SAP to bring Net unit back in-house

German business software maker SAP on Thursday said it would fold its U.S.-based Internet subsidiary back into its operations and appointed the head of the former unit to its executive board.

SAP Portals and SAP Markets, two subsidiaries that were combined in January, are being subsumed under a new business unit. Shai Agassi, the new board member, has been charged with leading the unit, which combines development of portal, e-marketplace, data analysis and e-commerce software, the company said.

Agassi joined SAP last year and oversaw the subsidiary. Before joining SAP, Agassi was chief executive of Top Tier Software, a portal technology company SAP acquired last year.

For SAP, the creation of the new business unit marks a shift away from separating Internet-related product development and marketing from the rest of the company.

First-quarter sales of applications developed by the subsidiary declined 45 percent year over year to $39.2 million in license revenue, SAP reported Thursday. Overall, SAP software license revenue fell 12 percent to $358.3 million in the first quarter, compared with a year ago. For 2001, the subsidiary booked $370.6 million in license revenue, slightly more than 6 percent of total company license revenue of $2.3 billion.

Gartner analysts Gene Phifer and Derek Prior say SAP's announcement that it plans to reabsorb its U.S.-based Internet subsidiary is good news for most of its customers. see commentary

"Two years ago, SAP sent two scouting boats--SAP Markets and SAP Portals--ahead to explore the evolving waters of openness in business software," Hasso Plattner, SAP's chief executive, said in a statement. "SAP has the advantage of understanding how quickly the market has evolved from a technology play into an applications game."

One of the tasks of the new unit will be to better incorporate its technology into the rest of SAP's product line. It will also focus on making SAP applications communicate better with non-SAP software and enable customers to link many different computing systems.

Agassi's promotion is a signal that the company is committed to the new applications it introduced during the dot-com heyday, said Laurie Orlov, an analyst at Forrester Research.

E-marketplace and portal applications were a departure for SAP from so-called back-office applications that automate accounting, human resources and manufacturing operations--once the bread and butter of the $6.4 billion company.

SAP doesn't often appoint new board members. The last time it did was last year when it added new Chief Financial Officer Werner Brandt to the board. Before that, the last time SAP added executive board members was in 1996. Agassi, an Israeli citizen, is the first non-German on SAP's executive board.