SAP AG has built the platform. Now the applications will come.
The German software maker used its annual analyst conference in Las Vegas last month to outline a strategy that will see the company pitching migration to its mySAP ERP 2005 platform with the promise that it will be a stable platform to grow from for a number of years to come.
Rather than forcing customers to upgrade the platform at regular intervals in the future, SAP will offer focused enhancements that customers can choose to adopt, or not, on top of the platform that fit their own specific business needs.
SAP’s CEO, Henning Kagermann, said the goal is to transform a vertical product architecture into an horizontal, customer-centric agenda. Rather than being of the “big-bang” variety, change will become evolutionary, over time.
“When someone goes into a hardware store, they don’t really want a drill; what they want is a hole,” said Kagermann. “The customer value proposition here at the end of the day is, ‘Customers don’t want tools, they want more holes.’”
Shai Agassi, president of SAP’s product and technology group, added that two years ago, SAP shifted from an application company on a closed platform to an application company on an open platform. With the rate of innovation that has been occurring, Agassi said it was important to consider how best to deliver that innovation to the market.
SAP’s response was its Switch Framework, which Agassi said will allow customers to seamlessly adopt innovations optionally every six months, without causing major disruption to the customer base.
“The rate of adoption will be considered customer by customer, without disruption,” said Agassi. “In the future, people won’t buy a platform. They’ll buy into the ecosystem.”
The company also used the conference to release its first enhancement package. It includes hundreds of services that customers can choose to adopt and which enable functional enhancements in human capital management and financials applications, as well as specific industry enhancements for the retail and manufacturing sectors. New enhancement packages are expected to follow two to three times annually, containing both functional and technical enhancements.
Joel Martin, vice-president, enterprise software with IDC Canada in Toronto, said while SAP’s model is a sound one, the first challenge will be driving customers to adopt and upgrade to the mySAP ERP 2005 platform in the first place. He said, though, that SAP has articulated a vision and they’re sticking to it, promising strong organic growth.
SAP is saying it believes mySAP ERP 2005 is a stable and fundamental platform going forward, said Martin, and it won’t be forcing customers to upgrade their core financials every six months based on vendor acquisitions and developments. Rather, he said, with a sound platform to build on, SAP wants to focus on the composite applications that affect things like governance and risk, procurement to payment, customer service…the business processes that feed into the core financial systems. Customers can choose the composite applications that make sense to their business, and their core platform investment is protected.
“They’ve got a strong suite of products and they’re bringing them to market in a way that gives their customers a chance to make knowledgeable decisions,” said Martin. “It instills confidence and should bode well for SAP’s customers.”
SAP executives said the firm plans to renew its focus on the mid-market, with the goal of building its customer base to 100,000, from 35,000, by 2010.