SAP strategy extends scope

It owns the enterprise resource planning software market but now the German software giant wants to own the entire corporate application market.

3 min read
SAP owns the enterprise resource planning software market, but that isn't good enough.

The German software giant wants to own the entire corporate application market from front office sales force and customer service software to advanced planning supply chain software at the opposite end of the spectrum.

"We don't want to do just back office applications. We want to do all applications," said Hasso Plattner, SAP chairman and cofounder. "ERP software and office software are the two most important software systems in the [corporate] enterprise. We are not a player [in the front office market] but we are confident SAP embarked on the right road."

Plattner launched an ambitious plan for his $3.6 billion firm to develop, within three years, front office and supply chain applications that can compete head on with niche market products that have been on the market for years.

While the back office applications, SAP's core R/3 system of financial, human resource management, and manufacturing management applications have reached that status, SAP only began exploring the other markets in the past 18 months. But Plattner said he is confident SAP developers can have to market by 2002, supply chain applications that are as good if not better than current offerings from i2 technologies in Irving, Texas, or Manugistics in Rockville, Maryland, and sales force, marketing, and customer service applications that will give Vantive, Scopus, or SAP competitor Baan's recently acquired Aurum a run for their money.

Bruce Richardson, analyst for AMR Research in Boston, said SAP is hoping to make its so-called New Dimension software products, those that are outside the scope of R/3, 30 percent of SAP's revenue in the next few years.

"That's billions of dollars," Richardson said. "The thing is they have to find revenue somewhere for new growth. Wall Street is talking 35 percent annual growth for SAP. That is huge and they have to find it somewhere."

While Richardson and other analysts believe SAP can develop the functionality in these applications in the given time frame, they are skeptical SAP can sell the products as standalone offerings and not as part of a larger R/3 sale.

"The sales channel is the big issue here," Richardson said. "They have to set up an affiliate channel and that will be difficult to do," especially when existing channels are already specialized in selling products from niche players like Vantive and Scopus and not willing to give up those offerings.

But SAP can reach its growth goals without ever leaving home. With 17,000 sites worldwide already using some aspect of R/3, analyst Joshua Greenbaum, of the Hurwitz Group in Framingham, Massachusetts, said SAP has a huge market right in front of it to make those numbers.

"SAP's real goal is to sell to this existing installed base," Greenbaum said. "There is huge pent up demand that is going to grow the next couple of years. The front office applications are going to piggy back on the expansion of R/3. I don't see SAP selling its [front office] or [supply chain] applications without R/3."

SAP announced today that it bought AMC Development's call center technology to add to SAP's Focus product, the mix of sales force, marketing, and customer service automation applications.

"This acquisition and joint development adds a critical piece to the SAP Focus initiative," said Heinz Roggenkemper, executive vice president, SAP Labs. "The call center will enable enterprises to engage in a dynamic, continuous dialogue with their customers, which will transform notions of marketing, sales, and service through one-on-one business relationships."

Financial details of the purchase were not released.

In other news, Oracle Corporation announced a 64-bit version of its Oracle8 database for R/3. It is meant to allow users to store terabytes of R/3 related data in the database. It is currently available with R/3Release 3.1 and 4.0 on Compaq/Digital Unix. By the end of 1998,it is expected to be available for all Unix platforms.