ORLANDO, FL -- SAP AG today revealed three investments it is making to bolster its position in the supplier relationship management (SRM) and regulatory compliance software markets and to stimulate support among independent software vendors for the company's NetWeaver set of service-oriented infrastructure products.
The investments, announced at Sapphire, the company's annual customer conference here, included SAP's acquisition of Frictionless Commerce Inc. (Cambridge, MA), a small provider of on-demand and on-premise SRM software and services. SAP also disclosed a new $125 million NetWeaver Fund which the company will use to make equity investments in selected independent software vendor (ISV) partners that incorporate pieces of the NetWeaver architecture into their products.
The enterprise software market leader also used the user conference to highlight a newly created Governance, Risk Management and Compliance (GRC) business unit, which is intended to expand on and bring to market risk management applications gained recently via its purchase of Virsa Systems Inc.
The acquisition of Frictionless, a 70-person company, was intended to fill functional gaps in SAP's current MySAP SRM product specifically around sourcing and to give SAP an entry-level product that can be deployed as an on-demand service, said John Zepecki, SAP senior vice president of SRM product strategy and development.
"We had a gap in our offering that Frictionless could fill and that would serve a lot of our users," said Zepecki in an interview with Managing Automation.
SAP declined to reveal how much it paid for Frictionless Commerce.
Although Frictionless Commerce currently offers its SRM products as either licensed software or on-demand services, Zepecki said SAP will focus on selling the on-demand version as an entry-level option. Three-quarters of Frictionless's customers have chosen the on-demand version of the company's products, Zepecki estimated.
Those currently with licensed versions of the Frictionless software deployed will continue to be supported by SAP, Zepecki said. Frictionless's manufacturing customers include Bristol-Myers Squibb and Philip Morris USA.
In the short term, SAP will continue to market the Frictionless products under a new but as-yet-undetermined brand name, Zepecki said. Over the next few months, SAP will develop a joint roadmap for its current MySAP SRM product and the Frictionless product. That roadmap, said Zepecki, will include integration of the Frictionless product with SAP's financial and materials management applications.
The addition of Frictionless Commerce will not affect the next release of MySAP SRM, version 6.0, due at the end of the year, Zepecki said.
In the long-run, said Zepecki, SAP will create a hybrid SRM offering, with the Frictionless product representing an on-demand option and the MySAP SRM product representing a more robust on-premises option. The hybrid strategy is similar to the approach SAP is taking to the customer relationship management market where the company offers on-demand and on-premises versions.
SRM competitors were quick to question the wisdom of SAP's latest acquisition. Avner Schneur, president and CEO of SRM vendor Emptoris Inc. (Burlington, MA), said Frictionless's support is weak for SRM functionality such as spend analysis and optimization.
"They (Frictionless) don't really bring much value overall to the SAP offering," Schneur said.
Zepecki, however, said Frictionless suited SAP's needs because it represented an upgrade in an area of SRM functionality where SAP was weak: sourcing. Frictionless was also attractive because it has integrated NetWeaver technologies into its product offering more extensively than competitors such as Emptoris, Zepecki said.
SAP's new NetWeaver fund, meanwhile, will target partners that have extensively deployed NetWeaver technologies and that fit SAP's strategic direction, noted Shai Agassi, president of SAP's product and technology group and a member of the company's executive board.
SAP will make investments from the fund in conjunction with venture capital firms and will target returns on its investments over a seven-year period. Average investments from the fund will be under $5 million, Agassi said.
At a press conference, Agassi and SAP CEO Henning Kagermann resisted suggestions that the company needed to mount the investment fund in order to continue to attract ISV partners to NetWeaver. SAP has certified 400 "Powered by NetWeaver" ISV partners to date, said Agassi, with at least 600 more in the works.
The investments, said Kagermann, are, at least in part, intended to give an indication to customers of which of its ISV partners SAP considers most strategic.
The new Governance, Risk Management and Compliance business unit will start with the Virsa compliance application but, over the next 18 months, SAP will roll out what Agassi called a "complete compliance suite" of products that will include integration with vertical applications such as the company's Global Trade Services system as well as vertical, industry-specific versions. Ultimately, Agassi said, the business unit will deliver a suite capable of presenting a single, unified risk balance sheet to users.
SAP does not anticipate making additional acquisitions to fill in its risk management and compliance product roadmap, Agassi said.
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Separately at Sapphire, SAP updated the 15,000 customers in attendance on its Enterprise System Architecture (ESA) strategy and previewed key technologies including a new graphical user interface the company has code-named Muse. SAP also announced formal availability of the next major release of its keystone product, MySAP ERP 2005.
Kagermann declared that the company remains on schedule to complete the rollout of ESA -- SAP's version of a
service-oriented architecture -- by the end of next year. ESA, which includes both service-oriented connectivity tools represented by the company's NetWeaver components as well as standard semantic definitions -- will eventually allow SAP to cut its customers' total cost of ownership in half and adopt new technologies five times faster than today, Kagermann claimed.
As part of the MySAP ERP 2005 release, SAP has published over 500 ESA definitions. Three-hundred customers have taken part in an ESA adoption program, SAP officials said.
SAP officials declined to say exactly what percentage of its customer base has upgraded from its previous R/3 ERP generation of products to the current MySAP set of releases which are required to fully implement ESA. SAP's senior vice president for ERP solution management, Tobias Dosch, however, said the company expects a more rapid customer transition to the 2005 release of MySAP ERP than it saw with the 2004 release.
Many SAP customers saw the 2004 MySAP ERP product as a transitional release, Dosch noted.
Betting that many R/3 users will resist the transition to MySAP ERP, SAP arch-rival Oracle Corp. yesterday announced a plan to offer support and maintenance services indirectly to R/3 users. The company said it is extending the support and maintenance offering to customers who run SAP in conjunction with the Oracle database management system. The offering is being made through a partner, Systime.
The offering will include help desk services and will be priced up to 55% less than support and maintenance offerings from SAP, Oracle said.
Meanwhile, SAP officials said the new Muse Web-based graphical user interface will be targeted at more casual transactional users of the company's enterprise applications. The interface offers a more simplified graphical presentation than the company's current mainstream offering based on its DynPro technology. The interface includes a guided procedure feature that shows users where they are in a multi-step business process as well as embedded help features.
The Muse interface, which will sit on top of existing SAP transactional systems, will begin rolling out in a few months, Agassi said. Eventually the company plans to use it to deploy different interfaces each tailored for users filling different roles within an enterprise.
The Muse GUI will become the latest in a lengthening list of user interfaces to be offered by SAP. They include the Duet products (
formerly known as Mendocino) -- jointly developed by SAP and Microsoft -- which are based on Microsoft's Office personal productivity applications as well as a UI based on interactive form technology from Adobe.