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6/8/2009
11:33 PM
Bob Evans
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SAP Tops Oracle And IBM, But Siemens Picks SaaS

While SAP today had to enjoy announcing a rip-and-replace deal over Oracle and IBM for a utility client, it also had to sit by and watch as longtime SAP global strategic partner Siemens not only overlooked SAP for a whopping 420,000-seat workforce-management license but also selected a SaaS vendor to boot. This is surely not a business for the faint of heart.

While SAP today had to enjoy announcing a rip-and-replace deal over Oracle and IBM for a utility client, it also had to sit by and watch as longtime SAP global strategic partner Siemens not only overlooked SAP for a whopping 420,000-seat workforce-management license but also selected a SaaS vendor to boot. This is surely not a business for the faint of heart.First, the good news for SAP: EnWin Utilities, the electricity distributor for Windsor, Canada, is replacing its Oracle and IBM software with SAP's utility-industry ERP solutions plus some business-intelligence applications. In a prepared statement, EnWin CFO Victoria Zuber said the SAP software "provides the broad and integrated functionality we need to further enhance efficiencies in our operations, gain greater transparency to comply with new regulatory requirements, and lower our costs of owning IT. Ultimately, this will help us to improve service to our customers."

EnWin is also expecting the SAP deal, which includes some of SAP's CRM and business-intelligence solutions, to provide some transformational know-how and muscle for the utility by helping it to pursue "innovative business models and customer services" and to automate business processes. And it's expected to help on the regulatory front as well, allowing EnWin to convert to the International Financial Reporting Standards (IFRS), which will become mandatory for Canadian companies in 2011, SAP said.

And now for the not-so-good news for SAP: as my colleague Mary Hayes Weier reported earlier today, the $110 billion Siemens Corp. today announced an enterprisewide workforce-applications deal with SuccessFactors that will go into production in 80 countries and across 20 languages for the electronics and engineering giant.

While SAP made no comment on Siemens' choice of SuccessFactors, it had to be a stinging blow for SAP since it and Siemens have had a longtime global strategic partnership that has seen Siemens lead SAP implementations in the financial sector, collaborate closely in the healthcare field, and ultimately build up a wide-ranging network of Siemens SAP applications experts.

On top of that, like many large global manufacturing and design companies, Siemens has long used a range of SAP applications. Workforce and HR-related applications are surely a key element in the SAP portfolio, and for a company of the size of complexity of Siemens to bypass SAP's workforce-management solutions is rather stunning. Indeed, Hayes Weier reported that the decision on the SuccessFactors deal was made at the Siemens boardroom level:

"In fact, Siemens calls the SuccessFactors selection a "strategic board-level initiative," and part of its FIT4 2010 company-wide program. This program calls for Siemens to focus on its strengths in key industries, foster a performance-based and ethics-minded culture, and innovate by linking technology and business ideas, in order to increase revenue, profitability, and improve cash flow."

More broadly, in putting the Siemens deal in perspective, Hayes Weier outlined the growing acceptance SaaS vendors are gaining in large organizations, particularly in the workforce-management side of the business:

"In the past two years, most of the big wins for SaaS have been for workforce-related applications. Flextronics and Chiquita Brands, for example, signed on for 200,000 and 26,000 seats, respectively, of Workday's Human Capital Management SaaS last year, for managing attendance, benefits, compensation, and performance. "The most obvious reasons for the size of these SaaS deals is that workforce applications are now designed to be accessed by every employee in a company -- not just managers and human resources staff -- while other types of SaaS offerings are designed for specific groups of employees within a company (such as CRM for salespeople and customer-service reps). "But there are other reasons why large companies are becoming comfortable with SaaS for workforce management. Even while businesses realize the importance of linking employee performance to revenue and profits, workforce apps aren't necessarily integrated with those that run a company's operations, such as financials, supply chain, and business intelligence apps. Companies are more likely to embrace SaaS if they can bypass any integration issues with their core business applications."

So all in all, a bittersweet Monday for SAP, but the company's not exactly some dainty and fragile little thing that will be crushed by this setback. If anything, we should probably expect to see this missed opportunity by SAP serve as a real accelerant for them to come through with a roadmap for their SaaS and cloud strategies so that SAP customers can begin to weave that thinking into their own strategic plans, an initiative we at Global CIO advocated recently in our open letter to SAP CEO Leo Apotheker.

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