The World According to SAP
by Judith Hurwitz, CEO
SAP is at an interesting crossroads. At its recent U.S. Sapphire user conference, company executives spent considerable time outlining the roadmap for SAP’s next generation infrastructure platform, its Enterprise Services Architecture (ESA). This is SAP’s version of a service-oriented architecture (SOA) framework built on top of its NetWeaver middleware combined with what it calls its “composite application environment” – the components of its wide ranging ERP solution. The company is making a pitch far beyond its traditional strength in ERP software and making a play to become a leader in middleware by taking on the competition: IBM with its on-demand strategy; Oracle with its new aggressive position spanning enterprise applications, database, and middleware; and Microsoft with its extensive technology stack that stretches from OS to applications.
Listening to SAP’s messages around its ESA is interesting from a number of perspectives. SAP’s greatest strength, but also its weakness, is its formidable suite of packaged applications. During the Y2K transitional era, SAP was able to leapfrog the competition by offering a comprehensive packaged enterprise environment. By putting themselves in SAP’s hands, companies could retire many home-grown applications and move to new packaged enterprise applications, while laying the Y2K problem to rest. They accepted a comprehensive, yet rigid, set of application services that dictated how a business process should function. It was a winning strategy because it offered a solution that was proven and relatively simple as long as you adopted SAP’s approach. This strategy, combined with the ability to execute, put SAP into a winning position vis–vis the Fortune 1000.
SAP is now trying to leverage its position as enterprise application provider to become the infrastructure provider as well. Ironically, to be successful in this movement, SAP has to transform its original strength of “structure and rigidity” into one of “flexibility” in the fluid world of service-oriented architecture. And to make the point, SAP is using compelling marketing adjectives, such as “agile,” “flexible,” and “modular.” Making the journey from the inflexibility and rigidity of the traditional ERP environment to a component-architecture world based on modular business services is complicated. What will it take to get there?
In my view, SAP has its work cut out for it. SAP is designing a middleware platform that incorporates NetWeaver, but is also adding in a business process layer to enable the streamlining of business processes. Behind this is the powerful notion of being able to tie business services together across departmental silos. In essence, SAP is leveraging its power in the applications market to move down into the middleware stack while it also moves up to the business process stack. To be successful in this strategy, SAP will have to attack the market on several fronts:
? SAP will have to continue transforming its ERP platform into a set of modular business services. The company has made some impressive movement in this direction but given the scope and scale of the effort, it will take many years to accomplish the task. It must also contend with the huge legacy environment of customers who have a variety of modules and versions of its platform.
? SAP must build a sustainable partner ecosystem. While SAP announced an impressive array of new partners at the Sapphire conference – including Hewlett Packard, Computer Associates, and EMC, among others – it will have to add hundreds of new players to its fold. Its partner program is in its early stages and will have to grow substantially if it hopes to take on IBM, Oracle, and Microsoft.
? There are major areas where SAP will need to focus development efforts, including its ability to build business services and provide comprehensive data management, as well as improving application development processes.
The Bottom Line
SAP’s position is complicated. It is using its dominance in ERP to position itself as a primary infrastructure player, but also seeking to establish itself as an SOA player, focusing on business process automation across departmental stovepipes. Getting to the end goal is the real challenge. SAP’s roadmap is a three-year journey involving serious management commitment. Clearly, SAP has demonstrated that it has the required focus and attention to detail. However, the complexity of the task is great, as is the weight of the legacy environment of the majority of its customers. To make headway, it must compete directly with IBM, Oracle, Microsoft, and probably with Hewlett Packard, too.
Oracle is already toe-to-toe with SAP, following its successful acquisition of PeopleSoft, and this is shaping up to be a long-running and very aggressive contest. The two companies are now fighting for the same territory; SAP has far greater strength in applications, but Oracle is much stronger as an infrastructure provider.
Could an alliance between SAP and IBM be an unintended consequence of the Oracle v. SAP face-off ? It’s possible, but IBM would need to be convinced that SAP did not pose a threat to IBM’s healthy infrastructure business. Both companies would need to find ways not to tread on each other’s toes.
The good news for customers is that SAP’s ERP applications will become a lot more flexible in the coming years. The competitive pressure for enterprise infrastructure will also serve customers well in the long term. All major players are focused on providing a service-oriented architecture. The key to success from the customer perspective will be to ensure that all of these approaches focus on interoperability and ease of implementation.