Insight

basically buy-what-you-want type package at a pretty reasonable rate. But he questions the markets acceptance of an ERP product delivered via SaaS.We have yet to see whether or not buyers will really accept a full [SaaS-based] ERP package, he says. SAP Business ByDesign could add a much-needed credibility boost for SAP in the on-demand market. The new product is really a major stake in the ground for SAP in the on-demand space, in the midmarket, in the model-based development space, and in the servicesoriented architecture spaceall four of those converge with this one product, says Josh Greenbaum, principal at Enterprise Applications Consulting (EAC). That on-demand market is heating up. SAP must now contend with a field of competitors with much longer histories in delivering SaaS functionality, such as on-demand specialists Salesforce.com and NetSuite, a company that has been lauded for its on-demand integrated ERP, CRM, and e-commerce capabilities. SAPs announcement happened to coincide with Dreamforce, Salesforce.coms annual user conference, and came just one day after NetSuite announced that manufacturer Asahi Kasei Spandex America had replaced SAP R/3 with ERP functionality from NetSuite. Greenbaum, however, says that SAP is a substantially larger and better-known company than NetSuite, putting the onus on NetSuite to retain its market position. He also sees challenges ahead for Salesforce.com: One of Salesforce.coms main problems is it lacks direct out-of-the-box integration with the rest of the back office, and for companies that have to weigh the choices of having a full ondemand suite versus a best-of-breed CRM solution that has to be connected to the back office, the [SAP Business ByDesign] story can be a very compelling one. But much of the success of SAP Business ByDesign rests with its channel strategy, Greenbaum says. All the great technology in the world wont work in the midmarket unless you have a strong, very motivated channel bringing [it] in front of the customers. Coreen Bailor
www.destinationCRM.com

A Shift in SAPs Growth Strategy: Buy Big to Get Bigger

The companys planned acquisition of analytics powerhouse Business Objects represents the largest in company history
Historically, SAP has shied away from gobbling up large software companies, but by announcing on October 7 its intent to acquire business intelligence (BI) and analytics player Business Objects, the German software giant delivered the biggest indication to date that it has its eye on leveraging a merger-and-acquisition strategy to secure new business. While SAP has made its share of smaller acquisitions, the Business Objects dealvalued at about 4.8 billion euro or $6.8 billionwill, if approved by shareholders, be the largest in SAPs 35-year history. Products going forward will be designed to enable companies to strengthen decision processes, increase customer value, and create sustainable competitive advantage through real-time, multidimensional BI, according to the companies. Moreover, the companies believe that customers will gain significant business benefits through the combination of enterprisewide BI solutions along with embedded analytics in transactional applications. Business Objects will operate as a standalone business as part of the SAP Group. Its a change in strategy for them, says Dave Kasabian, a research director at AMR Research. Business Objects is a market leader in business intelligence and has a very broad client base, bringing a lot of clients to the table for SAP. However, product overlap on the performance management side of the equation must be ironed out, Kasabian adds. Theyll have to do some product rationalization around the products that are currently available in that market. On his blog, Ray Wang, senior analyst for enterprise applications at Forrester Research, described the bid as a not-so-surprise move to insiders. Organic growth, according to Wang, is not sufficient to meet SAPs stated goals. Despite great success with organic growth, Oracles acquisition strategy is making a dent, he wrote, referring to Oracles dozens of acquisitions since the turn of the century. Henning Kagermanns quote from the press release says it all. The acquisition of Business Objects is in keeping with SAPs stated strategy to double our addressable market by 2010 as announced in 2005, said Kagermann. SAP will accelerate its growth in the business user segment, while complementing the companys successful organic growth strategy. What kind of [other] acquisitions will SAP make to meet this self-imposed target? Moreover, SAP evaluated Business Objects for more than just BI, according to Wang. After Oracles takeover of [BI vendor Hyperion Solutions, earlier this year], SAP evaluated the impact to its overall solution-centric ecosystem, he writes, citing Business Objects strong partner ecosystem. Wang also noted that Business Objects users may be forced onto NetWeaver in the long run. Dan Sholler, a Gartner vice president, says that the SAP Business ByDesign and SAPBusiness Objects announcements have dramatically increased the companys complexity. However, having better BI capabilities baked into all of SAPs products is going to be a benefit, he says, but thats something that will manifest itself over the space of several years. Coreen Bailor and Marshall Lager 17

What kind of other acquisitions will SAP make to meet its self-imposed growth target?

CUSTOMER RELATIONSHIP MANAGEMENT | DECEMBER 2007