Behind the Scenes with SAP

SAP is not complaining about its No. 1 rank in the overall enterprise software space. However, SAP spokesperson Laurie Doyle Kelly told CRM Buyer that although the company is pleased with its standing, it never takes its eyes off the competition.

“You should never put yourself in the number one position and then rest on your laurels,” Kelly said. “You need to listen to what the customer needs [and] keep an eye on what the competition may be doing or [on] unexpected competition, without losing sight of your goals.”

Competitive Advantages

Part of SAP’s strength is attributable to its clear market lead in Europe, where it maintains its headquarters. In fact, David Yockelson, technology research services director at analyst firm Meta Group, told CRM Buyer that even if Oracle and PeopleSoft were to merge tomorrow, SAP still would be the overall market share leader.

Yockelson said SAP’s market power also stems partly from its avoidance of confusing or doubtful entanglements, unlike competitors Oracle and PeopleSoft, which are locked in a bitter hostile takeover battle.

Also, each component of SAP’s software performs its assigned function quite well, he noted, adding that the company focuses on the complete enterprise picture and provides a well-integrated offering.

Vertical Expertise

Another one of SAP’s long-standing advantages is its ability to focus on business processes unique to specific industries, according to Kelly. In fact, she said, SAP has industry-specific knowledge about the inner workings of at least 23 different industries. As a result, the company has sufficient expertise to determine how software and solutions needs differ between, say, an aerospace and defense corporation and a PC maker.

Yankee Group senior analyst Kosin Huang told CRM Buyer that SAP has especially strong customer traction in the manufacturing and chemical industries.

She noted that SAP has the opportunity to leverage its position as the incumbent enterprise software provider for many large global organizations. When these companies seek ways to extend their capabilities by developing new products, they likely will turn to SAP first.

“The days of selling big-ticket million-dollar platforms are over,” Huang said, adding that SAP’s revenues increasingly will come from sales of add-on modules designed to solve specific business problems.

Commitment to Openness

For her part, Kelly noted that one of the key differences between SAP and its competitors is SAP’s full commitment to openness, a “pretty unique” position within the enterprise software space.

For example, SAP’s NetWeaver platform is designed to work with non-SAP applications, including those based on Java, J2EE (Java 2 Enterprise Edition) or .NET.

Huang said SAP’s open approach validates the general shift in the ERP space toward launching products that support other environments. By moving in this direction, SAP appears to understand how it needs to evolve over the next five to ten years in order to succeed, she added.

The Integration Buzzword

SAP’s integration focus does not stop with standards like Java and .NET, either. For example, the company’s xApps sit on top of other CRM applications and can be used to meet specific needs. This approach can be useful for a company that already has installed other best-of-breed CRM or supply chain management applications but now faces integration hurdles.

The xApps approach pulls together different functionalities from different applications to address specific needs, such as planning mergers and acquisitions, according to Kelly.

Huang said SAP’s strategy with NetWeaver and xApps products is a good idea because of the opportunities in the integration software arena. However, she noted, SAP’s greatest challenge with xApps may be selling these new concepts.

“Going forward, [SAP] is going to have to build a better story for potential customers” that clarifies the benefits of these add-on applications, Huang said. If the company can succeed, it seems positioned to retain its enterprise throne for the foreseeable future.