SAP sharpens its focus

The German software giant revealed that service-orientated architecture (SOA) would be an integral part of its future roadmap at the recent Sapphire event

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By  Diana Milne Published  June 18, 2006

|~|kagermbody.jpg|~|SAP CEO Henning Kagermann described service-orientated architecture (SOA) in his keynote speech at the Paris Sapphire event as “a common business language”. |~|Addressing customers at this year’s Sapphire event in Paris, France, Leo Apothekar, president of customer solutions and operations at SAP, stressed the need for agility. “IT must be much more dynamic, agile and responsive than it has been in the past so that it is able to facilitate faster business changes,” he declared. Apothekar could have equally been talking about SAP itself: the German software giant may have dominated (indeed, it pretty much invented) the business applications market in the 1980s and 1990s, but that market is set to change radically. Pretty much every major software vendor now has to deal with a whole new approach to how business software is written, deployed and used — service oriented architecture (SOA). SOA is made up of a set of linked repeatable business tasks, which are self-contained, and reusable software modules that are independent of applications and the computing platforms on which they run. It evolved as a solution for complex and inflexible application infrastructures; by managing standards, protocols, information delivery, and application integration, IT organisations found that they could save money and increase flexibility through reducing architecture complexity and duplication. SOA is now being hyped up as one of those technologies that can change how the IT industry — and the end-user IT department — works. That change could be as radical as, say, the move from the mainframe environment to the client-server world, its proponents claim. Today, much of the work of the average IT department lies in building and supporting vertically integrated applications, with IT deployments consisting of a series of project roll-outs. Switching applications can be extremely difficult, with organisations having invested millions of dollars in their systems. With SOA however, the user focuses on the type of service that needs to be delivered, rather than worrying about the underlying technology. While its great news for the IT department, it is not necessarily so if you happen to be the market-leading firm for the business applications market, with thousands of users around the world having invested millions of dollars in your software. For SAP however, SOA is not a danger — it is an opportunity. The vendor has thrown its weight behind transitioning to its own view of SOA, enterprise ser- vices architecture (ESA), a move that executives have described as a ‘bet-the-company’ gambit. In 2003, it began the task of overhauling its entire product line-up to take advantage of SOA. At Sapphire, the company was able to tell its EMEA customers that mySAP ERP 2005 — the latest version of its enterprise resource planning application — is now available. SAP has described mySAP ERP 2005 as a “milestone release” paving the way for the wide spread adoption of enterprise SOA. The adoption of this software will be many SAP customers’ first step on the enterprise SOA roadmap – one that the company believes reflects a fundamental shift in the way organisations do business. As Apotheker put it during his keynote at the Paris show: “In the past we could just think of IT as a back office function, but today it plays a powerful role in running your business. New global regulations have forced all of us to manage our business in different ways.” “Our customers need to be able to respond to these global changes in faster ways to stay ahead of the competition. Enterprise SOA is the only way to solve age old dilemmas between efficiency and flexibility because it delivers the best of both worlds,” he continued. “It will dramatically change the speed to innovate and to respond to customer demand,” he added. Apotheker claimed that SOA would “double productivity at the minimum” and enable a five times faster speed of adoption. The services within the SOA are independent from underlying platforms and programming languages such as Java or .NET making them vendor independent. All the web services within the Enterprise SOA communicate using web service standards — or as SAP CEO Henning Kagermann described it in his keynote “a common business language”. Already Gartner has predicted that by 2008 over 60% of enterprises will use SOA as a “guiding principle” when creating software applications and business processes. Worldwide a number of major customers have already set a strong pace for the transition from SAP R/3 to mySAP ERP — among them Air France, the Swiss facilities management company Edelwiess, the US- based supply chain service provider CHEP International and the Dutch government administration Provinice Noord Holland. SAP already has aggressive plans to accelerate adoption of mySAP ERP and predicts that the majority of customers will have migrated to mySAP ERP from R3 by 2007. “The migration from R3 is very fast,” Kagermann reveals in a meeting after his keynote. “I would guess that we will end up in 2009 with a few hundred R3 contracts not converted,” he claims. “What is key to our growth is the adoption rate in the market,” Kagermann states. “We are first in the market with our solution and we are convinced this is the next way forward for IT. Now it is a question of the first people to adopt it,” he goes on to explain. The release of mySAP ERP 2005 presents a significant challenge to SAP’s competitors — particularly its closest rival Oracle. Kagermann believes that Oracle’s strategy of adding new solutions to its portfolio through the acquisitions of different products will work against it if it tries to develop solutions based on an SOA platform. ||**||Focusing on retail|~|agassibody.jpg|~|Shai Agassi spoke at the SAP event.|~|“You can’t compare what we and Oracle are doing,” he claims. “We have one portfolio of products which has been developed 98% by SAP — but you are in a different position if you have bought different products.” “You have to redesign them first to come to one common design, and then implement it. It could be that they [Oracle] have to re-write an application from scratch to achieve that,” he claims. However Kagermann doesn’t rule out the possibility of SAP making more acquisitions of its own in the near future. “There are a few industries where it could be SAP would like to do an acquisition,” he says, although he declines to give any specific details, stating that he wishes to “avoid speculation” in the press. While Kagermann may be short of detail for any further acquisitions, at Sapphire, SAP delivered a very clear message about its roadmap for the years ahead — that it is fully committed to the development of enterprise SOA and it is that which will drive its strategy going forward. Throughout 2006 customers and partners will be able to use the enterprise services in SAP’s repository to build their own composite applications on top of SAP’s application infrastructure and the company will continue adding more services to the suite. “We will start now every quarter putting more and more services incrementally on top of the services suite which allows businesses to move into this new direction but also to take advantage of this opportunity of fast innovation,” promises Shai Agassi, president of the products and technology group at SAP. And by next year, all SAP applications, including those in mySAP Business Suite will be fully service-enabled. As Kagermann says: “For a long, long time there will be no next [new thing]. It’s really about reaching the full potential of this new concept.” To accelerate the pace of enterprise SOA development SAP has announced a US$125million fund for vendors building applications on the NetWeaver platform and it plans to release hundreds of enterprise services — web services pre-defined with business process to complement mySAP ERP. It has also established an enterprise services workplace, which provides partners, customers and systems integrators a hosted environment in which they can collaborate on SOA development. At Sapphire it elaborated on further initiatives to complement the release and increase its attractiveness to potential customers including the optional new user interface for mySAP ERP, Muse. Muse will allow customers to access an SAP application directly from their Mac, Linux or Windows desktop and in future from mobile devices, such as PDA. It has open standards based architecture and can be extended to deliver applications, composites and other service enabled software from SAP and its partner or from other solution providers. The product also runs Duet — the result of a joint initiative by SAP and Microsoft in April, which enables users to interact easily with SAP business processes through office applications. The two companies claim that Duet will enable customers to increase corporate policy compliance, improve decision making by bringing together the two worlds of business productivity applications and enterprise applications. They also claim the product will save employees time and money by increasing the return on investment (ROI) of enterprise software implementations by reducing employee training cost and accelerating user adoption. As well as announcing the steps it has taken on its roadmap to enterprise SOA, SAP used Sapphire to announce that it plans to develop hundreds of micro-vertical solutions for small to medium enterprises — a key focus area for SAP. Kagermann claims that alongside evolving the platform and developing solutions for business users, solutions for the mid market is one of the areas in which the company hopes to expand its business. “The midmarket is not a new one for us. We have been there for a long time — we are the market leader in the midmarket. Last year we increased our share in the mid market against our competition,” he states. “We also invested in the products we have to address more and more micro-verticals in the market,” he adds. To accelerate the development of such solutions, SAP has set up regional SME solution centres which will be located in the Americas, Europe, Middle East and Africa (EMEA) and Asia Pacific regions. As well as developing industry specific solutions the centres will be dedicated to helping SMEs to adopt SAP software as quickly as possible — a strategy that has been endorsed by Gartner. Bob Anderson, who is resea- rch director at Gartner praises SAP’s strategy: “Midsize enterprises in many industries remain undeserved, without business management solutions geared to their specific industry or microvertical needs and sufficient vendor coverage to address their market,” he says. “At the same time partners may lack the resources to bring new solutions to market cost effectively,” he continues. “Creating regional teams to focus on specific market and industry opportunities will help meet the growing market demand as SMEs increasingly seek to gain competitiveness through effective use of IT,” he says. Overall in 2006 SAP plans to introduce around 80 industry and market specific solutions and it will be establishing teams to develop the solutions in Spain, the UK, US, the Czech Republic, Singapore and Germany. Its goal is to eventually create a total portfolio of over 650 qualified solutions available worldwide, which will focus on the automative, chemicals, consumer products, dealer business management, fabricated metal, food and beverages, high tech, industrial machinery and components, life sciences, logistic service providers, professional services, public sector, retail and wholesale distribution industries. Of these industries retail has become an increasingly important one for SAP. Its offerings have been enhanced by the acquisitions of Triversity and Khimetrics last year — both of which have been integrated into the SAP for Retail product. Triversity connects data from the point of sale through to the retail supply chain and enterprise back office systems. This enables retailers to make clearer decisions about stock and pricing, reducing costs, driving growth and helping to build a better customer experience. Khimetrics provides enterprise software solutions that allow retailers to better analyse how to price and position items to boost profits and deliver more accurate profitability forecasts. Darryl Owen who is vice president of the retail and wholesale division, EMEA News at SAP, says: “I sometimes feel that SAP’s position in retail is one of the best kept secrets in the market. It’s a pretty good secret right now considering some of the largest wholesalers in the world are running the SAP solution.” He points out that whereas SAP had 900 customers three years ago, the figure has increased to 1700 with revenue having doubled globally. The company’s retail sector grew by 20% in the first quarter of this year and Jim Hagemann Snabe, general manager of indu- stry solutions at SAP, describes it as the industry sector with the “biggest potential.” Other important future growth areas for SAP, according to Hagemann, are the financial services, telcos, hospitality and the public sector. “We cover around 26 different industries and our strategy is to improve their core businesses through understanding their industries,” he claims. “Our challenge is to basically listen to our customers and we have a dedicated team of 2000 people who spent a lot of time talking to customers about their needs,” he notes. “We also have industry advisory councils who focus on understanding where this industry is going, what are the key challenges and we build elements of this into our industry functionality,” Hagemann adds. Building industry functionality into its ERP suite is just another strategy designed to drive the adoption of enterprise SOA. If SAP’s optimism is to be believed the whole face of enterprise software is changing — with enterprise SOA set to transform the role IT plays in businesses. The company has an aggressive strategy for pushing the development of this technology and has introduced a range of incentives to drive its adoption among both large and small to medium enterprises. Whether smaller businesses can afford to migrate to the new software — or indeed whether they will properly grasp the benefits of this complex technology— remains to be seen.||**||

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