SAP Jam Teleconference Notes: SAP's Growth and Innovation Strategies

Thanks to those of you that attended our SAP Jam Teleconference today, part of a series that will run throughout the week. For details on the next event in the series, see http://www.forrester.com/rb/teleconference/sap_jam_session_what_should_sap_clients/q/id/6292/t/1.

 

For those of you unable to attend, I will summarize some of the content that I presented on SAP’s overall growth and innovation strategy. SAP has  a double-barreled product strategy focused on Growth and Innovation.

 

Growth Strategy

The Growth strategy rests heavily on the current Business Suite, which includes the core ERP product that is used by approximately 30,000 companies worldwide. SAP claims that it touches 60 percent of the world’s business transactions, which is hard to validate but not all that hard to believe. The main revenue source today is Support, which comprises 50% of the total revenues of the company at more than 5 billion Euros annually, and it grew by 15% in 2009. Other growth engines include:

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Open (Letter) Season on SAP

Dear SAP Customer,

Hopefully you’ve all read SAP’s co-CEO’s open letter to you (http://ceos.blogs-sap.com), and also some of the great responses such as this one: http://bit.ly/b5foPD . With all these open letters flying around, I thought I’d write a slightly different one. Unlike most of my fellow commentators, I’m not going to tell SAP how to run its business. Instead, I’m going to give you, its customers, a suggestion on how you can cut the cost of your SAP environment. You ready? The answer is “buy less stuff from them”.

Actually, it is not as facile as it sounds. Many companies that I speak with automatically favour their incumbent vendors for new projects, while their IT vendor managers complain to me about their negotiation impotence. You won’t be able to get the contractual protection you need, such as limits on CPI maintenance increases, unless you make them a condition of future purchases. Large software companies such as IBM, Oracle and SAP focus predominantly on license sales. It wasn’t customers’ unhappiness, resulting from the Enterprise Support blunder, that caused SAP to fire its CEO and rethink its approach. It was the fact that you showed that unhappiness by voting with your purchase orders, delaying projects, going to competing vendors, and causing SAP’s license revenue to plummet. When Jim and Bill promise to “accelerate the pace of the innovation we deliver to you”, the d word is a euphemism for ‘sell’.

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SAP Middleware Directions: More Open Source, In-Memory Stuff

At the 15 March press and analyst Q&A by SAP co-CEOs Jim Hagemann Snabe and Bill McDermott, new middleware boss Vishal Sikka shed more light on the company's intentions for NetWeaver. Many of SAP's business applications customers use NetWeaver, both as a foundation for SAP's applications and to extend those applications using integration, portals, and custom developed apps. For about a year, the question has been how much additional investment SAP will put into NetWeaver.

Sikka made two comments that indicate how he's thinking about the NetWeaver portfolio.

1. In response to my question about whether SAP is concerned that Oracle's ownership of Java will put it at a disadvantage, Sikka started by highlighting SAP's work on Java performance, but then noted the availability of good open-source Java software to support the requirements of SAP customers.

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SAP 3rd Party Maintenance: An alternative for me? - Part Two

Hi, I'd like to share part two of a recent discussion that I had with Martin Schindler, Editor of Silicon.de. See part one here in case you missed it.

Martin Schindler: You indicated earlier that interest in third-party maintenance has increased since SAP wanted to make its Enterprise Support basically mandatory. Is this just excitement or real demand?

Stefan Ried: Yes, interest has increased. We're also seeing that from the vendor side. In addition to Rimini Street, which already offers maintenance for SAP systems, there is also Aptech, netCustomer, the Spinnaker Management Group, and Versytec, which are today limited to PeopleSoft, JD Edwards, and Siebel. The vendor space has developed further, and the list of SAP-supporting vendors will soon become longer. Finally, it makes sense to ask the larger systems integrators, such as Wipro, Tata Consultancy Services, IBM Global Services, and Siemens (SIS), which are also the largest SAP integrators, to quote for offering SAP third-party maintenance.

Martin Schindler: This is interesting. We've read little about such offers.

Stefan Ried: These integrators naturally don't make a lot of noise about these things, as they also have a partner relationship with SAP, of course. At the end of the day, the demand will be balanced with the supply — and if more customers request SAP maintenance from their systems integrator, they will start to offer it.

Martin Schindler: Is this profitable for integrators?

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Interested in how well SAP is addressing your data management and BI requirements?

It would be an understatement to say that data management is a hot topic today.   Master data management, data quality management, metadata management, data integration and data governance have all emerged as high priorities for many global IT organizations. Often times, these data management efforts are paired with investments in business intelligence and facilitated by data warehousing strategies.

Once the strategy, business case, and supporting architectures and organizations are defined (no easy task in and of itself), the next inevitable question is then, which vendors should IT leaders partner with to enable these strategies? There are pure play and best of breed MDM, data quality, BI and DW vendors that offer unbiased, agnostic approaches, eliminating any vendor lock-in or reliance on database platform or enterprise applications. On the other hand, a single platform vendor can offer better ease of integration with existing IT infrastructure than the best of breed alternatives.

These considerations lead us to a major platform vendor, like SAP.  Similar to its mega-platform competitors, IBM and Oracle, SAP offers a deep and wide set of data management, BI and data warehousing solutions that promise not only integration within these products, but more notably - across its broader product portfolio of enterprise applications.

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SAP 3rd Party Maintenance: An alternative for me?

I'd like to share a recent discussion that I had with Martin Schindler, Editor of Silicon.de

Martin Schindler: There are experts who talk of a non-existing market when it comes to SAP third party maintenance. Is that correct?

Stefan Ried: You could have the impression, especially for Germany, because companies remain very close to SAP and many have decided for a Single-Vendor-Strategy. But in other countries it is much less the case. However the price politics of SAP in the last year and now the slow innovation speed has raised the discussion of alternative maintenance model again.

Martin Schindler: Are there German users with real interest in obtaining maintenance for their SAP system through another company?

Stefan Ried: Yes, there is definitely interest.

We regularly make, and particularly in the last year, sample calculations for users (as well as for system integrators) if it is worth going for third-party maintenance. It depends on various factors, whether it is worth it.

Martin Schindler: What do these factors look like?

Stefan Ried: Companies must check, for example, how much "know-how" exists in-house. Third-party maintenance can work very well, if not everything from SAP-Maintenance is needed. This is for example the case, when parts of the SAP-System are regarded as frozen, small legal changes follow, or to repair a bug. With this technical problems, compatibility with operating system patches, performance problems within an established system can be addressed and the system can operate securely with very little change. So, third-party maintenance vendors can, especially for older SAP systems, work very well.

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