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SAP: Getting Serious

SAP is considered the Microsoft of Europe. The company was founded in 1972 by five IBM systems engineers. SAP is a world leader in so-called enterprise resource planning (ERP) software, with clients such as DuPont, Coca-Cola and even Microsoft. ERP manages a company's HR, logistics, manufacturing, purchasing, inventory and finances (the back-end systems). However, with the onslaught of the Web, ERP has been looking outmoded.

SAP has made attempts to implement the Web in its offerings, such as with its mySAP.com offering. But the attempts have been slow. SAP has been a nonentity in terms of such huge trends as the creation of B2B exchanges.

For SAP, it has been resistant to change. The company was against partnering, for example. There were no stock option plans.

Recently, the resistance has been costly. This was evidenced in the past earnings report. Revenues increased only 10%.

But SAP has finally realized that it must change - and fast. The company has recently decided to institute employee stock options. It was a necessity. The company has been losing key executives (such as the CFO and president).

Partnerships? That is also being done. Several days ago, SAP entered a critical partnership with CommerceOne to create the next-generation e-business marketplaces. It is an ambitious project, which calls for the transformation of linear supply chains to parallel, collaborative communities.

What's more, SAP will invest $250 million in CommerceOne (this increases SAP's position from 1.5% to 4%). The benefits are potentially huge, especially with the extensive client base of SAP. Integration with legacy systems is vitally important for effective B2B exchanges.

Let's face it: The technology space is too big for any company to go solo. Specialization is key. Now that SAP has accepted this, it's in a position to ramp up its growth rate and its stock price.



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