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:

  • Analytics, which includes the Business Objects portfolio
  • SME products, which consists of Business ByDesign, the SaaS product, Business One for small businesses and All-in-One, which is a preconfigured version of the enterprise ERP system.
  • Industries, which are a key area of focus for growth that includes both development of new modules for the ERP system and acquisitions that bolster the portfolio in specific industry markets. Though not as aggressive as Oracle to date in acquisitions, look for SAP to step up its game here to drive revenue growth and verticalization.

Two other important strategic elements that we talked about during today’s SAP Jam Session included CRM and  Sustainability, detailed by my colleagues Bill Band and Alex Peters, respectively.

 

Innovation Strategy

Innovation is a high priority for SAP now, particularly since it has not been much of a factor in recent years. SAP is putting agile development methods in place to get products to market faster. This is important, because several product releases, including ERP 6 (originally called ERP 2005, released in June 2006), Business ByDesign and Enhancement Packages, have been slow to reach market and gain customer adoption.

  

On the technology front, 4 areas are key to SAP’s innovation strategy, as articulated by CTO Vishal Sikka:

  • In- memory computing. SAP Chairman Hasso Plattner, a passionate computer scientist himself, believes that in-memory computing is a game changing technology that will allow the entire application, not just the data, reside in memory, improving performance and enabling real-time analytics. It also will help the applications exist in the cloud, which is discussed next.
  • Software-as-a-Service, or more broadly, Cloud Computing. Besides Business ByDesign for the SMB market, SAP has an enterprise SaaS strategy that will bring a set of SaaS-based applications to market that are complementary to the Core ERP solutions.
  • Mobile. Pervasive connectivity is a term SAP uses to describe its strategy for mobile computing, which most apps vendors are working on these days. SAP’s challenge will be able to get compelling mobile apps to market, soon.
  • Interoperable Components. This is a technology strategy that focuses on integration. This is the fourth leg of CTO’s Vishal Sikka’s vision, and it ties into a strategy that SAP calls timeless software that talks about innovation without disruption.

SAP’s growth and innovation strategy have not changed materially since Bill McDermott and Jim Hagemann Snabe took over in February as Co-CEOs. However, further developments will likely be showcased at SAP’s SAPPHIRE conference in May. Stay tuned for our analysis as this even unfolds.