While its top-tier rivals in the applications space were busy fighting over the past year, SAP has been making strides in market share, customer wins and, most importantly, in technology vision. With an economic recovery now underway and IT purse strings loosening as a result, SAP is also shifting its message to customers. The software giant, which, like most of its competitors, had preached caution and conservatism over the past couple of years, is now encouraging growth. Hooray, finally, for that.
The growth message permeated SAP's customer conference, called Sapphire, last month in wet and muggy New Orleans. There was perhaps poetic justice in the environmental conditions. Important initiatives undertaken by SAP during the downturn and software market consolidation are beginning to germinate.
SAP is now claiming the No. 1 market share spot in all major application categories, including ERP, SCM, SRM, CRM and PLM. Under the youthful and focused leadership of Bill McDermott in the U.S., SAP seems to have gotten its act together. McDermott says that over the past year SAP has been gaining U.S. market share each month, lifting its footprint six points to 34% against rivals. Overall, SAP's stats have surged -- 22,600 customers, with 2,500 of those being new additions over the past year. Of this base, 54% are now in manufacturing, a five-point gain. In the crucial mid-market battleground, SAP's penetration now stands at 8,000 clients. Its new BusinessOne product for the mid-market has already garnered 3,000 customers.
But those impressive stats are history. What's vital is how SAP is defining its future. Two central elements in that definition are its NetWeaver and Enterprise Services Architecture (ESA) initiative.
Introduced about 18 months ago, SAP says that NetWeaver, a seven-module integration and application platform, and ESA, its blueprint for a future services-oriented architecture (SOA), are picking up momentum. SAP announced at Sapphire an agreement with Microsoft to expand integration efforts between NetWeaver and .NET. CEO of SAP Henning Kagermann said he expects to ship 5,000 to 6,000 NetWeaver platforms in the next year.
He also announced a general roadmap for ESA. This year, the first of what he called "service-enabled scenarios," such as for collaboration, will be developed. By 2007, the mySAP suite will be fully enabled by ESA. The SOA, by itself, should have a useful life of about 10 years.
SAP's growth message stressed that customers should not wait before they implement NetWeaver. What is being positioned as an evolutionary change by SAP now could end up being disruptive for companies caught playing catch-up. However, many customers, even after 18 months, still don't know what NetWeaver is.
One long-time user put it this way: "What value does it return to my customer?" asked Jan Pope, VP and CIO at Avid Technologies, an SAP shop since 1996. "We've had some meetings but we have to learn more about it." Another customer had this view: "We don't have a definite plan to deploy at this point," said John Matrachisia, IT director at Sentry Group, a manufacturer of fire-proof safes.
Nevertheless, the interesting thing is that both Avid and Sentry believe that the SOA concept is the wave of the future. Given that they and others perceive an SOA inevitability, the next challenge before SAP isn't the concept as it is the identification of business benefits of its migration strategy.