Singing Kumbaya and plotting Oracle's demise

SAP is undergoing a transformation, trying to become the Switzerland of the software market, a move analysts welcomed as overdue. This is a big change for a company known as a tight-lipped shop, which prefers to keep to itself with little help from partners.

But the transformation is being spearheaded by Hasso Plattner, who is more engaged than ever at the company he helped co-found 30 years ago. Plattner, the co-CEO of the business software maker, has broken with the past, linking arms with several high-profile partners. And during the company's annual trade show, he spent a good part of his time emphasizing his commitment to make SAP software work better with competing systems.

Although SAP has taken heat for being late to the market with its own set of Internet-based business applications, and for being slow to understanding e-business, Plattner believes people are changing their minds.

Plattner, who founded SAP in 1972 with four IBM colleagues, sat down with CNET News.com to talk about SAP's direction, the competition against Oracle, and the company's new relationship with IBM.

Q: You were able to steal some major Oracle clients recently. What did you offer that made them switch?
A: We are silently making inroads. A year ago, Larry Ellison challenged SAP and told our customers they should stop (installing) SAP instantly and go to the superior Oracle system. All that happened is Oracle customers looked in more detail at SAP and found that Oracle's propaganda is much nicer and easier to understand than the systems. Some companies left SAP because they thought Oracle was the better choice; maybe they weren't happy with the SAP implementation, but (some have) come back. We've had some losses...but now we're getting customers back.

I think Oracle has lost its focus and is well behind its promises. And I mean focus in the sense that the top dog believes in his own propaganda too much. Oracle customers are coming to SAP. I wouldn't say there is a mass migration, because Oracle has 6,000-plus customers, but we feed on Oracle a bit, and in new competitive situations, we're very strong.

What about the other core competitors in your group--PeopleSoft and J.D. Edwards--does SAP still see them in competitive situations?
I always thought that PeopleSoft was one of our better competitors. They still have a tough time to become financially successful, but they have their markets. They're in the public markets, they're in the universities, and they're still a competitor. Other competitors we have lost, like Baan. I don't see J.D. Edwards much anymore, either.

What was the one message you wanted customers to walk away from at this year's Sapphire show?
To realize that SAP in the e-business (world) is a factor which can't be ignored and, in some respect, for the achievements we have made in the last two years. The deeper the analysis goes, the better SAP shines. The open integration strategy is fully understood. The public opinion now has to be rolled out to all customers--25,000 sites. That's pretty big. We have a lot of work to do.

A lot has happened over the past year in the business-to-business market. Many of the players are having a difficult time. Where do you see that market headed?
I see splendid opportunity for that market, but only when you really fulfill your promises. The dot-com world's success on Wall Street didn't mean that they were very successful with your customers. That's the lesson we have learned. We should not drive companies by looking to Wall Street too much. We have looked, but not too much. We have trusted ourselves more, and we have not given the company up just to please Wall Street but to please our customers and to walk along our own visions and marching orders.

The ASP (application service provider) market is also in a state of flux. A lot of competitors have either disappeared or are now experiencing consolidation.
We jumped into this market with both legs, and we got burned. There is a market, but again, I don't know what happened in the last two years. Yes, there is a market for ASPs...but they have to be more attractive. They have to be more flexible, and in the end, customers have to adopt this. Otherwise, the business model doesn't work.

At last year's Sapphire show, SAP said it would be more open to partnerships and work to simplify its message and deliver a clearer message to the industry. How has SAP improved in that area? What has it done to simplify the SAP message?
The whole presentation of SAP to the outside world has changed. Simplification was the word. I think we have changed a lot. We speak with a much more comprehensive voice, and we're much more focused. And where we're not, we still have room for improvement, but I think we came a long way.

Customers are thinking of SAP differently?
There must be something (different); otherwise the request for MySAP.com (software) wouldn't have quadrupled. This is, for me, the biggest indication that something has changed. And the fact that IBM came back...They made, I think, a stupid decision a year ago, absolutely stupid decision, to basically ban SAP from the new marketplaces and supply-chain and CRM (customer relationship management) software business. They got stuck with their Ariba-i2 story there. They didn't select the best possible partners. The two partners hated each other so much that the whole alliance, the whole "dream team" alliance, fell apart.

What was your assessment of the alliance?
I never believed that this (alliance) could work. This was the biggest experiment in the world. If IBM can't make it happen, who else could make it happen? They spent a lot of money and a lot of energy; despite that, it was a foolish decision to ignore SAP, and they lost in the SAP camp. They lost market share. And that brought them back. We can't ignore them because they're still one of the largest services companies. I predicted that they would all step on each other's feet and then they would scream and shout at each other, and that's what exactly happened.

What did you conclude from that?
Software companies are not mature companies. They cannot--even the bigger ones--they cannot really acknowledge where their limitations are, where their strengths are, because they always live in the future. And they have to demonstrate to Wall Street how much they live in the future. When you live in the future, you expand beyond your capabilities and then you step on each other's throats.

You've been at this for many years now. You've seen the market at its best and at its worst. Why do you think you've stuck with SAP and with this industry for so long?
I think one of our biggest abilities is to adapt to new situations. There's always the risk that you stick too long with your existing plans and business setup. There's an even higher danger when you're very successful that you do not criticize yourself early enough. So this is one of the abilities of SAP. We're a pretty open society, which means that there's criticism allowed and discussed.

I think we have the ability to reorganize ourselves. We have done a lot in the last two years to reorganize the company, to reorganize the focus. And we have done this several times in our history. We have done this with (our flagship software suite) R/1 and R/2 in the '70s and we have done this in the end of the '80s with R/3 and now again in the end of the '90s, with regards to e-business systems.

I personally still enjoy it. This is by far the best opportunity for business systems ever. Sometimes we go back to the old days and say, "Oh, look what we did with so little," and now we have all these resources available. We can do much, much, much better systems today, so therefore it's fun.