SAP Becoming a (Legal) Polygamist

Event Summary

According to the press release from June 14 at SAPPHIRE 2000 Las Vegas, the annual SAP Americas customer conference, SAP AG, the leading provider of inter-enterprise software solutions, SAPMarkets Inc., the SAP subsidiary dedicated to delivering mySAP.com marketplaces, and Commerce One Inc., the leader in global e-commerce solutions for business, announced a preliminary agreement to jointly deliver the next-generation e-business marketplace solution for the Internet economy. The yet to-be-named marketplace suite promises to revolutionize business by offering companies possibly one-stop shopping for the entire range of e-business marketplace services. Based on a common architecture, these services will range from collaborative design through fulfillment, including industry-based content services and business intelligence.

The broad agreement will result in a single joint offering that will include the best technologies and applications of both companies for e-business marketplaces. Technology and applications will be provided by SAP and delivered by Commerce One, SAP and SAPMarkets through joint development, sales and marketing, beginning immediately. The companies claim that the marketplace suite will provide customers with highly capable, open marketplace technology; e-business applications; and delivery capabilities in a single solution.

Commerce One will provide the marketplace infrastructure that enables companies to establish and operate trading portals, and SAP will provide functionality in the areas of supply chain management, product life-cycle management, customer relationship management and business intelligence. The marketplace suite will combine Commerce One's MarketSite Portal Solution, including the Exchange Operating System, Auction Services and Content Engine, with mySAP.com e-business applications for advanced planning and optimization, product life-cycle management and business information warehousing.

The companies also will join forces to develop a next-generation e-procurement solution based on customer requirements as part of the marketplace suite. The marketplace suite will adopt Commerce One's XML Common Business Library (xCBL), an industry-standard set of XML building blocks, and a document framework that provides open integration with all buying and selling applications, as well as open integration with business applications in every industry. In addition, the companies will extend xCBL to incorporate the SAP Business Application Programming Interfaces (BAPIs), enhancing end-to-end business processes over the Internet.

"With the union of efforts between the companies, we will be able to achieve our mutual vision of a frictionless economy," said Hasso Plattner, co-chairman and CEO of SAP AG and CEO of SAPMarkets. "Our 13,000 customers want a single, market-leading e-business marketplace solution to harness the power of the Internet. SAP, SAPMarkets and Commerce One will deliver this solution."

"This `dream team' of industry leaders will deliver the collaborative marketplace of the future," said Mark Hoffman, chairman of the board and CEO of Commerce One. "Our exchange partners worldwide are demanding industry-leading e-business applications. Our relationship with SAP adds tremendous value across a broad range of functionality. This is a huge win for the entire Internet economy."

To ensure the rapid, global deployment of the marketplace suite, the series of agreements to be finalized by the companies will result in the purchase by SAP of approximately $250 million worth of unregistered common stock in Commerce One as well as royalty sharing between the parties over the three-year term of the agreements. In addition, the companies will closely collaborate on new technologies for the marketplace solution.

Market Impact

Once again, behind the showy marketing pitch lies SAP's tacit acknowledgement that it cannot manage everything on its own any more. SAP seems to have departed from its stubborn, build-it-in-house approach. While this backing down may again be with a heavy heart, it also exhibits pragmatism and wising up to the circumstances. This partnership is a confirmation of a significant shift in SAP strategy as it tries to reinvent itself from a large, inert business applications software company to an Internet leader.

SAP has to be willing to be more flexible and humble in its strategy if it is going to succeed in the new economy. With the excess of integration products on the market and improved interconnectivity, users are becoming much less wary of gathering best-of-breed components. Ground up development of a complete end-to-end e-business solution, which would cover all functions of the front and back office is undisputedly a major mission. This is particularly true for e-business and Internet market places, which is all about customization and modeling software to meet the needs of ever-changing business environments, markets, and the demands of customers and suppliers.

While SAP can effectively manage large human and financial resources functions, it would certainly not suffice at this stage; coordination and time constraints play a major role too. SAP, owing to this alliance, has a chance to put content behind its extensive recent advertising campaign for mySAP.

One should not forget that the partnership holds huge potential benefits for Commerce One too. The company may gain direct and plausible access to coveted large SAP customer bases in over 20 industries. Furthermore, there is also the benefit of rounding out its offering with SAP technology to fend off the threat from Oracle and/or the IBM/i2/Ariba alliance. Until now Commerce One was lagging behind these in terms of business and supply chain functionality.

User Recommendations

SAP and Commerce One customers should certainly consider the combined offering, but avoid selecting it without looking at what the other vendors have to offer. Notwithstanding, SAP should be included on almost any initial long list for global extended-ERP selections. However, existing and potential users currently evaluating SAP products, particularly its extended-ERP product components, may benefit from considering already available and fully functional components from other vendors on the merits of individual components, instead of blindly following their brand loyalty. Each component should be put through its paces using a well-documented set of requirements, scripted scenarios demonstrations and rigorous reference checking.