SAP Gives Up, Declares Victory. Again.
SAP AG and Commerce One are joining together to build what SAP wasn't
able to build alone: the mySAP.com business suite. Widely perceived as
lagging behind in the development of the marketplace capabilities that
were an essential part of the image of mySAP, SAP has now solved its problem
by bringing Commerce One, a leader in the deployment of e-procurement
marketplaces, into the picture.
One operates a global network of marketplaces called the Global Trading
Web; most of the individual regional marketplaces outside the U.S. that
comprise it are jointly owned with large local companies. The regional
marketplaces in turn bring together individual company-based or vertical
marketplaces. Commerce One also sells the software that allows individual
companies to build their own marketplaces. In the long run, Commerce One
hopes to garner a significant portion of its revenues from transaction
fees. (See Commerce
One: Everything But Profits)
arrangement with SAP will certainly help Commerce One achieve its revenue
objectives, as SAP itself is expected by both parties to join the Global
Trading Web. It was not explained why this was not settled in time for
the announcement; we'd guess that SAP wants some kind of preferential
pricing, and will probably get it. In addition, it is inevitable that
many of the trading exchanges built with Commerce One's tools under mySAP
will also join the Global Trading Web.
third partner in the deal is SAP's Silicon Valley subsidiary SAPMarkets
Inc. SAPMarkets will be responsible for the bulk of the effort required
to integrate the mySAP applications with those offered by Commerce One.
As part of this integration SAP will teach its own application interfaces
to speak Commerce One's version of XML.
announcement marks the second time that SAP has gone out of house recently
to add capabilities to mySAP. In May the company announced that it would
integrate customer relations management software from the Clarify unit
of Nortel Networks (see SAP
Gives in to CRM (Part Time) Matrimony ).
two companies will share royalties during the three years that the agreement
is in force. Revenues will be derived from both software licenses and
transaction fees. In addition, SAP will contribute $250 million by purchasing
Commerce One stock; this is a drop in the bucket of Commerce One's $7.9
billion market capitalization.
One had earlier taken steps that might have led to a similar partnership
with SAP's rival PeopleSoft (see Commerce
One Goes High, Wide and PeopleSoft). Perhaps only coincidentally,
the week before SAP and Commerce One made their announcement at SAP's
Sapphire 2000 user conference, PeopleSoft intended to sell 1.2 million
shares of Commerce One. Commerce One assured TEC that the technical and
marketing arrangements with PeopleSoft are still in place.
Both SAP and Commerce One can smile from ear to ear (or, from "e-" to
"e-"). Commerce One gets access to SAP's 13,000 existing customer base
and to the leverage of its mySAP efforts, including SAP's help in reaching
22 industries in which SAP has expertise. Best of all, it doesn't seem
to have to do much that it wouldn't do anyway. In theory SAPMarkets will
do the heavy lifting of the integration, and the combined solution will
be sold by SAP's notably assertive sales force.
of course, has a chance to put content behind its extensive advertising
campaign for mySAP. The companies would like us to think of this as the
creation of a Yuppie automobile. In their words, "Commerce One + SAP Markets
= very fast car. SAP = high performance fuel & stable engine."
think of it more in terms of the classic Rock Hudson and Doris Day movie
Send Me No Flowers, in which Rock is an advertising agent who creates
a giant campaign for a product that doesn't exist, even as a concept,
and Doris is a rival who brings him up on ethics charges before the "Advertising
Board." In the end, a product magically appears in the nick of time and
well, who are we to spoil the predictable ending.
the case of SAP and Commerce One the ending may not be quite as totally
predictable, but it is hard to see it ending as a tragedy. Certainly,
both mySAP and the ASP market in general gain a lot of credibility from
this announcement - not that SAP needed it in its traditional markets
but, as the company has discovered, the Internet is a different world.
Today, it seems to be one that SAP may own a large piece of.
analysts have predicted that dot-com retail companies will be absorbed
or eclipsed by the larger bricks-and-mortar dinosaurs. This partnership,
like the one that Ariba and i2 made with IBM (see B2Big
Deal for IBM, Ariba, and i2) suggests that the B2B world will be less
about predation than symbiosis, and may suggest a similar model to the
The reason this partnership looks good is because it makes sense for current
and potential customers of both companies. Because the possible advantages
are obvious, we think it important to issue some cautions. First, the
combined offering does not exist; it will be "rolled out on a phased basis,
beginning immediately." Second, SAP software has been historically difficult
to integrate with. This difficulty exists both at the level that Commerce
One will be working and at the level that you will need to work to make
SAP's products work with your existing systems.
the other hand, the makers of e-procurement and market infrastructure
software have always known that it was their job to learn how to work
with the leading ERP systems, especially SAP's. So while each of the products
is a proven winner and there will potentially be convenience in working
with this new offering, even existing customers of one of these vendors
should evaluate a number of vendors for future software rentals or purchases.
It could turn out that there's a better match for you with no increase
in integration pain.