SAP - A Humble Giant From The Reality Land? Part 5: Challenges and User Recommendations

Part 5: Challenges and User Recommendations
P.J. Jakovljevic - August 10, 2001

Event Summary 

During its international e-business conference, SAPPHIRE, on June 12-15, SAP AG (NYSE: SAP), the leading provider of business software solutions, released a spate of upbeat announcements in its effort to portray itself as a reformed vendor of choice for all aspects of e-Business, including planning and collaboration. As an illustration thereof, SAP cited that its flagship mySAP.com suite has met with remarkable success in the market. SAP reached a major milestone in 2000 when the number of licensed users of its mySAP.com platform reached 1 million. Since then, more than 3 million additional users have reportedly licensed mySAP.com.

About This Note: This is a five-part note covering the announcements at the SAPPHIRE conference.

Part One covered Alliances and Partnerships
Part Two covered Expanding Functionality
Part Three discussed Market Impact
Part Four discussed SAP Strategy
Part Five covers the challenges faced by SAP and User Recommendations,

Challenges 

Delivering on this extremely ambitious strategy will be an enormous challenge. Although SAP has done a remarkable job of demystifying the mySAP.com conundrum, there will still be confusion as prospects might be overwhelmed with all the new products and unfamiliar terminology.

It appears that SAP's recent revenue growth is attributable to its market recognition, large customer base, and to risk-averse customers' unwillingness to go for less viable vendors, rather than to SAP's immaculate marketing effort. Moreover, SAP's sales force will not only have to learn how to sell the products but also whom to target within a prospect's organization with every piece of software.

The fact remains that many new SAP modules are quite cross-functional, while some may even require the creation of new roles within an enterprise (e.g., a VP of new product introduction (NPI)). One should also account for the ongoing costs of cross training the SAP consulting force on new and still developing e-business applications from its traditional ERP functional orientation. The same holds for the sales force that has been reorganized around vertical industries in respective CRM, SCM, business intelligence and other product areas.

Another caveat is that as a result of the changes within the company, a significant part of the SAP US-based workforce has been with the company for only a year of less. The challenge for SAP is to get enough experienced people who can sell point solutions CRM, SCM, PLM, e-procurement, etc, both within the realm of SAP and as stand-alone components that can be integrated with other products. Since the longer term SAP sales people are accustomed to selling the monolithic ERP SAP product, 'the whole enchilada', contracts and /or upgrades rather than selling CRM, SCM and PLM point products, it will take time for them to be retrained or cross-trained to sell the new components. The result is when it comes to the new components, the entire sales force is still learning. The lack of experienced sales resources in these new areas may impede SAP's proficiency in selling these products outside of its install base.

The Key is Execution 

Therefore, SAP's potentially unwieldy and scattered global development organization, disparate product components and their developments' coordination, and the lack of sales focus may hamper the execution of its otherwise attractive strategy.

SAP should clearly articulate the delivery milestones of its recently announced e-business strategy. These should address time frames for all main product lines releases, and also, how customers can feasibly migrate piecemeal from individual components to the integrated whole. SAP R/3 Enterprise, the next major release of its flagship ERP suite, which is slated for general availability in 2Q 2002, and which will supposedly provide an R/3-based kernel of horizontal components, upon which customers can incrementally deploy new mySAP.com and 3rd-party components without the need to update their core ERP systems, is the step in the right direction, but with the long way to go. Also, although SAP Web Application Server (SAP Web AS), which is an incarnation of SAP Basis as the underlying technology for most of SAP's solutions, should enable new Internet paradigms to be combined with the transactional operations of ERP, it will also require significant mindset change and retraining of former ABAP programmers into e.g., HTTP or JavaScript.

While SAP seems to have finally realized that it would unlikely be the sole application provider within a single enterprise and that, for it to provide more value to its customers, it must be more open with its competitors, some reservations in the market about its sincere intentions will remain. Partnerships have been ephemeral, however, and remain effective only as long as the partners have common interests. Any partner's commitment to SAP is certainly not unique. However, SAP relationships with Commerce One and IBM do seem to have merits and should remain solid and produce results for both partners for some time to come.

User Recommendations 

SAP's business applications market's leadership remains unquestioned although it will continue to be vigorously challenged my many. SAP seems to be doing well in both perception and the wars on the ground. More important will be how well the company will execute its impressive but highly ambitious vision. The market has often in the past witnessed how long the road is between the vision and execution, SAP huge resources notwithstanding.

Nonetheless, one would be hard pressed to find a case where SAP should not be included on at least an initial long list of vendors in a global application software selection. The depth and breadth of mySAP.com's offerings should be attractive to a wide range of companies, both industry- and size-wise. However, users should question the company's delivery fulfillment of its strategy and appreciate that migrating older instances of SAP R/3 to mySAP.com and/or integrating mySAP.com components to other software will remain painstaking for some time to come despite SAP's commendable initiative in easing that.

More comprehensive recommendations for both current and potential SAP users can be found in SAP - A Leader Under Reconstruction.