Market Impact (continued)
This continues a discussion of recent announcements from SAP, including Financials. For the announcements see Part One.
Today, companies are striving to shore up the existing technology and applications inside their organizations first, and only then to extend them outward to trading partners. SAP seems to be positioned well to achieve this. SAP has been pursing the right avenues to technologically prop up its product. Its recently unveiled Internet-based product architecture roadmap that includes Web services, portals, exchanges and Web Application Server (WAS), bundled with its knowledge of business processes bodes well to promoting it into one of the few vendors able to provide an applications infrastructure foundation.
To achieve this, SAP had to pay some price in soul searching and organizational readjusting. Although having to deal with in-house political struggles, and having to spin the reasons of the merger of subsidiaries (as some may rightfully ask why these were spun off in the first place at all (see SAP to Become Leaner, Meaner and More Organized), the positive sign is that SAP has become nimble enough to react quickly to the changes in the market.
SAP Markets, set up in May 2000, was chartered with the job of delivering mySAP.com marketplaces, since, immediately afterwards, SAP teamed with Commerce One to jointly develop and sell what became the MarketSet product suite for e-procurement and marketplaces (see SAP Gives Up, Declares Victory. Again.).
In 2001, following SAP's acquisition of TopTier Software, a vendor of portal software and integration products (see SAP Acquires TopTier To Further Broaden Its Horizons), SAP Portals was set up to manage all of SAP's portal business, including mySAP Workspace and the Business Information Warehouse (BW) products.
The recent merger between SAP's subsidiaries may reflect the fact that B2B portals are of a greater interest and benefit to customers than a mere impersonal marketplace that focuses only on procurement price reduction. SAP's focus on delivering a portal as overlaying personalized user interface may prove to be a crucial bet, as an intuitive portal might prove to be a simple and effective way to integrate information from disparate systems. In addition to the above-touted Drag&Relate functionality, SAP Enterprise Portal offers many other cutting edge features such as cascading portals, federated portals (multiple portals working concurrently), knowledge management (KM), shared team spaces and proactive notification of problems.
As users have increasingly been asking for more effective ways for companies to share information and collaborate during the buy/sell process, SAP Markets and SAP Portals will have ultimately targeted the same business opportunities in the past. Since the users have shown more inclination towards private trade exchanges (PTX), the need for companies to combine their marketplace strategies within an enterprise portal framework has lead to a more integrated approach to enabling access to internal and external collaborative systems.
Having said all the above, the consolidation of the subsidiaries makes sense. Combining them will also likely reduce the overhead and development costs of the units and, possibly, provide a more sustainable business unit. Moreover, instead of dealing with two sales channels, customers will now have one point of access to the complete mySAP product set. IBM's decision to integrate its e-commerce application WebSphere Commerce v5.1 to its WebSphere Portal Family v2.1 through new packaged integration services from IBM Global Services and IBM business partners, may additionally endorse the emerging trend towards integrated approach to internal and external collaborative systems to eliminate the duplication of effort of a customer company.
On a more down note, SAP's license revenues drop in 2001 and a recent drop in the German market, might indicate a loss of the supremacy aura against the backdrop of competitors' success (e.g., PeopleSoft, IFS, Intentia, Navision, Baan, Scala, etc.). These vendors have also shown good results in SAP's stronghold, the European market, which can cut into SAP's top line in the future. This may also indicate that customers might be wising up to the fact that SAP does not necessarily deliver the best value to everybody across the board. The cost, time and effort to upgrade SAP to newer version continue to be a concern to some users too. The perception that SAP is still the most cumbersome and expensive product to deploy remains indelible in many minds, despite an increasing number of flawless SAP implementations. Some caution also comes from the fact that SAP's service & support revenue continues to grow much faster than new license sales. This indicates a slowing down of new accounts creating activity, which should likely mean more opportunities for competitors.
Also, many prospects and existing customers are still unclear about what mySAP.com entails, despite much more aggressive and savvy marketing, which has made contributions to SAP's recent success (for more information, see Has SAP Found Magic Formula (One) To Learn The Ropes Of Marketing?). This may force SAP to further expend resources to clarify the unclear points, as seen in approximately 20% higher sales & marketing expenses in 2001 compared to 2000.
Furthermore, the above merger move might fly in the face of previous SAP's efforts to portray itself as an open and fair player, and that SAP Portals business entity would be seeking to partner with many other e-business software vendors in order to provide user integration across the heterogeneous applications landscape. Given that SAP Portals' independence will now be less likely in this blended setup closer the parent's scrutiny, and backed up with the controversial relationship with Commerce One (see Gosh, They Kill Partnerships, Don't They?), many vendors may see the new entity as a competitor rather than a partner. As SAP will be challenged to deliver a convincing message to both SAP and non-SAP users, it is a no-brainer to guess which side will have a right of way. Also, the uneasy situation with Commerce One should be preying on SAP management's mind too (not to mention on their common customers' minds) despite assurances of amicable partial separation and SAP's ever increasing independence of the partnership. A true closure, may it be an acquisition or total parting of ways might set many minds to rest.
SAP's viability and the business applications market's leadership remains unscathed, as the company remains strong and will be the leader for a long time to come. It might be difficult to find a case where SAP should not be included on at least an initial long list of vendors in a global enterprise applications selection. The depth and breadth of mySAP.com's offerings may be attractive to a wide range of companies, both industry- and size-wise. Potential and existing SAP users should not reckon with having all components of mySAP.com deployed before 2004 though. Existing SAP users should evaluate maturing SAP CRM, SAP PLM, SAP BI and SAP SCM functionality against their best-of-breed investments notwithstanding.
Users anticipating projects in the next 12-18 months should ascertain the recently announced technologies bearing in mind the maturity factor and while comparison-shopping with other renowned available products. While SAP has espoused one of the most compelling and promising collaborative-Commerce vision to-date, particularly through its moves in the portal space, its Java compliance and in the Internet marketplace -- the ideal enablers of collaboration it still has to prove to the market it can integrate and deliver, and satisfy the small and medium-size customer with quick implementations and nimble responses to problems. SAP customers should expect continued challenges with external integration and product upgrades, although these will be less of a problem with every new product release.
The creation of the merged unit is primarily good news for SAP customers that aspire to integrate their internal applications with applications from their partners and who need to exchange information with their trading partners that are often not SAP shops. They should observe the future development of the subsidiary, as much of the needed functionality will likely be produced here. As non-pure SAP shops might view the new entity as much less independent of SAP, they should challenge it to prove its track record of partnering and integrating to other third-party applications.
More comprehensive recommendations for both current and potential SAP users can be found in SAP - A Humble Giant From The Reality Land? Part 5: Challenges and User Recommendations and in 'Collaborative Commerce': ERP, CRM, e-Proc, and SCM Unite! A Series Study: SAP AG.
This concludes Part Two of a two-part News Analysis that continues a discussion of recent announcements from SAP, including Financials.
Part One covered the recent SAP announcements.