SAP Puts Its Money On Web Services

Every application SAP ships from now on will include a native version of NetWeaver, its new computing engine based on Web services. By 2007, SAP will have retooled its entire software suite to run on NetWeaver and what SAP calls its Enterprise Services Architecture. And the German software vendor is redoubling its efforts to get NetWeaver in the hands of its customers, promising that by year's end, there will be 1,000 happy customers who can talk about the benefits they've achieved from the technology.

It's a monumental task, one that SAP executives say marks a paradigm shift for the leading enterprise app vendor. To pull it off, the company has already put nearly $1 billion in research and development toward the effort, and that kind of hefty investment will continue for the foreseeable future. "This is a big commitment from SAP," chairman and CEO Henning Kagermann says. "And we will deliver."

NetWeaver and the Enterprise Services Architecture--which SAP says will ultimately provide businesses with an integrated-yet-heterogeneous IT environment that will let them assemble business processes such as cash management on the fly--was unveiled in January 2003. But even then, SAP wasn't sure just how far the commitment would go.

The answer became clear by the end of 2003, after an internal validation that a full-fledged application could be built on NetWeaver and the Enterprise Services Architecture, and SAP used its annual conference this week to drive home the message. "We've validated that the company can bet the farm on this architecture," says Shai Agassi, a member of SAP's executive board.

Customers say they're pleased with SAP's decision to build its entire suite of offerings, and its future, on a services-based architecture. "An architecture that is open, can be interconnected with other platforms, and is interoperable is the right thing to do," says Ian Robertson, director of IT in the Americas for the Wrigley Co.

SAP also hopes its strategic shift will propel the company into the No. 2 spot, currently held by Oracle, in the enterprise software market. Analysts say it could give SAP traction. Oracle's challenge, says Forrester Research VP Navi Radjou, is to let go of its "not invented here" mind-set and accept that customers buy best in class. SAP has embraced that notion with NetWeaver, Radjou says, but "I don't hear anything like that from Oracle."

SAP is backing its commitment to an open, services-based architecture via an extended relationship with Microsoft, which has been pitching such a computing infrastructure for several years. The two companies said this week that they're working together to deepen integration between NetWeaver and Microsoft's .Net software architecture so businesses can share functionality between SAP enterprise applications and Microsoft Office.

The tighter relationship is spilling over into development efforts for individual customers. Wrigley's Robertson says Microsoft is funding research to help the consumer goods manufacturer connect Office apps under SAP's Enterprise Portal, the umbrella user interface that's built on NetWeaver. The project was started a few weeks ago and will last for several months.