In January 2003, to much fanfare, SAP America rolled out a collection of IT infrastructure technologies that, the company said, would "provide extensibility across heterogeneous IT landscapes." SAP, well known as the market leader in applications software -- not in infrastructure technologies or products -- called its ambitious undertaking NetWeaver.
Two years later, a period during which SAP has had to work hard to explain and define the objectives behind what was at first a confusing initiative, NetWeaver has become the central focus of the world's largest application provider. But, perhaps more importantly, NetWeaver has begun to wield a software industry-wide influence that will help shape the future of software architectures in the Internet age.
In an industry where growth rates have fallen from over 20% just a few years ago to what leading market research firms say is a near-permanent single-digit posture, SAP's NetWeaver initiative is being watched and followed by software providers in nearly every category as a potentially landscape-altering undertaking that could breathe new life into the enterprise applications market. While a number of other application providers have come out with integration methods of their own -- Siebel's Universal Application Network, IFS' composite applications and PeopleSoft's AppConnect, to name a few -- none have garnered the attention of SAP's NetWeaver. By promising to resolve many of the integration problems that have long plagued enterprise application vendors and their customers, NetWeaver has a chance to improve return on investment (ROI) and revive innovation and spending on new applications throughout the market.
For manufacturing companies, the stakes could not be higher. Long-needed integration, not only among enterprise applications but also between factory floor systems and those higher-level applications, is in the offing if NetWeaver succeeds in transforming the SAP base and influencing the architectural direction of the rest of the software industry. The potential is nothing less than the technological integration of the entire enterprise.
But NetWeaver did not initially stimulate such lofty expectations. In fact, as far as SAP's manufacturing customers were concerned, when SAP launched NetWeaver that January day, the applications giant might just as well have dubbed its new initiative "WhatWeaver?"
SAP actually took its first steps down this new integration road six months earlier in June of 2002 at its annual Sapphire meeting when it began discussing the idea of xApps, a type of composite application. When SAP followed that announcement with NetWeaver, customers were left scratching their heads.
"Initially, there was a whole lot of confusion about just what SAP was doing," says Jim Shepherd, senior vice president at AMR Research (Boston). NetWeaver, Shepherd says, was seen as a bunch of disparate technologies -- some old, some new -- without a compelling rationale or clear ROI. "SAP didn't do a good job explaining what NetWeaver consisted of, whether customers were going to have to pay extra for it and, most importantly, what bottom-line value it would deliver. For a long time the perception was out there that NetWeaver meant SAP was going to be competing head-to-head with BEA and IBM as an independent IT infrastructure vendor, which wasn't really the case."
Today, much of the initial smoke has cleared. Last year, analysts and even competitors such as PeopleSoft began touting the concept of service-oriented architecture (SOA), which involves using standard Web-based messaging to break heretofore monolithic applications into modular components or services that can be reassembled as composite applications supporting end-to-end business processes. The idea, which SAP calls enterprise-services architecture (ESA), is at the heart of NetWeaver.
Then, in September 2004, SAP delivered NetWeaver 2004, which for the first time combined all NetWeaver components into a single product release with a common menu and consistent support.
With the increased industry-wide focus on SOA and clearer NetWeaver marketing and packaging, some customers say they now get the concept, and they're beginning to sew pieces of NetWeaver into their companies' IT backbones. Take Jim Haney, vice president of architecture at Whirlpool Corp. (Benton Harbor, MI), for example. Whirlpool has deployed the Web Application Server (WAS) and Portal pieces of NetWeaver to integrate SAP and non-SAP applications. And, over time, says Haney, the company will begin to consolidate, moving some applications from IBM's WebSphere platform to NetWeaver.
"With NetWeaver, SAP is moving to the next level of integration between its components and components from other providers," says Haney. "One of the reasons for going to a suite of tools like NetWeaver is to make integration easier. It makes sense, but providing the tools needed to achieve that means SAP is going to have to play in a bigger field with all of the other very large vendors."
Dramatic Customer Increase
SAP claims that, in 2004, the number of NetWeaver reference customers grew from 30 to 1,300. The number includes customers that have deployed more than one NetWeaver element and used the technologies to integrate SAP and non-SAP applications.
But, even as it comes into sharper focus, one fact is clear: NetWeaver is a massive undertaking that will take SAP at least two more years to complete and it's customer base many more years to fully implement.
"This is the largest project by a factor of about three than any project in the history of SAP," says Shai Agassi, a member of SAP's executive board and the company's NetWeaver point man. At the time of NetWeaver's introduction, Agassi called the plan the "blueprint for the future of SAP." Looking forward to that future, he says it will take most customers several years to digest all of NetWeaver.
The main reason for the gradual uptake: While pieces of NetWeaver are already fairly mature and ready for enterprise-wide deployment, some components and tools such as NetWeaver's Master Data Management (MDM), composite application development environment, security infrastructure and service management framework are new or substantially undefined. As a result, say experts, manufacturers shouldn't yet consider a wholesale replacement of the application servers, integration servers, Web portals and business intelligence infrastructure that currently underpin many IT environments.
Puncturing the Myth of ERP
So just what is NetWeaver, and why is it so important to SAP and the software industry? NetWeaver is a collection of infrastructure technologies that will underpin SAP's applications -- mySAP ERP, SRM, CRM, etc. -- and allow them to flexibly interoperate with one another and with pieces of applications from other software vendors. In essence, the elements of NetWeaver -- an application server, integration server, Web portal, business intelligence software, master data management system, composite application development environment and more -- will eventually replace the three-tier client/server architecture used by SAP's current ERP suite.
While the client/server underpinnings of SAP R/3, known as BASIS, were hidden from customers and outside developers behind difficult-to-use proprietary interfaces, the elements of NetWeaver are being pushed front and center. SAP is encouraging customers to begin using NetWeaver elements to ease integration headaches. The company is also heavily recruiting independent software vendors (ISVs) to build versions of their products around NetWeaver so that they will better interoperate with SAP applications.
While the various elements of NetWeaver are now available as a unified, supported product, full integration between NetWeaver and a SOA-enabled version of mySAP ERP won't be in place until 2007. At that point, SAP officials say, the company will have completed the first phase of a massive effort involving redefining functionality in the ERP suite as Web-based services, defining the behavior of those services in the context of specific composite-application scenarios and building a repository from which services can be accessed and reused. So far, SAP says it has defined 57 services that will be accessible in the repository. Eventually, there could be as many as 10,000.
Once NetWeaver is fully merged with SAP's applications, company officials say, the new ESA environment it enables will help banish many of the problems that frustrate enterprise-software customers and, says SAP's Agassi, threaten the viability of the software industry itself. (See Q-&-A interview, p. 22.)
Today, as manufacturers know all too well, most ERP systems -- SAP's R/3 included -- are large, monolithic clumps of code that are difficult to configure, integrate with and deploy. SOAs like NetWeaver would break up the clumps by decomposing application modules into a series of Web services -- fine-grained pieces of software that can be accessed across a network and perform well-defined tasks such as entering an order or performing a credit check. Using infrastructure technologies such as an application server to coordinate messages between those SAP Web services, and services from other vendors, and an integration server to perform data translations, NetWeaver would be used to flexibly recompose those Web services. NetWeaver also includes a new development environment now being rolled out called the Composite Application Framework, which developers would use to define their business processes and assemble composite applications that conform to them.
To enterprise application customers like Rick Beers, this all sounds pretty good -- in theory. Beers, director of business process architecture at Corning Inc. (Corning, NY), like many manufacturing executives, is wrestling with the consequences of what he calls a "faulty premise" upon which ERP was built. That premise, says Beers, was that large enterprises would be able to run their businesses on centralized, tightly integrated instances of ERP systems that would be used to automate end-to-end business processes.
Opportunities Abound
But, says Beers, companies like Corning have found through hard experience that it's usually not practical to run an entire large company on a single instance of an ERP application. As manufacturers expand globally and through acquisition, says Beers, running multiple instances of ERP applications -- even different ERP systems -- is often unavoidable. And, it turns out that ERP vendors aren't good at automating all aspects of a business. Enterprises such as Corning, he says, often resort to best-of-breed applications for tasks like supply chain planning and order entry. And the presence of multiple ERP instances and multiple best-of-breed applications makes integration an escalating and expensive headache.
"Large ERP vendors like SAP and PeopleSoft are realizing, correctly, that in order to fix this, the next wave of innovation will not be in the applications themselves but in moving up the stack to provide the seamless interoperability that does not exist today," says Beers, whose company runs PeopleSoft's Enterprise ERP applications.
NetWeaver is SAP's bid to define and, to some extent, control this next wave of innovation, which is being framed around the concept of service-oriented architecture. As the nexus of innovation moves up the technology stack from applications to SOA, SAP faces major opportunities and risks, say experts. As the ERP market share leader, the company has a clear opportunity to convince its 24,450-company customer base to rely on SAP for SOA infrastructure in the form of NetWeaver. If SAP is unable to make its case and execute on that opportunity, however, it opens the door for powerful competitors to step in.
"If SAP doesn't move up into infrastructure, others like Microsoft with .NET and IBM with WebSphere will move in," says Bob Mick, vice president for emerging technologies at ARC Advisory Group (Needham, MA). "Whoever wins the battle for the infrastructure space will also have a strong hand in controlling the applications."
But NetWeaver is much more than just an attempt by SAP to protect its applications business from competitors. It is also a bid to breathe growth and new life into the enterprise applications market by allowing customers to reduce what they're spending on integration and to instead spend that money on innovative new applications. Quite simply, says Agassi, attempting to integrate disparate applications with a collection of infrastructure tools from multiple vendors is eating up more and more of his customers' already scarce discretionary IT budgets.
"We saw more and more money was allocated to maintaining that [infrastructure] stack moving forward instead of [creating] value, instead of [improving] processes, instead of improvements in the business," says Agassi.
More Money on Hand
By developing and providing infrastructure pieces like an application server and offering many of the pieces to customers under ERP maintenance contracts, SAP helps customers free up more resources for spending on applications. Unless SAP takes that step, says Agassi, "the whole industry dies. And, with it, IT becomes more of a block."
Another reason SAP is pushing NetWeaver so hard is that the company needs to regain the mantle of technology leadership, a claim that SAP would disagree with, but which is a perception among leading analysts. "Through the 1990s, SAP's multi-tiered, scalable client/server architecture got a lot of attention and allowed it to differentiate itself from competitors," says AMR's Shepherd. "In recent years, all of the attention has tended to go to e-business and Web-based products, and there has been a perception that SAP was outdated technology. One of the goals of NetWeaver was to reclaim SAP's position as a technology thought leader."
Despite its slow start in explaining NetWeaver, SAP is now succeeding at reclaiming that thought leadership position, at least in the eyes of analysts such as Shepherd, and is beginning to erase the distinction between applications and infrastructure. PeopleSoft's September announcement of a $1 billion partnership with IBM to bundle WebSphere with PeopleSoft applications -- since undercut by Oracle Corp.'s successful takeover bid -- was a clear reaction to NetWeaver, says Shepherd. Similarly, Oracle announced plans in December for a 40-city "Architecture of the Future" tour to explain its own SOA plans.
"SAP has succeeded in changing the game," Shepherd says. "It's created the notion that vendors might not be just application providers. They might also be legitimate providers of portals, application servers, development tools and process management configurators. Buyers have now started to think, 'I don't have to go buy applications from vendor A, an application server from vendor B and an integration server from vendor C. Why not just get it all from one?'"
Show Me The Value
Not all manufacturers are buying into SAP's NetWeaver message. Some still see few immediate returns and little ROI involved in migrating to a new IT infrastructure stack, particularly one that isn't yet tightly integrated with their ERP applications. Where's the payoff in replacing application servers on which your staff is already trained, wonder IT managers like Jerry Taylor, senior principal technologist at Raytheon (McKinney, TX)?
"I understand what it means to Web-enable an application, but I still don't see the benefits of service-enabling an application," says Taylor. Replacing existing application servers and other infrastructure "all takes time and money and training dollars before you can start to see a benefit," says Taylor. "It's hard to make a case for that investment."
Taylor says Raytheon is pilot testing the Master Data Management element of NetWeaver as part of a company-wide upgrade to SAP version 4.7. Raytheon, however, has made no commitment to deploy the technology in production.
Others such as Corning's Beers worry that deploying applications and service-oriented infrastructure from a single vendor could, over time, lead to lock-in. Although SAP has committed to sustaining interoperability between NetWeaver and middleware from both IBM and BEA Systems Inc. (San Jose, CA), customers who choose SAP for both applications and infrastructure could, at some point, find that bringing in non-SAP applications or middleware later is difficult.
In October, for example, SAP introduced what it called an improvement to the Java programming language that will make applications written in Java less prone to failures and downtime. The enhancement, borrowed from SAP's ABAP programming environment, however, will be available only to Java applications running on SAP's NetWeaver elements such as the Web Application Server. SAP has also said that it doesn't plan to offer the Java innovation to standards bodies.
Judging from the growing number of NetWeaver reference customers claimed by SAP, however, many manufacturers are able to overlook or overcome lock-in concerns, at least long enough to begin deploying discrete pieces of NetWeaver. One such manufacturer is Nibco Inc. (Elkhart, IN), a $450 million maker of fittings and valves for commercial and residential applications. Nibco, which first deployed SAP R/3 in 1997, has already migrated to mySAP Business Suite and is now beginning to use pieces of NetWeaver to build its own composite applications that link previously separate business processes. For example, it deployed the Business Intelligence and application server pieces of NetWeaver to build what it calls a closed-loop inventory optimization system. The system automatically downloads inventory information from SAP and demand information from a separate system, and then analyzes the data to determine Nibco's optimal asset allocations. It then reenters the results into SAP's MRP module for planning.
"If you can take a business problem and provide information people can take real action on, then you've really got something," says Rob Masney, Nibco's director of information technology.
Nibco is also planning to deploy NetWeaver's Master Data Management and Portal elements. The Portal, in conjunction with WAS, would replace a customer self-service extranet that Nibco built in 1999 using IBM's WebSphere infrastructure. "Ultimately, we want to partner much more closely with SAP and eventually replace WebSphere there," says Masney.
Any concerns about lock-in, says Masney, are offset by other advantages Nibco receives by using infrastructure and applications from one vendor. For one thing, Nibco already has most of the NetWeaver elements it's using as part of its current mySAP license. That means no added cost. (While SAP customers pay extra for the MDM and BI components of NetWeaver, most others are included under ERP licenses.) Says Masney, "There's a lot of synergy in the base technologies, and we can develop one set of skills in our people that can be leveraged across all of them. Plus, if something goes wrong, there's one throat to choke."
Some manufacturers are also beginning to see in NetWeaver an opportunity to finally achieve the elusive goal of integrating plant floor systems with enterprise applications. Arla Foods, a dairy cooperative based in Aarhus, Denmark, is deploying the Exchange Infrastructure (XI) integration server and portal elements of NetWeaver as part of a company-wide effort to create a standard integration between the manufacturing execution systems (MES) that control the company's plants and the SAP ERP applications that control enterprise functions.
That integration is feasible, says Arla production manager Arne Svendsen, because the XI piece of NetWeaver allows for integration with SAP's ERP applications using the extensible markup language (XML), and because SAP has recently agreed to support the ISA S95 XML-based standard for integrating plant floor and enterprise systems. That means Arla can integrate its MES and SAP ERP systems without using proprietary application programming interfaces that are difficult to use and expensive to maintain. The S95 standard will be the conduit for the ERP/MES integration, and common message definitions will be provided by using the business manufacturing markup language (B2MML).
Arla is now in the process of upgrading its ERP systems and replacing homegrown MES systems with software from Wonderware (Lake Forest, CA) on the plant side, which also supports the S95 standard. SAP is now creating mappings in XI between its ERP data model and Wonderware using S95 and B2MML. Arla will be able to use those mappings to complete the integration in about six months, although the ERP upgrade and MES rollout to all of Arla's plants will take about two more years, says Svendsen.
Once the integrated ERP/MES project is complete, says Svendsen, Arla will have a much better, up-to-the-minute picture of how well the business is running. Arla, for example, will be able to automatically download from SAP to the MES systems the company's production schedule, orders and up-to-date bills of material. And the MES systems will be able to instantly transfer to the ERP system updated information on materials consumption and energy utilization. "This will be information that is real, that we can rely on to operate the business much more reliably," says Svendsen.
Wanted: Third Party Support
But that kind of buy-in from leading edge manufacturing customers alone won't be enough to ensure NetWeaver's success. In order to meet Agassi's goal of establishing NetWeaver as an attractive platform for all SAP -- and even some non-SAP -- customers, the company will also have to convince ISVs to support NetWeaver by reworking existing products to use elements like XI or WAS, or by developing new products that take advantage of NetWeaver's service-oriented approach. That won't be easy, say experts, because SAP has traditionally competed aggressively against many of the same ISVs it is now attempting to woo to NetWeaver.
"Compare SAP with IBM," says ARC's Mick. "As a provider of middleware, IBM doesn't compete with its partners. They made a strategic decision to get out of applications, and that allows for any ISV that wants to work with IBM as a neutral provider of app servers and other infrastructure. With SAP, it's not quite that clean."
SAP has had only modest success luring ISVs to NetWeaver. So far, only 12 have developed and brought to market what SAP calls xApps, composite applications that use NetWeaver components and interact with pieces of SAP's applications in a truly service-oriented fashion. Accenture (Chicago) is the latest SAP partner to announce a xApp. Eleven months in development and called Integrated Exploration and Production, it collects information about the state of upstream oil and gas exploration equipment and, using WAS, the Portal and BI, integrates with SAP ERP.
Amit Chatterjee, SAP's director of NetWeaver product marketing, acknowledges that, to date, the list of ISVs that have developed xApps is "quite short." But, say company officials, SAP is attempting to lure more partners to the NetWeaver platform by offering developer support and doing a better job of defining what SAP calls "white spaces," areas of application functionality that SAP does not plan to provide itself, and where ISV opportunities may lie.
"As part of our evolution from application player to business platform player, we realize a need to do a better job of defining white spaces," says Rami Branitzky, vice president for business development and xApps at SAP.
One of the white spaces SAP has gone out of its way to identify has been MES. Over the last few years, MES vendors have worried that SAP would make a direct play for the plant floor applications space. With the appearance of NetWeaver and SAP's need to attract plant floor ISV partners to the platform, however, SAP "has conceded that they don't want to be the production interface on the shop floor," says Carter Johnson, vice president of strategy and business development at MES software vendor Visiprise Inc. (Alpharetta, GA). As a result, says Johnson, Visiprise has decided to port its products to NetWeaver's XI, Portal, WAS and BW components, gaining what SAP calls "Powered by NetWeaver" status. ("Powered by NetWeaver," one step down from xApp developer status, means that an ISV has ported its product to two or more NetWeaver components.)
Visiprise decided to support NetWeaver, says Johnson, because it will allow the company to build integrations with the leading ERP platform that are much tighter than the company can provide today using traditional programming interfaces such as SAP's BAPIs. By next month, Visiprise will have completed the port and defined several business-process scenarios in which customers could use NetWeaver to integrate Visiprise's MES applications with SAP ERP. Visiprise, which has a partnership with infrastructure provider BEA, expects that some customers with SAP ERP deployed may switch from BEA to NetWeaver, Johnson says.
Developers Sweeten the Deal
Besides being clearer about where it will play and where it won't, SAP is also attempting to attract ISV partners to NetWeaver by reaching out to developers and using its considerable financial resources. Last July, SAP launched the SAP Developer Network, a Web site (www.sdn.sap.com) that provides developers using NetWeaver with technical support and best practices information supplied by peers as well as SAP. So far, says SAP Developer Network vice president Ziv Carthy, 100,000 developers have registered as members, with thousands more joining every week.
In addition, says Branitzky, beginning this year the company will begin funding start-up companies that are willing to build their products around NetWeaver. The funding will be funneled through SAP's SAP Ventures venture capital unit.
SAP's goals for attracting ISV partners to NetWeaver are ambitious. So far, SAP has 65 "Powered by NetWeaver" ISV partners in addition to the 12 xApp partners. SAP also has certified 450 other ISV applications that can communicate with NetWeaver components. By the end of this year, says Branitzky, SAP hopes to have 150 "Powered by NetWeaver" ISV partners. And, over the next five years, says Agassi, SAP's goal is to have up to 2,000 xApps developed by SAP and ISV partners.
In order to achieve that, however, SAP will need to do a better job of defining the opportunities for potential ISV partners. One partner, business intelligence tool vendor Business Objects (San Jose, CA), has so far balked at committing resources to developing xApps because, says vice president for alliances Gordon Breese, "SAP's messaging around what white spaces would be available to use have been unclear. They are still very much an applications company, and there always seems to be somebody somewhere at SAP who feels that every ISV application competes with an SAP application." Although Business Objects is a "Powered by NetWeaver" partner, the company has so far declined to build xApps.
Besides picking up the pace on ISV recruitment, experts say SAP will need to continue to enhance existing NetWeaver components and fill in some significant gaps. While customers see NetWeaver's WAS, Portal and BI components as relatively robust, many say they are still reluctant to build major business processes around newer NetWeaver pieces such as MDM and XI. Whirlpool's Haney, for example, while sold on the NetWeaver concept, still isn't convinced that XI is ready for production deployment. Whirlpool continues to test the integration server element of NetWeaver.
Similarly, NetWeaver's development environment, specifically the Business Process Management piece of the company's Composite Application Framework, is still incomplete. While SAP says it is collaborating with partner IDS Scheer AG (Saarbrucken, Germany) to develop a tool for defining business processes and composing NetWeaver-enabled composite applications, so far a version of the tool that integrates directly with NetWeaver's service repository is missing. It will be delivered next fall, says Mathias Kirchmer, CEO of Scheer North America.
"Some pieces of NetWeaver are quite mature. Things like BI, the Portal and the application server have been around for a while," according to AMR's Shepherd. "But other elements like MDM are much newer. The concept of master data management has only been around for a couple of years, so SAP is having to invent a whole new category of software. It's no wonder the tool is still evolving."
Continually Developing
SAP officials admit that some NetWeaver elements such as MDM are relatively immature. Over the next few months, however, MDM will gain important new capabilities, says Sunil Gupta, director of product marketing for MDM. SAP will begin adding process and industry-specific applications to MDM that, for example, will allow consumer packaged goods companies to build the kind of global data synchronization business processes increasingly demanded by large retailers.
At the same time, experts say, NetWeaver is missing some important elements. Unlike competitors such as Oracle, which has emphasized Grid computing for workload management and high availability, SAP so far has provided little in the way of products for monitoring and managing services in NetWeaver. Similarly, SAP has lagged in providing a unified NetWeaver security environment, particularly one that makes use of standards such as WS-Security and can interoperate with security infrastructure from other vendors.
While SAP's goal is for NetWeaver to become the default SOA infrastructure for its installed base of application users and eventually to command a significant market share position overall, company officials say they're realistic about how quickly that will happen. Agassi now estimates that, by 2010, only about half of SAP's 24,450-company customer base will have migrated to NetWeaver and to mySAP ERP, the version of SAP's flagship application that will fully support NetWeaver.
In the meantime, most customers will adopt NetWeaver in bits and pieces, implementing specific elements as they make business sense, but not necessarily embracing the entire technology stack. And, say SAP officials, that's OK for now.
"At some point, I'd love to see all of the lights on and SAP NetWeaver fully deployed at every customer that we have," says Chatterjee. "The reality is that this is a marathon. But that is the goal."