A tangible aura of corporate self-satisfaction seemed to permeate the air at SAP's user conference in Copenhagen in April 2005, and not without just cause. SAP was basking in its strong financial performance in its first quarter of 2005, and company executives claim the German software powerhouse has further extended its lead in the business application market over recently merged Oracle and PeopleSoft.
To add to its jubilant mood, SAP has won plaudits from the analyst community for the breadth and maturity of its service- and process-oriented vision. In a ferociously competitive enterprise software market, one City analyst said: "SAP is the best-positioned to take advantage."
But SAP is not content with winning on the application front, and is now girding itself to tackle long-term rival Oracle on its home ground. SAP is only too aware that for a significant proportion of its installed base, Oracle remains the database of choice. That strength gives Oracle the ability to challenge SAP in the application market; now SAP is intent on undermining Oracle's database business.
First, SAP has released over 100 analytic applications for its mySAP platform. The applications enable any users to create custom-built reports based on data from SAP and non-SAP business systems. The most obvious competitors for SAP here are other business intelligence vendors, such as Cognos, BusinessObjects and, of course, Oracle itself. But tellingly, Oracle has been increasing the analytic capabilities bundled with its database, and SAP will be keen to attract its users to its own analytic apps.
SAP has also increased the pressure on Oracle's database business by working with IBM to optimise its DB2 database to work with mySAP. Features such as the SAP Tuner auto-configures DB2 to run in an SAP environment. The message SAP wants to project is clear, says David Bradshaw of IT analyst company Ovum: "SAP will be hoping [to] persuade companies to run SAP less often on Oracle."
However, amid all the positive noises emanating from SAP, it still has one significant challenge to overcome: getting customers to upgrade to its mySAP platform. SAP's executive board member Shai Agassi is bullish over the prospects. This issue is "history", as far as he's concerned: the battle, he claims, has already been won.
But while SAP is keen to promote the idea that migration from its previous R/3 applications platform is virtually complete, there is little direct evidence to support this claim. Even Agassi admits that 10% of SAP's installed base could still be running R/3 in 2010. This is important to SAP because its entire process-centric strategy for enterprise applications is predicated on customers embracing its newer mySAP and NetWeaver technologies.
SAP claims that two-thirds of its customers are now on mySAP contracts, so clearly the company has managed to sell its vision. But, in light of the upheaval of migrating to any new enterprise resource planning system, it is far from certain that customers will be starting that migration imminently. Nor can SAP demonstrate customer commitment to NetWeaver, the integration engine that sits at the heart of its service-oriented architecture: Agassi says it is impossible to break out NetWeaver sales from other software sales without getting entangled in complex reporting regulations.
By increasing the sophistication of add-ons to mySAP, such as analytics and the project to build in integration with Microsoft's Office software, due for release in Autumn 2005, SAP is hoping that its efforts will make the steep migration path to mySAP more compelling.