SAP plans new platform as competitive weapon

For the past 18 months, SAP AG has been knocking on the doors of PeopleSoft Inc. customers, extending maintenance and licensing incentives to lure them over. Now that Oracle Corp. has acquired PeopleSoft, SAP is pulling out a fresh weapon from its arsenal in the battle to win customers -- new technology.

By 2007, SAP plans to have all its applications running on a new platform, to be based on the company's NetWeaver integration platform. The new technology, which the company is simply calling Business Process Platform, will lead to an "industrialization of the software industry" similar to the industrialization of the auto industry, according to Chief Executive Officer (CEO) Henning Kagermann.

IDG News Service spoke with Kagermann about the new technology and the changed competitive environment after the German CEO presented the company's fourth-quarter results in Frankfurt, Germany, on Wednesday.

IDGNS: You introduced NetWeaver two years ago. Have customers meanwhile grasped what this technology is all about?

Kagermann: NetWeaver is an integration platform. We have integrated many technical tools into it so that customers can integrate their legacy systems with SAP technology more easily. Our flagship product, mySAP ERP, is already running on NetWeaver, and we plan to have the entire mySAP Business Suite on the platform this year.

Behind NetWeaver is a fundamental shift in architecture, which we call enterprise service architecture, or services-oriented architecture as it is also called in the industry. The idea behind this architecture is to give people on the outside access to functions inside our technology. In this sense, NetWeaver is a kind of composition platform for them to compose services.

IDGNS: Although you're still in the process of rolling out NetWeaver, you're already talking about a successor -- Business Process Platform. Why the change?

Kagermann: We could stop with NetWeaver, but if customers really want to adapt more quickly to new business models and be more innovative with their use of business software in the future, then they also need to be able build new services faster and with greater flexibility. To achieve this, we will take what is generic enough in our technology, such as components, business objects and processes like billing, and put these into an application platform. So if a company wants to develop a new add-on application, it now has access to functionalities such as CRM (customer relationship management) and SCM (supply chain management) through open interfaces.

What all this means is that we want to create reusable processes at the application level and combine these with NetWeaver. This, in a nutshell, is the idea behind our new Business Process Platform. It's essentially an evolution of NetWeaver with the added capability to run ready-to-run processes.

IDGNS: You have said that SAP's new business application software is something that businesses will use increasingly to gain a competitive edge. Does this mean you're prepared to give customers the choice between developing their own applications like CRM and SCM to run on your platform or buying these ready-built from you?

Kagermann: Exactly. Customers won't have to plug into our CRM application completely if they want to use our CRM technology. Instead, if they so choose, they can make use of reusable pieces -- available through the new Business Process Platform -- to compose their own application. A reusable part, for example, could be the order management function of our CRM application, which is the same in our ERP system.

IDGNS: Is it fair to say that the Business Process Platform will not only help you speed up application development and make more cost-efficient use of your resources but also give your customers greater flexibility to develop their own business applications running on SAP technology?

Kagermann: Yes, we and our customers will both benefit, but so will our partners. This is an important aspect. We can't develop every add-on application requested by our customers because the market for many of these applications is simply not large enough. But while a local application for a particular industry may be too small for a global company like SAP, it could be a huge market for a small partner. Our new platform will help partners compose these types of applications.

IDGNS: What about hooks to Microsoft Corp.'s .Net and IBM Corp.'s WebSphere?

Kagermann: Interoperability will be continued.

IDGNS: And the platform will be based on an open architecture?

Kagermann: Definitely. We let customers decide in which language they want to develop their add-ons. The discussion about whether it has to be Java or our own ABAP (Advanced Business Application Programming) is stupid.

IDGNS: When can expect to see the Business Process Platform?

Kagermann: We will provide some access to the platform to ISVs (independent software vendors) beginning this year. In 2006, we will provide ISVs with broad access to the platform so they can develop software applications on top of it, as well as our All-In-One (midsize) customers. We aim to move our complete portfolio to the Business Process Platform by 2007.

IDGNS: Will the new platform help you better differentiate yourself from Oracle, especially after its acquisition of PeopleSoft?

Kagermann: We believe so. What we've been saying all along is that the underlying technology, such as database operating systems, is a commodity and that it makes no sense to integrate our software in this layer. We want to give customers the freedom to choose their operating system, whether it is Unix, Linux or Microsoft. Oracle has a different view, and so does Microsoft.

There is a piece of that technology, however, where we can add value and have done so with our NetWeaver integration platform. Now with the Business Process Platform, we're taking NetWeaver and melding it with a piece of the applications layer. This new platform, in turn, supports a higher services layer, which isn't hard-coded but model-driven. Here I can imagine consultants composing processes and building analytic tools. We will offer applications at this level but so will others in competition with us.

So to come back to the question, Oracle still believes everything revolves around data. We say everything revolves around processes. Just think, for example, about collaboration across enterprises. This has nothing to do with data; it's all about processes. The future is business innovative sharing processes. That's where we're going with our new platform.

IDGNS: And how about Microsoft?

Kagermann: Yes, they are a competitor though more at the lower end. But I think if their solution scales, they will also want to move up.

IDGNS: And you're responding by driving down into the market for small and medium-size businesses, right?

Kagermann: Yes, we're competitors in this segment. But we also cooperate in other areas.

IDGNS: What about price pressure, especially in the wake of the Oracle-PeopleSoft deal?

Kagermann: I'm not sure what will happen. All kinds of things could happen. We could see stable prices but this depends on how determined Oracle is to gain market share.

IDGNS: Will you be making any acquisitions this year?

Kagermann: Our product portfolio isn't complete. But the question is priorities; we can't do everything. It's important that we generate innovative add-on products around our core products. If we don't do this, we could see customers move to our competitors. So we may consider some acquisitions to fill some gaps.

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