SAP Banking, FSCM, DMS L2 1 2
GRC Consultant SolMan F3 1 3
Basis Consultant - Basis TE4 1 2
ABAP Consultant - (TE3)
ABAP NTW 1 4
Net weaver (Java Workflow L3 1 2
expert to design the
web portal) Developer L2 1 2
HW, SW required: SAP IDES ECC 6.0, IS-Banking and SAP Solution Manager
Note: We presume that this section is for the SOLMAN for in-house box configuration
and testing only. We are not looking at using only standard reports for demo. In case
we need any custom reports, we may need more ABAP effort.
Duration to build this and hence the total cost of implementation: 4
months
Ongoing costs: This is for further development such as in Phase II where we will
add mobile alerts, etc.
• Resource Cost – Salaries
• Establishment Cost
Author: Partho H. Chakraborty 15

16. Business Case: CHANNEL FINANCING USING SOA
Other Costs: Travel Cost – Client Visit
Costing Summary
Note:
1. Exchange Rate is taken as 1 US$ = Rs. 50.72
2. If we exclude the license cost, then all other costs are Rs. 3,456,568
Financial constraints: No financial constraints as there is no development except
for GUI and the whole project would be over in maximum 4 months
Payback period and return on investment (ROI): 2 implementations would
payback our investment if we look at an ad hoc figure of minimum Rs. 50 lakhs per
implementation.
Risks: Need to be compatible with the existing application. The major risk factor is
that we do not have prior experience to validate our expectations using eSOA in
Channel Financing as we will not have any other financial application systems to
work with in-house while developing the product.
Revenue
Revenue can be broken up as per the following:
Implementation revenue: As this application looks standard with all SAP Modules, an
end-to-end implementation would take around 960 man hours. The consultants on
the job would be:
1 FICO Consultant (L4) – 480 man hours
1 FICO Consultant (L3) – 480 man hours
Any other work would have to be estimated such as customization of NPAs.
Author: Partho H. Chakraborty 16

17. Business Case: CHANNEL FINANCING USING SOA
Annual Maintenance Contract (AMC): 1 functional and 1 Technical
Consultant would suffice. This can be done offsite.
Royalty: This needs to be worked out with SAP
Upgrade revenue: The next version would include mobile alerts and Net Banking
apart from improving the feel and look of the standard features in the GUI. This would
have to be estimated when we chalk out next version.
Benefits derived
Increased customer satisfaction
Best partners of SAP and leveraging SAP Modules
Value Addition
This process helps to know the missing details or link between Risk and Credit, for
example; Bank Statement does not tell when the loan would be over nor there any
provision for the customer to intimate about the completion of loan.
Let’s Take a Simple case study:
Month Earnings Expenses
Feb’09 1000 100 (Savings)
200 (Expenses)
500 (Car Loan)
150 (Consumer Loan)
50 (Personal Loan)
Total 1000
Here, Consumer loan last installment is on Feb’09 and the customer will have surplus
amount of 150/-. So he wants to take new loan from Mar’09.
But this information about 150/- Surplus is not reflected anywhere in the Bank
statement. Thus prima facie, the entire loan gets rejected and customer is not
intimated why the loan is rejected.
The above issue was detected while studying the various modules and this issue
though not a part of Channel Financing, can be easily resolved.
Author: Partho H. Chakraborty 17

18. Business Case: CHANNEL FINANCING USING SOA
Project Management Framework
Governance
The governance structure is as follows:
a) Partho Hemendra Chakraborty (Project Manager)
b) Sameer Rahim Shadab (SOA)
c) Geetha Pilli (GUI)
Quality management
a) Methodologies and standards as followed by Intelligroup.
b) Change, issue, and problem management as followed by Intelligroup.
c) Review and acceptance procedures as followed by Intelligroup.
Project Responsibility
Partho H. Chakraborty
.
Author: Partho H. Chakraborty 18

19. Business Case: CHANNEL FINANCING USING SOA
Note: Names if any, are Suggestive only and without any relation to any real
entity whatsoever. It is only to give a feel and touch of how transactions
can be structured and names are indicative
This article is meant for education purposes only and it is not be
reproduced for any commercial purpose by print or electronic medium
whatsoever
This case study is written by:
Partho H. Chakraborty
A - 305, DSR Spring Beauty Apts., 124/1, ITPL Main Road, Brookefields, Kundalahalli, Bangalore -
560 037, India
Tel: +91 80 420 50293, Cell: +91 99863 22504
email: parthohc@airtelmail.in; parthohc@rediffmail.com
Skype: parthohc01
Author: Partho H. Chakraborty 19