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SAP plan could spawn software battle

The company's release of new integration software pits it against Microsoft and others in the business of stitching together incompatible programs.

Software maker SAP plans to release by month's end a new set of data integration technologies that could set up a clash with other companies in the business of stitching together incompatible software.

The German company has spent more than a year developing the new package of programs, called NetWeaver 2004, and will release it by March 31, SAP executive board member Shai Agassi told CNET this week. SAP plans to discuss the details of the release on March 18 during the CeBit computer conference in Germany, he said.


What's new:
SAP is set to release NetWeaver 2004 by the end of the month. The package of data integration technologies is designed to link incompatible business programs and make important corporate information more accessible.

Bottom line:
The move could create a rift between SAP and others active in the same arena--namely Microsoft and IBM--despite the German company's planned strategies to diffuse competitive tensions.

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NetWeaver is the new technical foundation for SAP's popular collection of application programs, which are used by thousands of the largest companies around the globe to streamline manufacturing, accounting, sales, human resources and other corporate tasks.

The new architecture puts SAP on a collision course with IBM and Microsoft, analysts said. That's because it incorporates many of the same interoperability tools and computing infrastructure programs that those two sell. Specifically, NetWeaver is intended to compete with IBM's WebSphere and Microsoft's BizTalk Server products, as well as with software from smaller makers. It's also a challenge to consulting companies specializing in systems integration, including Accenture and the Global Services arm of IBM, they said.

At a higher level, SAP's direction highlights the growing power of companies able to supply the glue that makes all the pieces of businesses' sprawling networks work as one system.

"It's an absolutely fundamental battle," said Joshua Greenbaum, analyst with Enterprise Applications Consulting. "These companies don't want to sell dribs and drabs to corporate clients. They want to define and deliver the next level of innovation. It's worth billions and billions (of dollars) to whoever can capture that."

"These companies don't want to sell dribs and drabs to corporate clients. They want to define and deliver the next level of innovation. It's worth billions and billions (of dollars) to whoever can capture that."
--Joshua Greenbaum, analyst
Enterprise Applications Consulting
Software integration has emerged as one of the top priorities for many big companies saddled with multiple generations of incompatible software. Without strong links between business systems, companies can't easily access data stored in multiple systems, and that cuts them off from important information. For instance, it makes it more difficult to know which customers are spending the most money, or which area of the company is least profitable.

SAP's Agassi downplayed the idea that the company's NetWeaver initiative would put it at odds with Accenture, IBM, Microsoft and other longtime partners. After all, the company relies on consulting and technology allies to make its systems work. But without naming names, he did acknowledge the potential rift. NetWeaver "is disruptive to the integration platforms," Agassi said.

However, SAP has done some things to diffuse the competitive tension. It's making NetWeaver compatible with IBM and Microsoft technologies. It's also likely to focus on selling NetWeaver to its own customer base, rather than to the industry at large, Forrester analyst Byron Miller said.

"The play (for SAP) is primarily taking over the application integration landscape in places they already have a predominate portion of business," Miller said.

Tearing down walls
The new architecture, which SAP began to discuss publicly nearly two years ago, incorporates a set of computing standards for linking systems collectively called Web services.

SAP and others are touting these new standards as a vendor-neutral way of making incompatible business systems communicate without an army of expensive consultants and finicky custom software that's difficult to maintain. "You've got to tear down the wall (separating systems), which is kind of funny coming from us in Germany," Agassi said during a speech this week at the Sand Hill Group Software 2004 conference in San Francisco.

NetWeaver 2004 is a collection of new and revamped products packaged to run on one server. Previous versions of the programs required separate servers and different underlying technologies, which was a deal breaker for many customers, analysts said. Included in the 2004 edition are SAP's portal software, application server program, integration tools, data analysis systems, workflow programs and mobile computing infrastructure, Agassi said.

"SAP has the largest of the large customers, which means (those customers) are going to be extremely interested in where SAP is going and generally conservative in respect to moving there right away."
--Byron Miller, analyst
The product is also designed to work with interoperability programs from WebMethods, SeeBeyond and others, Greenbaum said. SAP is keeping pricing for NetWeaver under wraps for now, but analysts said several components have a price tag separate from the SAP application set. One of them is a program called SAP master data management, which is designed to keep data in synch across different applications.

SAP says Web services, as incorporated into NetWeaver, will make companies more efficient, but the company also has its own interests in mind. When businesses buy software programs from SAP or its rivals, they typically spend three to five times as much or more on consulting services and other software tools than they do on the applications themselves.

"All the (application) vendors have taken it in the ear in the last couple of years," Miller said. "The days of huge deals are over. They're down doing incremental deals. What do you do to keep your company on track and keep it growing and so on? You expand into a new business area."

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SAP isn't alone in its move toward the interoperability sale. Siebel Systems, Oracle and Microsoft are all pushing Web services-based business software integration. Siebel's initiative is called the Universal Applications Network, and it incorporates tools from other software makers. Microsoft's product in this area is called BizTalk Server, and Oracle just recently launched its own product through a program called the Customer Data Hub.

It will take software makers another one to three years to put the final touches on their new software architectures, Agassi predicted. In another four to six years, the technology will catch on in the corporate mainstream, he said. "This is a big transition," he said.


SAP customers should expect
to see little near-term changes
as the company moves into the
integration and infrastructure
software market.

In the meantime, SAP's No. 1 priority this year is to sign up new NetWeaver customers that it can use as references to spawn more sales, Agassi said. SAP is also quietly urging thousands of customers to upgrade to newer versions of its software as it discontinues support for aging releases that don't work as well with NetWeaver. The company plans to phase out standard support for R/3, its flagship product in the '90s, over the next four to five years.

Spurring customers to move to the new versions could be SAP's biggest hurdle for NetWeaver, Miller said. "A (SAP-like) system is a huge corporate investment and moving some of these companies that have highly modified versions to new versions is always a tough deal," he said.

"SAP has the largest of the large customers, which means (those customers) are going to be extremely interested in where SAP is going and generally conservative in respect to moving there right away," said Miller.