SAP Fills Out 2007 Agenda

PALO ALTO, Calif. — A lot of tech companies will tell you that their customers rely on their software. That’s no surprise. But there is something a little different about that claim when enterprise application vendor SAP says it.

“At a big company like Siemens or Nestle or Colgate, if you take away Microsoft or Google for a day, it might be very inconvenient, but life would go on,” said Peter Graf, SAP’s executive vice president for solution marketing. “Take SAP away and business stops; orders aren’t taken or processed and nothing works.”

And if you were to take SAP away, a lot of companies would be affected. SAP said it has 12 million users worldwide at some 100,600 installations. The company’s software was key to the production of Microsoft’s Xbox, and it also helps power Apple’s iTunes store, to name but a few of its blue-chip customers.

Historically a conservative company (Graf admits SAP “stumbled a bit” as the Internet started to take off), SAP is moving quickly to help lead the next computing paradigm, service-oriented architecture (SOA) , which allows enterprises to work with a variety of applications seamlessly.

“We believe mySAP is the best ERP  we’ve ever built in terms of industry functionality and usability,” said Graf. “Additionally, it gives companies a head start to deploy SOA in their enterprises, bringing more flexibility to business processes.”

An SAP agenda

In a briefing here at its Silicon Valley campus, SAP executives discussed with internetnews.com the company’s strategy and product plans for the coming year.

At the top of SAP’s agenda is the SOA initiative, its new Duet software for Microsoft Office users, and an enterprise search service still in development.

Graf said the opportunity SAP sees is to reach millions more users and help CIOs innovate more. “Traditionally, IT departments have an ‘it’s working, don’t touch it,’ attitude,” said Graf. But in a highly competitive environment, and increased regulatory pressure with Sarbanes-Oxley and other policies, change is almost mandatory.

SAP’s answer is to provide a standard platform based on its NetWeaver software on which to allow customers, ISVs,  and others to innovate. While most platform vendors let customers innovate to some degree, analyst Joshua Greenbaum credits SAP for running more forcefully with the idea.

“Some of SAP’s competitors are known for predatory partnerships, where you also have to compete with them, and I think SAP used to be more like that too,” Greenbaum, who is with Enterprise Applications Consulting, told internetnews.com. “But SAP’s ecosystem strategy is deliberately inclusive; it’s a real ecosystem. That’s going to be a real advantage to them in the long run attracting customers.”

Zia Yusuf, head of SAP’s Platform Ecosystem Group, said the company’s list of independent developers and contributors is growing rapidly. SAP has over 1,500 ISVs working on products and numerous online forums. And Yusuf said the SAP developer network has had over a million posts during the past two years.

“You can’t have a real platform or thriving ecosystem unless others agree to participate,” said Yusuf.

More help in attracting customers will come from SAP competitor and partner Microsoft. Duet, which uses the more familiar Office interface to access SAP software, will be sold by both companies.

“We have yet to see the full potential of Duet, but I think being able to use Office as the user interface for your ERP system is huge,” said Greenbaum.

Dennis Moore, who heads SAP’s Emerging Solutions Group, said Duet’s development was driven by customers. “They really want their key IT vendors to work together,” said Moore.

Office has about 400 million paid users, and Moore said about 100 million are already SAP customers. The problem is that only a subset of that 100 million have access to SAP data.

“Most enterprise applications have been designed for the user who spends the day in those applications,” said Moore. “Duet is designed for those who live in Office. So now with Duet, for example, Office users can have current inventory data at their fingertips.”

Moore said SAP has invested heavily in Duet and has over 200 people working on it with a totally SOA-oriented approach.

Greenbaum said the only thing he sees risky about SAP’s Duet plans is setting expectations too high. “You can’t do everything in an Office interface,” he said.

Also, SAP and Microsoft will compete for some sales of Duet. But Graf said the benefits of wider adoption outweigh any lost sales.

“We have a very grown-up relationship with our partners like Microsoft and IBM,” said Graf. “We understand there are common opportunities we can’t afford to miss. We also compete with IBM, which has Websphere, but they’re also a great customer, and competition doesn’t keep us apart. There are no hard feelings.”

Next page: Searching beyond Google

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Searching beyond Google

The other area SAP has high hopes for is search. But the company isn’t necessarily competing with search goliath Google. While SAP already offers search features in its Netweaver platform, Moore said SAP’s latest planned enterprise search service is very different than what Google offers.

“Internet search is built around links from one document to another, but in the enterprise there are very few of those kind of links,” said Moore. “There’s a huge, unexploited area of internal meta data you can’t get over the Internet.”

Greenbaum said he’s long been a skeptic about search being a supremely critical application as Google and its competitors believe. “But the ability to search structured and unstructured information in an analytical way can be very successful.”

Currently in beta, Moore said the as yet unnamed, and un-priced enterprise search service will be released sometime in the first half of next year. It will automatically tie into a user’s security settings and profile providing different results depending on the user. For example, a search on Moore’s name showed the people he reports to and report to him, among other links.

Software as an optional service

SaaS  is also very much in SAP’s plans. Earlier this year, SAP announced a major investment in software-as-a-service, though it’s far from moving dramatically to the on-demand model.

Graf said SaaS has a lot of value, but is more limited than SaaS proponents like Salesforce.com market it to be.

“We don’t see on-demand software as an all-encompassing truth,” said Graf. “It has great benefit and we like the fact it lets us get the value of our software out to customers quickly. But it’s more of an onramp” than a final destination.

SAP gives customers the option to bring its on-demand applications in-house for more direct control and development.

Analyst Charles King thinks this hybrid approach is one of many smart moves, including its focus on SOA, which SAP has made in the past year to ensure continued growth.

“There’s been some noise from competitors about SAP customers being slow to adopt its next-generation technology, but these are large customers that tend to be very slow to make changes,” King, with Pund-IT Research, told internetnews.com. “These kind of sales can take months or years.

“The key thing is SAP already has a big customer base with tens of millions of dollars of investment, and most of them aren’t likely to go elsewhere.”

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