Microsoft, SAP get closer on Web services

The deal, which calls for better links between Microsoft's .Net development software and SAP's NetWeaver integration server, could help big companies more easily tie their SAP business applications to Microsoft Office and other Windows-based software, Microsoft executives said.

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The agreement came at SAP's Sapphire user conference in New Orleans on Wednesday. It extends an existing 10-year partnership between the companies, but deepens the technical integration between their products. Microsoft and SAP will now cross-license their intellectual property and participate in cross-marketing and sales calls. In addition, Microsoft's tools can now be used to build extensions to SAP's software.

The deal should help both companies, an analyst said. "This lets SAP leverage the Microsoft development community to build SAP applications, which hasn't been that easy in the past because of proprietary interfaces," said Ron Schmelzer, an analyst with ZapThink in Waltham, Mass. For Microsoft, the deal helps the company gain entry into large enterprise deals to sell additional software, Schmelzer said.

Tighter bonds between Microsoft and SAP could cut into the market for third-party integration software from WebMethods and other companies, Schmelzer said, since those products won't be as necessary as a result of the deal. Officials from WebMethods were not immediately available to comment.

The deal underscores that the relationship between the companies has taken on greater importance as an increasing number of businesses deploy SAP's software on Windows-based servers. The companies estimate that there are more than 40,000 SAP installations on Windows server software, and that two-thirds of all new installations of SAP are on Windows. SAP's software also runs on Unix and other operating systems.

Microsoft executives are also quick to point out that the deal is a high-level endorsement of Web services technology, which has been a centerpiece of Microsoft's strategy for the past four years. Some analysts have said that big companies have been reluctant to use Web services as a key part of their most important business systems until software makers fully support the technology in their products.

"If there was any doubt at all that Web services were going to be at the center of enterprise applications, this announcement removes that," Eric Rudder, the senior vice president in charge of Microsoft's Server and Tools business unit, told CNET News.com. "Seeing the next wave of applications embrace these standards is a huge step toward getting them in use."

Tomorrow, the world...
Increasingly, Web services have become Microsoft's calling card to forging alliances with partners. The company struck a similar deal in April with Siebel Systems, which makes customer relationship management software. Rudder said that more deals are in the works.

"You can absolutely expect us to continue announce key relationships with broad-based ERP and CRM vendors around Web services," Rudder said. "You can expect to hear more announcements from us before the year is over."

The announcement extends to Microsoft's Windows and .Net infrastructure software and doesn't affect the company's own business applications software plans.

Microsoft in recent years has increased its investment and development resources in building enterprise resource planning and customer relationship management software. Some analysts see the competition between Microsoft and SAP heating up over the next few years, as Microsoft attempts to win more deals with larger companies.

SAP and Microsoft will continue to compete in the market for business applications, at least on a minor level, said Charles Fitzgerald, general manager of platform strategies at Microsoft. "This is really a platform deal. We have worked with SAP long before our own business solutions (division) existed."

SAP and Microsoft estimate that they only have about a 1 percent overlap in the business applications market, Fitzgerald said.

The nitty gritty
Specifically, the deal calls for SAP and Microsoft to do the following:

•  This summer, begin testing tools that will let developers use Microsoft's Visual Studio.Net tools to build SAP Web portal applications.

•  Offer through SAP a new version of SAP.Net Connector, a tool for linking SAP applications to Microsoft.Net.

•  Incorporate what Microsoft calls advanced Web services protocols to handle transactions into SAP's NetWeaver. Microsoft, along with IBM, introduced those advanced Web services concepts last year.

•  Make available sample code and a software development kit for integrating Office applications, such as Excel, into SAP's applications. The support extends to Longhorn, as the next version of Windows, expected in 2006.

•  Integrate SAP NetWeaver and Microsoft Exchange and Windows SharePoint Services software. Microsoft said it will deliver software to integrate those products later this year.

In addition, the companies will jointly staff a collaboration technology support center in Walldorf, Germany, where SAP is based. SAP and Microsoft will collaborate on marketing and sales calls, publishing technical papers, and funding of marketing development.