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by Joshua Greenbaum, Contributing Editor   | Abstract: | The software giant may not be making headlines with its vertical market strategy, but don't be fooled — SAP is in the lead with its program. |
With vertical-industry expertise becoming the ticket to market success, SAP has a problem on its hands. As Oracle grabs headline after headline for its M&A strategy — which focuses largely on industry-specific acquisitions — SAP has looked more like a laggard than a leader. But SAP is way out in front — as long as you know where to look. SAP has one of the richest troves of industry-specific functionality in enterprise software, making it the company to beat in a broad range of vertical markets. SAP's embarrassment of riches starts with its historic partnership with customers in key industries, such as oil & gas and pharmaceutical manufacturing, fueled in part by a program run by the European Union in the 1980s and 1990s that funded joint product development efforts. The spiritual descendants of that program can be seen in two sets of joint development efforts at SAP. The first, Community Development Groups (CDGs), specifies enterprise services — to be productized by SAP — targeted at specific industry requirements. SAP has nine groups under way or completed, with 16 more planned. Some of the CDGs are highly specific, such as one being formed for enterprise services in the banking industry, while others are more general-purpose, such as technical documentation management. But even the latter has heavy-hitting vertical players involved: banks, such as ABN AMRO; manufacturers, such as Airbus and Lockheed Martin; forest products companies, such as Weyerhaeuser; and even consumer products companies, such as Wrigley (yes, that Wrigley). The other joint development effort comprises eight Community Advisory Groups (CAGs) whose mission is to define industry best practices, independent of SAP's technology platform. Most of these groups are cross-industry, covering areas such as sensor networks and radio frequency identification (RFID). They involve impressive industry and customer partners, such as Colgate Palmolive. But wait, there's more. SAP is pursuing industry-specific development work in its Duet group, and industry-specific functionality with its governance, risk, and compliance efforts. Another way that SAP, its partners, and end users come together to map out industry requirements is through Industry Value Networks (IVNs). SAP has five active IVNs: consumer packaged goods, forest products, high-tech, oil & gas, and public sector, with more planned. If specifications can't be met with existing SAP and partner functionality, a new CDG is formed. Finally, SAP's 26 vertical industries are augmented by a growing coterie of NetWeaver partners. This is the added value of SAP's ecosystem strategy. After all, SAP's thinking goes, sharing revenue with a partner may not be as lucrative as owning it all, but it beats letting a competitor take a cut. There's still more to SAP's vertical market efforts: field sales, vertical functionality delivered regionally, and separate activities with the company's systems integration partners. The bottom line: No discrete, headline-grabbing event — such as Oracle buys Retek, or iFlex, or even Siebel — points to a specific moment when SAP crossed over into serious vertical contention. But SAP and its vertical functionality aren't missing in action; they're simply hiding in plain sight. |