Kagermann: ‘We’re not following the consolidation trend’

SAP AG will continue to grow and develop new technologies organically rather than buy out other business software firms, the company’s chief executive told its annual user conference on Tuesday.

Contrasted with competitors like Oracle, which has pursued an aggressive growth through acquisition strategy in recent years, SAP CEO Henning Kagermann described SAP’s strategy as one of co-innovation, working with customers and partners to develop on SAP’s NetWeaver platform, and outlined new social networking initiatives SAP is launching to help foster communities of interest.

“SAP is co-innovating the future while our competitors are consolidating the past,” said Kagermann. “We’re not following the consolidation trend for good reasons; because it’s not a good strategy for our users.”

Noting that SAP has delivered on its promise of a service-enabled suite by establishing enterprise SOA (eSOA) across the SAP product suite this year, Kagermann said that eSOA platform is needed to enable the growing trend of business network transformation. Companies are increasingly having to look outside their organizations and more effectively collaborate with business partners and customers, and that takes enterprise SOA.

“Business network transformation has become the primary source of competitive differentiation,” said Kagermann. “It’s about business connectivity, it’s about speed, and it’s about people productivity.”

Joel Martin, vice-president of enterprise software with IDC Canada, said that, while SAP is doing some exciting things around Web 2.0 with its social networking initiatives, he was struck by the “stay the course” theme of Kagermann’s address.

“There’s not a lot of fancy new things going on here,” said Martin. “The message to their key customers, the  multi-billion dollar companies, is we’re not throwing you any curveballs. We’re here to support your business processes and help you execute.”

The strategy is not without its downsides though, said Martin. With Oracle moving to consolidate the market through acquisition, he said Oracle becomes a more attractive upgrade option for companies that are already using many of the products Oracle has acquired.

“It makes it harder for SAP to go in there and compete if more and more of their platform is being consolidated with Oracle,” said Martin.

SAP used Sapphire to lay-out a new roadmap for its Duet offering with Microsoft, and launch a Duet appliance with HP and Microsoft that promises to shorten implementation times. Duet, jointly developed by SAP and Microsoft, allows SAP users to use the Microsoft Office platform as an interface into their SAP systems.

Later this year, the companies will release Duet 1.5, followed by Duet 2.0 toward the end of 2008. In the future, users will be able to access SAP’s CRM data from Office as well as information held in mySAP applications. Customization capabilities are also planned so that users and partners can tailor existing scenarios to their own needs and come up with new ones.

“An increasing number of our customers are depending on Duet, and with this roadmap our customers can plan their future around these two great platforms, SAP and Office,” said Léo Apotheker,  SAP’s president of customer solutions and operations and deputy CEO in a news conference.

But while the two companies are collaborating on Duet, their competition is heating up elsewhere. SAP is increasingly wooing the midmarket, an area where Microsoft has strength with its Dynamics platform. And Microsoft used its recent Dynamics user conference to launch its play for the enterprise space, traditional SAP territory.

“Every once in awhile good friends will compete, and I think we compete hard but fairly,” said Kagermann. “I think having such strong competitors makes our products better.”
IDC Canada’s Martin said the Duet partnership makes a lot of sense for both companies. SAP gets a more feature-rich, user-friendly interface into its backend, and Microsoft further entrenches Microsoft Office’s dominance on the enterprise desktop.

And while the companies may compete as well, Martin said both companies have a long ways to go before they’ll really start to butt heads.

“Microsoft has a long way to go before they reach the levels of complexity that SAP can offer,” said Martin. “In Canada we don’t expect to see a lot of competition between the two. Oracle is a lot closer to the level Microsoft is playing at.”

Facing questions on pricing, Apotheker defended SAP’s current pricing models, which have been described as high. Calling SAP’s pricing models competitive, and reflective of the value of the products and innovations SAP is bringing to market, Apotheker did say SAP will need to be more creative and explore new models of software pricing.

“I don’t think competitive pricing is going to hurt SAP,” said Apotheker. “We deal with very intelligent customers that understand the value SAP brings, and understand value sometimes means price.”

Also on Tuesday at Sapphire, SAP announced it will be expanding its incremental upgrade through enhancement packages strategy to the entire SAP platform by 2008, and also released a new roadmap for NetWeaver.Beginning later this year, new capabilities and enhancements will be available focusing around improved user access and productivity, accelerated application and business process composition, streamlined access to relevant and reliable information across the enterprise and automated governance of eSOA.

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Jeff Jedras
Jeff Jedras
Jeff Jedras is a technology journalist with IT World Canada and a member of the IT Business team. He began his career in technology journalism in the late 1990s, covering the Ottawa technology sector for Silicon Valley North and the Ottawa Business Journal. He later covered the technology scene in Vancouver before joining IT World Canada in Toronto in 2005, covering enterprise IT for ComputerWorld Canada and the channel for Computer Dealer News. His writing has also appeared in the Vancouver Sun & the Ottawa Citizen.

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