SAP Keeps Traction On Some Tires Of Its Omni-Wheel-Drive Part 2: Challenges and User Recommendations

Part 2: Challenges and User Recommendations
P.J. Jakovljevic - June 7, 2002

Strategies

It has also become obvious that SAP's software solutions outside its core ERP system can attract customers even beyond its install base on a stand-alone basis. After years of wavering, SAP's SCM, CRM, portal and PLM applications seem to be adequate and comparable with the functionality of best-of breed specialists, which means a potential revenue stream through new products and services in the future, if not necessarily these days. At least, they may be enough to somewhat freeze the markets and slow down the sales cycles of niche specialist vendors. Today, companies are focused to leverage 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 oblige these in their endeavors. Its recent strides in portals and BI may also indicate that SAP has been espousing it as an enabler of understanding of business activity rather than a business activity-monitoring tool. Evolving from transaction-crunching, data-specific systems to information-rich decision support systems (DSS) is a way to go, as BI is getting increasingly embedded into day-to-day enterprises' operations.

To that end, SAP's idea to integrate mySAP SCM with promotion planning and other industry-specific enhancements, although still not crystal clear and not date committed, is an intriguing and shrewd concept, which is also not readily provided by enterprise software providers for the CPG sector. Traditionally, manufacturing, marketing, and supply chain management divisions have been hard pressed to coordinate production and inventory plans with company promotions, and therefore the product that would cater for that could fill a huge void. The planned integration should allow multi-level, available-to-promise (ATP) checks to determine material availability of both ingredients and finished goods in order to meet promotional requirements. SAP also foresees the participation of the supplier network to view future promotional campaign plans and improve exception-based planning. Although a cry far from reality today, the example might illustrate the value that applications delivered by a vendor that covers so many basis could produce.

To achieve this, SAP had to pay a price in soul searching and organizational readjusting. 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 exchanges. On the other hand, in 2001, following SAP's acquisition of TopTier Software, a vendor of portal software and integration products, SAP Portals was set up to manage all of SAP's portal and BI business. As both areas have meanwhile matured from pure technology prospecting and harnessing efforts into application deployment opportunities, a loose-canon operation of subsidiaries might have indeed served the purpose.

Another reason for SAP to assimilate the recently combined SAP Portals/SAP Markets entity back into its own was to mitigate the hefty burden of re-branding, updating, and integrating an array of products, including BI, the former TopTier product, SRM, and the MarketSet platform as well as to merge the various organizations that support the products. To that end, the companies with large investments in SAP will be the ones most likely to benefit from the move. Assimilating the entity will also likely reduce the overhead and development costs of the units for SAP, while, instead of dealing with two sales channels, customers will now have one point of access to the complete mySAP product set.

The recent merger between SAP's subsidiaries will have possibly reflected the fact that B2B portals are of a greater interest and benefit to customers than a mere impersonal marketplaces that focus only on procurement price reduction. SAP's focus on delivering 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, and to possibly subtly 'hijack' the user base of other back-office systems in place. In addition to the proverbial Drag & Relate functionality, SAP Enterprise Portal 5.0 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. SAP's portal-based Business Packages also offer business context-sensitive content to internal users (employees and management) and to external users (customer, suppliers and trading partners).

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 would have been targeting the same business opportunities. SAP intends to provide collaborative process integration for enterprises via exchanges from SAP Markets and user-level integration via portals, and 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.

Challenges

On a more down note, SAP's license revenues drop in 2001 and a continued drop in the US, Japanese and German markets, might indicate a loss of the supremacy aura against the backdrop of competitors' steady performance (e.g., J.D. Edwards, 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. Second North American management reshuffling in two years might indicate protracted sub-optimal divisional performance compared to SAP's performance in other regions. Wofgang Kemna's two-year stint as SAP America president was indeed a mixed blessing - marked by total revenue growth but with declining license revenue and first significant layoffs at the end of last year.

There has also been an impression that a room for improvement exists in tackling the small-to-mid-market and service-based institutions segments. It is quite likely that Apotheker's appointment is of a temporary nature, as, likewise it did well with appointing Martin Homlish to run its North American/Global marketing operations, SAP might want to consider hiring for a long-term position of its North American operations president a local seasoned person, possibly outside of its own ranks rather than to keep rotating SAP America president role within its German HQ veterans' circle.

SAP's competition is also growing directly proportionally to its product offering growth, which might become too much to spar with even for a vendor of SAP's musculature. Namely, in a pure ERP sense, SAP competes against Oracle, J.D. Edwards, and PeopleSoft in the higher-end of the market, while in the Tier 2 range it faces Intentia, IFS, Baan, SSA GT, QAD, MAPICS, Lawson and Geac as just as fierce competition; and with its strong focus now at the SME level, it will face an army of competitors spearheaded by Microsoft's Great Plains and Navision offerings (see Microsoft 'The Great' Poised To Conquer Mid-Market, Once and Again), Epicor and Best Software to name only few. Looking at the SCM market, SAP challenges the pure player likes of i2, Logility, and Manugistics.

On the PLM front SAP stacks itself against the slew of pure product data management (PDM)/PLM software vendors from the engineering design side (i.e., PTC, EDS, IBM/Dassault Systems, Matrix One, Agile Software, Sequencia, etc.), and on e-procurement side against Ariba, Clarus, and its partner/competitor CommerceOne.

As mentioned in Part One, SAP also has to be taken seriously in the CRM space against the Siebel, PeopleSoft and Oracle, while these join IBM, Plumtree, Epicentric, BEA Systems, Sun/iPlanet, BroadVision, Hummingbird, Vignette and many others in the battle for the portal space. This formidable competition may also prompt the customers towards 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 increasing number of flawless SAP implementations.

Furthermore, the above entity assimilation 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 (e.g., the company still offers an option of licensing its iView Server and specific iViews portal objects). Given that SAP Portals' independence will now be lessened as this setup provides for closer parental scrutiny, and the fact of the strained relationship with Commerce One, many vendors may see the move as SAP's reversal in the proprietary direction. This might benefit Siebel, which has gained the endorsement of several prominent enterprise application integration (EAI) suppliers and systems integrators (SI) for an initiative to standardize EAI (see Siebel Rallies Its Integration Alliance Troops). Rather than offering many proprietary integration brokers, Siebel wants to offer standards-based pre-packaged business processes to plug into industry-standard servers, to raise the least common denominator of interoperability. SAP will thereby be more challenged to deliver a convincing message to both SAP and non-SAP users, given its own integration broker.

Also, the uneasy situation with Commerce One should be preying on SAP management's mind (not to mention on their common customers' minds). A true closure, may it be an acquisition or total parting of ways might set many minds to rest, but SAP does not seem be clear yet about the best course of action. The fact that particularly private trade exchanges (PTX) may still offer benefits to some customers (as seen by QAD's focus on providing these), and Commerce One's recently announced focus on hub-based back-office integration functionality based on the Web services technology acquired through its erstwhile acquisition of Exterprise, coupled with its core skills in Business Process Management (BPM) and content management, might represent enough of incentive for SAP stick with it as to grasp the challenge of integration of technologies and processes between multiple ERP systems. On the other hand, repeated negative Commerce One's impact on SAP's bottom line cannot be tolerated for long.

User Recommendations

SAP's viability and its business applications market's leadership remains unscathed, as the company remains rock-solid and will be the leader for a long time to come. It becomes quite 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, as the depth and breadth of mySAP.com's offerings may be attractive to a wide range of companies, both industry- and size-wise. Existing SAP users should therefore evaluate maturing SAP CRM, PLM, Portals/BI and SCM functionality against their best-of-breed investments notwithstanding.

As SAP is not typically synonymous with speed, 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. Potential and existing SAP users should not reckon with having all components of mySAP.com deployed before 2004 though.

The assimilation of the recently merged portal/exchanges 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. On a more general note, every vendor should be challenged to prove that their applications can operate on data they do not necessarily own, through a presentation layer they did not devise, and to run on an application server built by someone else.

More comprehensive recommendations for both current and potential SAP users can be found in 'Collaborative Commerce': ERP, CRM, e-Proc, and SCM Unite! A Series Study: SAP AG. Also, very detailed information about mySAP.com is contained in the ERP Evaluation Center.