Change of Heart

SAP is working hard to live beyond its ERP origins. Will it succeed?

If its June Sapphire conference was any indication, SAP is making a tremendous effort to catch up with the Internet age. It has now publicly adopted two stances that, although fairly common in the world at large, represent a 180-degree turn for this leviathan corporation: openness and user-centricity.

SAP is trying to shed itself of the ERP label, which is becoming increasingly passé. SAP now wants to be a big player in cross-enterprise integration, an enabler of the extended supply chain.

Making bilateral business-process integration among partners dynamic is a demand born of the New Economy. The expected efficiency gains are too enormous for enterprises to ignore: SAP cites an estimated 20 to 50 percent savings in supply-chain overhead cost, or 2 to 7 percent of total manufacturing cost. Meanwhile, the entry costs for accessing the technology are diminishing, making those efficiencies easier to capture.

In its “ERP days,” SAP’s strategy for solving the previous Big Problem — intra-enterprise integration — was to create a heavily controlled, closed system. Interfacing R/3 modules with third-party systems requires special training in SAP’s proprietary languages and models. Furthermore, business-process reengineering often needs to accompany an R/3 installation. Installations typically take five to seven years to complete, if they are completed at all, and cost millions of dollars in either case.

However, the Internet, the attendant rise of open standards, and frequent lightspeed alterations of the economic landscape have now made ERP a scorned acronym. It implies a lack of agility, an inability to capture efficiencies promised by business process integration with supply-chain (or, perhaps more appropriately, “supply-net”) partners.

In support of SAP’s declaration of openness, CEO Hasso Plattner announced at Sapphire a groundbreaking partnership with e-marketplace platform company Commerce One Inc. Although it was an early investor in Commerce One, SAP had previously decided to create its own, competitive electronic marketplace technology, mySAP.com Now SAP and Commerce One will collaborate on all levels — from engineering, through marketing and sales — to combine their strengths. SAP’s biggest opportunity is to exploit its huge base of customers by selling them a relatively easy means of leveraging R/3 in e-marketplaces.

However, the huge R/3 installed base doesn’t necessarily give SAP a margin for error in the B2B market against its competitors, most notably Ariba Inc., Oracle, and I2 Technologies Inc. With new e-marketplaces springing up everyday on various platforms, the only way to assure supply-chain partners of your platform’s viability is to make it interoperable with other marketplaces and to make the complexities of those interconnections transparent. SAP, having finally recognized this reality, will now engineer XML-based interfaces to R/3 along with Commerce One and make them publicly available.

As for customer-centricity, SAP has long been notorious for the complexity of its user interface. Its new “user-centric” overtures manifest most visibly in mySAP.com and the SAPWorkplace, an integrated portal view of the extended enterprise designed to work with R/3 and mySAP.com, and address multiple kinds of users. For example, for business managers involved in IT purchases, mySAP.com’s offerings are categorized by function rather than the cryptic R/3 module names.

Furthermore, SAPWorkplace is supposed to eliminate the need to launch multiple windows during a transaction. Its “drag-and-relate” functionality, jointly engineered by SAP Labs and TopTier Software Inc., lets end users share data elements among applications — even non-SAP ones, such as search engines or Dun & Bradstreet’s credit profiles — by dragging and dropping elements into the navigation part of the view.

To help combat infoglut, that notorious scourge of the information age generally and R/3 in particular, SAPWorkplace also now supports “MiniApps,” “just-enough” views of commonly used elements such as Excel spreadsheets, Web browsers, and forms. Furthermore, through predefined roles, users get access only to the information and applications they need.

Despite the divergence of resources into Internet-age technologies, Plattner still made it clear that he plans to support R/2 and R/3 (back to version 3.1i), even while trying to persuade all customers to upgrade to R/3 version 4.6. Paradoxically, Plattner insists that SAP’s dominance in the fading ERP market is what positions it so uniquely to let customers (presumably the ones most successful with R/3) compete in the B2B e-commerce world. And he has a point: Unless your own house is in order through data and process integration, you can’t really exploit those potential efficiency gains of the extended supply chain. — Jeanette Burriesci