InformationWeek

However, the company seems to be signing more marketplace deals, such as the one it has with eLabs Europe, a marketplace for scientific laboratory equipment in Munich, than creating joint ventures with industry giants. Launched in September, eLabs plans to turn on its mySAP.com system this month and anticipates that it will be able to easily integrate its customers' systems to its trading platform because many of them are SAP customers. "The concept of mySAP.com is to enable our customers to transact with us seamlessly without writing a lot of code," says James Evans, director of marketing and product services for the startup. Yet, customers who don't use SAP would need to employ consultants to help link their systems to eLabs' platform, making SAP's strength as a marketplace provider contingent on the premise that the rest of world runs on SAP. The vendor is working to change that by developing a more open architecture based on the Extensible Markup Language and HTTP. The goal is to provide seamless integration with SAP--and non-SAP--marketplaces and companies.

MySAP.com customer Beyond.com couldn't agree more. The Santa Clara, Calif., software and IT services marketplace is implementing SAP's core ERP components and plans to go live in October. "The way of the future is to seamlessly integrate financial transactions with our customers by sending an XML file that feeds into their systems," Beyond.com CIO Gordon Jones says.

Another key enhancement SAP is addressing is E-commerce application performance. The speed at which an SAP system could answer queries and provide data was limited in the past by reporting requirements embedded in the ERP transaction environment of R/3 and mySAP.com. Thus, companies such as Acta, a provider of ERP data-caching applications, have carved out a niche among companies linking ERP data to high-volume E-commerce systems. SAP says it has removed those barriers and that scalability of mySAP.com is higher than in the old R/3 system. "Our bottleneck was reporting," Plattner says. "Today that reporting is removed from the transactional system and put into the Business Information Warehouse."

Business Information Warehouse, SAP's analytical application, is becoming a requirement in all SAP deployments. Considered SAP's most-successful application outside its core ERP system, with 14,000 installations, Business Information Warehouse is entering its second release, generally available this month. The new version allows queries through the Web and provides a more granular level of reporting.

SAP is also readying a release of its supply-chain management application, Advanced Planner and Optimizer 3.0. The upgrade, a centerpiece of SAP's marketplace platform, is in limited release this month and will become generally available by September. It promises expanded functionality in three areas: collaborative planning, transportation planning integrated with a demand-planning system, and a strategic-planning component called network design that helps companies decide where to build new warehouses or when to outsource production.

SAP also is focusing on version 3.0 of Business-to-Business Procurement, scheduled for limited release by October, which will link to SAP's business-intelligence and supply-chain planning applications for optimized purchasing of strategic materials.

Facing competition from more focused rivals, SAP faces an uphill battle in these new markets and some analysts question whether the company will really lead the market in anything but back-office applications. "They don't have to," Forrester Research analyst Laurie Orlov says. "They can be market trailers and continue to sell to their installed base and be quite viable." That's not enough for Plattner, though. "There's a strong tendency toward new accounts," the SAP co-chairman says.

Osram Sylvania, the North American operation of Osram GmbH of Germany, completed a five-year implementation of SAP's R/3 ERP suite this year. Now, the Danvers, Mass., lighting products company is implementing SAP Internet Sales to let construction contractors, resellers, and distributors check prices, availability, and order status, and process orders on the Web. "Our idea of E-commerce was to extend our ERP system beyond the four walls of our enterprise," says Mehrdad Laghaeian, VP of IT.

Osram Sylvania chose SAP for its E-commerce system after seeing only a "road map" of the company's E-commerce application a year ago and meeting with SAP developers in September. "We figured it was worth a shot," Laghaeian says. "All the functionality we needed was already within the classic SAP. What SAP couldn't do at the time was presentation to the outside world on the Net."

But other SAP customers aren't so devoted. Lucent Technologies Inc. chose to build a marketplace on i2 Technologies' TradeMatrix trading exchange platform. Lucent's decision to pass on mySAP.com came last fall. "We felt that SAP at that time wasn't near as far along as the i2 product," says Emil Sommerlad, CIO of Lucent Technologies Power Systems in Mesquite, Texas. "The initial release of mySAP.com was geared toward the SAP environment and wouldn't have hooks in place to integrate well with non-SAP systems. The benefits we can get in participating in a trade portal aren't integration with our back-end but with our trading partners."

That challenge is manifest in SAP's sales and development organization, particularly in the United States, which has been crippled by the departure of key personnel, including two CEOs. Revenue in the Americas region--the United States, Canada, and Latin America--declined 3% last quarter; it was the only region in which revenue fell. "There are a lot of disgruntled SAP people out there," Benchmarking Partners analyst David Dobrin says. "Underlying that is the feeling their talent wasn't appreciated. Especially in America, a lot of people haven't been able to step into leadership positions."

Indeed, when the CEO of SAP America, Kevin McKay, stepped down in April, the SAP board in Walldorf filled his spot with one of their own. New U.S. CEO Wolfgang Kemna, a German who previously headed SAP's German subsidiary, has a personable, open manner and an easy smile. Though he has no previous U.S. business experience, he helped build SAP operations in South Africa and the Middle East during his 13 years with the company. He is adamant about empowering U.S. managers. "This is not a takeover" by Walldorf, Kemna says. "We want to empower the management."

Though optimistic, Kemna has a daunting task ahead of him. He's charged with restoring the confidence of SAP America's staff of 4,400, stabilizing employee retention, and jump-starting sales in what was once SAP's fasting-growing national market. On top of that is the challenge of going toe-to-toe with fierce American competitors in their own backyard. Kemna says the biggest challenge, however, is within the company: "The only company that can make us fail is SAP." (See sidebar story, "SAP America Chief Lays Out Plans To Turn U.S. Sales Around.")

--With additional reporting by Steve Konicki

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