The ERP-related announcements, made at the Sapphire trade show this week, are the latest steps along SAP's bid to rebuild its products around a service-oriented architecture.
SAP's march toward completing its enterprise services architecture quickened this week, but its customers aren't keeping pace.
At its Sapphire customer conference, SAP unveiled MySAP ERP 2005, a new release of its core applications set, and a set of 500 "productized" enterprise services that run with the ERP apps and SAP's NetWeaver application integration platform. But while interest in the new technologies was high among conference attendees, the vast majority of SAP's 35,000 customers have yet to migrate off the vendor's aging R/3 applications onto MySAP and NetWeaver.
"I think a lot of our members want to get to that next level of ERP to take advantage of broader services applications," said Mike Perroni, president of the Americas' SAP Users Group (ASUG) and a VP at Halliburton in charge of that company's enterprise applications group. But he acknowledged that most--including Halliburton--are still using R/3 version 4.6C. And some of those using MySAP and NetWeaver are doing so in a limited fashion, such as implementing them only for a CRM system.
Jim Walsh, VP of IT at luggage and accessory maker Tumi, was enthusiastic about SAP's product direction, saying its strategy of developing its applications as components and services plays well to smaller companies like his by providing more IT flexibility. "The CRM apps just keep getting better and better," he said. But Tumi is also currently using R/3 4.6C applications. Walsh plans to begin discussions with AnswerThink, Tumi's IT implementation service provider, this fall about migrating to MySAP.
SAP won't say how many customers have migrated from R/3 to MySAP. Shai Agassi, president of SAP's product and technology group, expects 6,000 to 8,000 MySAP implementations in the next 18 months and that 95% to 98% of SAP's customers will have contracted to upgrade by 2009. He also said most upgrades can be completed in 60 days. "It's not such a big step," he said.
But customers are worried that implementing a service-oriented architecture will mean big changes and big price tags, says Josh Greenbaum, principal of Enterprise Applications Consulting. SAP, he says, can't let up making the cost-benefit arguments of upgrading.
The stakes are high in the competitive enterprise applications market. Oracle, SAP's chief rival, is merging its acquired PeopleSoft, JD Edwards, and Siebel applications with its own under its Fusion project. Last week's Infor Global Solutions acquisition of SSA Global Technologies--which itself was made up of application vendors including Baan and Epiphany--for about $1.4 billion created what the company claimed to be the third largest application vendor after SAP and Oracle.
The competition is fierce. In March, SAP said more than 200 companies were taking advantage of its "Safe Passage" program to migrate off the applications acquired by Oracle to SAP. And last week SAP's TomorrowNow subsidiary began offering support services for Siebel applications, in addition to the PeopleSoft and JD Edwards software it already services.
Oracle countered by announcing last week that it will provide support and maintenance services for SAP R/3 applications. An Oracle press release quotes Oracle president Charles Phillips as saying 94% of R/3 users haven't upgraded.
SAP's Enterprise Services Architecture, first outlined by the company in 2004, is the company's three-year road map for evolving its applications into Web services-based modular components and services that are easier to implement and operate. CEO Henning Kagermann said there are more than 300 companies--The Body Shop personal care product retailer and mining company Rio Tinto were two that were named--are in an ESA early-adopter program working with SAP to help develop the technology.
MySAP ERP 2005 (so named because of the vendor's product naming convention, according to an SAP spokesperson) and other announcements at Sapphire were described by SAP executives as "stepping stones" to ESA. MySAP ERP 2005 applications are built on NetWeaver and can access the 500 services SAP announced this week.
Those services include business functions in finance, human resources management, procurement and logistics execution, product development and manufacturing, sales and service, corporate services, and analytics. All are available online through the SAP Developer Network. Next year, in the final stage of ESA development, a new release of NetWeaver will include a repository with the services built in.
Making SAP applications easier to use is also an element of the ESA plan, so the company announced Muse. It's an improved user interface that allows Linux, Mac, or Windows users to access SAP applications from their desktops. Versions of Muse for specific industries will be rolled out over the next 18 months.
The Duet software SAP and Microsoft debuted earlier this month, which links SAP apps and Microsoft Office applications, similarly fits into SAP's ESA blueprint. "That could have huge productivity implications," said Home Depot CIO Bob DeRodes, who appeared briefly onstage during an SAP executive's keynote speech at Sapphire.
Another step SAP is taking to make its ESA vision more attractive for customers include establishing a $125 million fund to provide seed money to independent software vendors building composite applications that run on NetWeaver. Also on tap: establishing "industry value networks of customers and ISVs in consumer product, retail, technology, and public-sector markets to develop industry-specific apps." SAP already has such networks in the banking and chemical industries.
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