SAP’s tryst with monopoly

The German enterprise software maker SAP AG couldn’t have chosen a better

time to announce it was changing for the better. While its rivals Oracle,

PeopleSoft, J D Edwards and Siebel are engaged in achieving self goals, SAP is

moving ahead aggressively.

SAP recently announced a host of upgrades and product innovations at its

annual Sapphire convention at Orlando in the US, where SAP partners, customers,

analysts and the media had gathered to listen to the company’s executives on its

future direction. "While the competition is in turmoil, we are innovating," was

the message sent out by SAP to the market.

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‘Clearly, the

portal is a very strong technology for us’ 

Hasso

Plattner

founder &

chief software architect, SAP 

The market seems to have lapped it up. In the US alone, the largest

enterprise user market, an impressive number of PeopleSoft customers rang back

SAP offices enquiring about a free system evaluation scheme to make the switch

to SAP, according to Bill McDermot, chief executive officer of SAP US.

Acquiring customers from rival camps is a key ingredient in SAP’s growth

strategy. The approach can’t be helped simply because the market is likely to be

undernourished at a mere 3% growth rate (predicted by AMR Research for 2003).

SAP’s goal is clear: pull customers from competition and goad existing users to

spend more of their IT budgets on SAP products.

To take care of the first part of its strategy, SAP has climbed a moral high

ground labeled "stability". "We do not believe in acquiring companies for their

customer bases," SAP chief executive officer and chairman of the executive

committee Henning Kagermann said. What Kagermann did not mention was that in

order to supplement such a stance, SAP has acquired senior executives from IBM,

PeopleSoft and J D Edwards, all of whom were handling key accounts in the

US.

Soon after Oracle announced its hostile takeover bid for PeopleSoft, SAP

released an advertisement in major US cities inviting users to take a free

system requirement evaluation program to see if they could switch from

PeopleSoft to SAP. The advertisement has worked wonders, according to company

officials.

The second part of the strategy lies more in its products. SAP is talking of

a new integrated business application suite (modified MySAP Suite,) an

application development platform (xApps) and the enterprise services

architecture (ESA) pitched right at enterprise application integration

(EAI).

ESA versus EAI

"Consolidate now with SAP and get done with

consolidation forever. Do not add unnecessary layers of complexity," Kagermann
had said in his keynote address at Sapphire. He was pitching for SAP’s ESA

versus EAI.

SAP’s ESA offers customers the means to extend enterprise resource planning

systems into network connected enterprise solutions, a market that every EAI

service provider is tapping. ESA gives SAP’s system a deeper entry into

enterprises, which can then perpetuate and self propagate. SAP’s ESA consists of

four layers. At the base is the "computing platform", which will come from the

likes of IBM, HP, MS or Sun. On top of this sits the infrastructure integration

platform that can be Websphere, ".Net" or Netweaver. The third is the

application integration platform that consists of the MySap Business Suite and

xApps. On top of these lie the business solutions–the end user element.

The key aspect in ESA is master data management, which will pool data from a

multitude of databases in an organization into a master database. This

integration of databases is key for organizations wanting to derive value and

speed of operations when they are, say, grappling with separate databases for

inventory, manufacturing, sales and budgeting. Integrating such diverse

databases into a single database is where EAIs are presently making their money.

SAP plans to plug that revenue hole.

The bottomline of SAP’s consolidation story is that the company is

integrating all its individual components into a suite.

SAP sales executives–who were till now competing with Oracle, PeopleSoft and

Siebel with the individual components of SAP ERP, SAP HR and SAP CRM

respectively–will now sell the complete suite–the Microsoft way.

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“Consolidate

now with SAP, and get done with consolidation forever” face=Verdana color=#000080 size=1> 

Henning

Kagermann  

chief executive officer,

SAP

The new look

To start with, SAP has dropped the ".com" in

MySAP.com. The new offering is MySAP Business Suite, which has all the features
of the old suite and, in addition, it has been loaded with extended

capabilities. MySap continues to have the portal technology as its key engine.

SAP founder and chief software architect, Hasso Plattner, said: "The portal is a

very strong technology for us."

All existing components–such as SAP ERP, CRM, HCM (human capital management)

and PLM (product lifecycle management)–continue to be bundled with the MySAP

Business Suite. Each of these components are being upgraded to offer greater

functionality. SAP has adopted an open-end approach for MySap. It’s now easier

to integrate industry add-ons, third-party applications and other generic

services that run above SAP applications.

The suite comes with a "built-in" business integration tool and service. A

user who is switching over to the new MySap suite need not hire an EAI service

provider for integrating various solutions so that they can all work together.

SAP Netweaver, which is bundled with the MySap suite, takes care of this

need.

User interface

The biggest change that SAP is undertaking is

refining its user interface (UI). SAP badly needs to reduce the number of its
user dialogue forms (the UI screens which take data inputs from users and gives

the desired output) that run into a few thousands. The volumes of the UI screens

make it difficult for people to use SAP systems and users have to undergo

training every time a new component is added.

SAP is working on developing a standardized UI with just over 40 screens that

can work with most of its applications. The most significant progress it is

making is to integrate its UI with a program that is used most often, the MS

Office. Meanwhile, the portal technology is expected to give it the

customization capabilities.

Regaining lost ground

SAP is yet to find its roots in the HR (HCM)

market. PeopleSoft has stolen a march over the German giant in this case. SAP is
not averse to admitting this. However, PeopleSoft’s recent woes are likely to

contribute immensely to the fortunes of MySap HR. The new MySap HR will bundle

everything from employee interaction to e-learning and knowledge management. The

company has tied up with third-party content providers such as Siemens for the

MySap HR offering.

The small and medium business (SMB) segment is another area in which SAP has

to play catch up. It has tied up with IBM and Amex, which are evolving their own

SMB strategies. Amex alone is said to have brought in close to about six new SMB

customers to SAP in the last quarter.

The company is making a valiant effort to defy the gravity of the market. Its

product innovations are coming at such a moment in the history of enterprise

software market that it can be a real turning point for SAP. Parallels can be

drawn with Microsoft, when it integrated its Office components into a single

suite while the others were fighting over individual components.

However, SAP is not the pioneer of this concept in the enterprise market.

Oracle did it a couple of years back. It launched an integrated Oracle Business

Suite. It did not worked for Oracle. Will it for SAP?

Prashanth Hebbar

(CIOL)