Amid Challenges, SAP CEO Kagermann Sticks To His Plan - InformationWeek

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Amid Challenges, SAP CEO Kagermann Sticks To His Plan

Technology, business models, and leadership are in flux.

SOA: ELEGANT CONCEPT, HARD SELL

Coca-Cola is embarking on an ambitious project to get its worldwide bottling franchises to use common business processes, cut costs, and improve supply chain efficiency. It's using SAP's Enterprise SOA to develop reusable services that underpin processes, like a bottler placing an order with Coke.

The approach eliminates the need to write code every time developers want to change a process. It also means there's no "big bang" switchover to a new software system, something that's been the death of many an ERP-driven plan. "That will allow bottlers to converge one step at a time, one process area at a time, one module at a time, at a time that's right for that bottler," says Coca-Cola CIO Jean-Michel Arès.

Another huge win for SAP is Home Depot, which over the next few years will shift from its customized applications to SAP's ERP suite and Enterprise SOA framework. "SOA's been around for a while, but it took a company like SAP to give it a kick in the butt to get it more widely understood and known by people," says Matt Stultz, Home Depot's director of SAP technology.

Overall, SAP is growing modestly; first-quarter software license sales were up 10% compared with the same quarter last year. Net income rose 10% to $421.6 million from last year's first quarter, and total revenue increased 9% to $2.95 billion. Can SOA drive bigger sales gains? The company reckons that 16,000 of its 39,000 customers are appropriate for the SOA-based version of its enterprise ERP suite. About 2,500 already have migrated--hardly a stampede, given that some likely did so for a temporary maintenance discount.

Most businesses aren't ready for SOA because it's expensive and can take years to implement. Peter Lagana, director of SAP technologies at Wyeth Pharmaceuticals, has just started trying to persuade his business-unit colleagues of the value of SOA, but it could take months, even years, he says. SOA could help SAP shake its reputation for complex applications marked by long implementations and messy customizations. "There's so many times you have to put in the whole module of SAP, and then if your business can't fully align to what this huge app does, you have to customize it," Lagana says. "SOA should make that unnecessary."

SAP is looking flat-footed in another emerging technology area--software as a service. Granted, most big software companies are moving slowly, for fear of cannibalizing their sales of packaged software. SAP positions its hosted CRM product as a stepping stone to its licensed product. At last week's Sapphire event, it introduced an on-demand procurement application, but more interesting will be the larger service-based ERP product it's testing with a few dozen customers called A1S. Kagermann is candid in acknowledging some customers might be ready for software as a service before SAP is ready for such a different business model. A1S is scheduled for delivery in 2008, but Kagermann says he'll push back those plans if needed.

SAP also needs to improve its tools for letting people analyze and share the data stored in its systems. Starting this year, it will add Web 2.0 capabilities to NetWeaver and SAP ERP, including an Ajax-enabled interface for NetWeaver Portal to more easily create mashup views of business data from different sources. Portal users will also be able to create wikis and social networking circles. SAP also said it has sold, with Microsoft, 400,000 licenses for Duet, the companies' co-developed software for accessing SAP data through Office apps.

On the SOA front, SAP says an upgraded NetWeaver, due in the third quarter, will provide a repository from which developers can pull services to build composite apps.

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