Enterprise software providers can have periods of highs and lows but in the case of SAP, 2010 should be logged as the year of both. I had the opportunity to view live webcasts in conjunction with the SAP Key Influencer Summit held this week, and I could not help but reflect on a rather interesting year for a company that is trying hard to increase momentum, and better respond to more dynamic market with a even keel.
For SAP, 2010 was no doubt, a year of highs and otherwise. There are many large and small SAP installed base customers that continue to have a stakeholder interest in SAP’s success in innovation and business support, but at the same time, have their own challenges in keeping up with constantly changing business needs while reducing unnecessary costs. Customers need to have choices among various dynamic enterprise software providers since that helps keep the market vibrant and constantly innovating vs. the taxing of customers with the burden of maintaining older and less responsive technology. This has special significance for supply chain management process needs.
SAP entered 2010 with a two year burden of intense activity directed at the re-architecting of its core ERP system, which in our view, hindered the pace of product innovation. A near revolt from global customers relative to increased annual software maintenance fees led to a decision of change at the CEO level.  In early 2010, the Co-CEO structure of Jim Snabe and Bill McDermott assumed the reigns. We have previously voiced our observation that co-CEO models have marginal track records, especially in times where strong leadership models are required. To their credit, their first agenda item was to speak directly with hundreds of customers to gain direct feedback on customer impressions of SAP as a partner. We only wish we could have been able to listen in on some of these sessions.
May 2010 provided highs and perhaps other reactions. In mid-May, SAP announced its intent to acquire database provider Sybase for a reported $5.8 billion. Many of us in the blogosphere questioned why such a high price, as well as the long term value of the acquisition. In August, Sybase management responded by articulating the framework of a combined vision for on-device applications, but many will have to wait until next year to see some specifics in terms of applications support.
A high point in 2010 was the annual Sapphire conference held in May. Masterfully orchestrated and globally simulcast, the event provided vision and an uplifted SAP. In a previous Supply Chain Matters commentary, we noted our observation that SAP had returned to its roots for articulating its former role as a broad based business solutions provider, avoiding the previous one trick, sales oriented marketing shows of the past. The vision and organizational alignment in product direction looked sound, and the in-memory concept of future product direction had the potential to be game changing. In late September, SAP announced its Q3 earnings which reflect 12% revenue and 31% profit growth year-to-date. That is an obvious positive. Disappointing remains the lack of any appreciable progress in SAP Business By Design’s depth of supply chain functionality. SAP management indicates that there has been lots of large customer interest in the business subsidiary model of BBD. If so, the suite needs to have deeper supply chain planning, execution and fulfillment collaboration functionality to tie back to corporate systems.
The obvious low point was the announcement of the November verdict in Oracle vs. SAP TommorrowNow where a federal jury awarded Oracle $1.3 billion in damages for copyright infringement by this SAP subsidiary. Beyond the implications, if upheld in the appeals process, of the largest amount of copyright infringement ever awarded, was the outright admission by SAP of liability. The obvious question in hindsight lies in the degree of management and oversight that SAP had in managing the activities of this subsidiary, not to mention the wisdom of the this acquisition. If the verdict is upheld, these funds that would have been invested in innovation or people will instead go to an arch competitor.
Other disappointments were the delay in Release 5 of SAP Business Suite scheduled in late summer, which was re-scheduled to December. This followed last years delay and entire revisit of the SAP Business By Design product architecture. An argument can be made that SAP is serious enough about meeting customer expectations that it is willing to make the toughest management call. That is a good news, since some software companies would forgo initial quality for revenue goals. Conversely, a track record of product milestone delays does not help customers in planning their own technology timeline deployments, and nor does it help instill confidence to make the leap into a new technology platform.
In the combination categories, in our view, were statements made regarding the breakthrough release of SAP Business Objects 4.0, SAP NetWeaver 7.3 and of course, SAP Business By Design 2.6. I note these in the combined category because they acknowledge it has taken multi-year efforts to bring these platforms to what is termed breakthrough status, while communicating to customers months ago on the compelling benefits for each.
In the category of encouraging is this month’s announcement of the initial release of the HANA application (high performance analytical appliance) which was conceived and developed in a matter of months, and can have significant implications for future supply chain analytical enhancement capabilities.
In our part two commentary, we will reflect on our 2011 resolutions for SAP.
Bob Ferrari
