SAP chief touts Commerce One deal at trade show

The company is also pushing to increase sales for its mySAP.com Internet-based business applications, chief executive Hasso Plattner said at SAP's annual trade show here.

SAP makes enterprise resource planning (ERP) software to help companies track their finances, human resources, logistics and other business needs. Like rivals Oracle and PeopleSoft, the German software company has been working overtime to develop its own set of more lucrative front-office and Web-friendly applications, as more companies look to the Web for many of their business needs.

Hotter software segments such as customer relationship management (CRM), supply-chain management and procurement software have pushed ERP software makers to ink partnerships with smaller, more specialized software makers or, as SAP and Oracle have done, to develop their own products.

Yet today Plattner said that SAP will no longer be "closed" to partnering with competitors in the software market.

"As much as we like to cover as many areas as possible, it's obvious that no company can cover it all," he said. "This is where alliances come in. Software companies have to come together and...work together as engineers. This is a fundamental change."

Plattner shared the stage with Sun Microsystems chief executive Scott McNealy and Commerce One chief Mark Hoffman. Hewlett-Packard chief executive Carly Fiorina appeared via satellite.

SAP said it will buy $250 million worth of Commerce One shares as part of a plan to jointly develop e-commerce marketplaces. SAP, which developed its own procurement software, said it will collaborate on new and existing marketplace products with Commerce One.

Commerce One has been revered as the so-called pioneer of the lucrative business e-commerce market, selling its specialized software to create online marketplaces for companies looking to drive down their purchasing costs by moving their supply chain online.

Analysts say the Commerce One agreement is something SAP had to do to keep up with Oracle, which has been busy inking numerous marketplace deals in recent months.

"Commerce One has been able to build a name for itself in the Net market space that SAP, to date, has not," said Joshua Greenbaum, who heads Enterprise Applications Consulting in Berkeley, Calif. "SAP can ride on the coattails of Commerce One's marketing in the Net market space...This is a marketing war, and Commerce One has been really good with that out there."

Yankee Group analyst Harry Tse said the Commerce One deal is an admission by SAP that it "couldn't do it all." Tse said the deal bodes well for both parties, which are knee-deep in the race to grab land in the business e-commerce market.

"Commerce One is aggressively pushing the adoption rate of their product, and SAP has the installed base as well as the intention to push it," Tse said. "SAP just needed the technical help" from Commerce One.

Enterprise Applications' Greenbaum stressed the benefit to Commerce One as well. "At the same time, SAP can really bring the promise of back-end integration that, to date, has not been realized in the business-to-business marketplace," he said. "So from Commerce One's standpoint, this is an enormous deal as well."

Aiming to regain confidence in the adoption of mySAP.com software, Plattner also boasted a new client, food giant Nestle, which will add 230,000 new mySAP.com users. This marks the largest contract to date for 28-year-old SAP.

Last quarter, SAP posted sagging profits due to increased costs with the development of mySAP.com as well as costs related to its new employee benefits program. Software license sales grew just 4 percent, resulting in a challenging quarter for the company.

Plattner said he sees only stronger numbers ahead.

"Already, 22 percent of our software sales are from mySAP.com," Plattner said. He projected that sales from Web applications will add over 30 percent in sales by next quarter, over 50 percent in the second half of this year, and over 80 percent by 2001.