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6/29/2004
11:33 AM
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Billion Dollar Bet

Inspired by a relative newcomer, SAP is banking on its Web-services-based NetWeaver to become an IT-platform vendor.

The gutsy undertaking has played a big role in the massive NetWeaver project, the 32-year-old company's largest development effort ever. It's bigger than the project that put SAP on the software map--the retooling of its mainframe-based R/2 software to its client-server R/3 apps. NetWeaver and the Enterprise Services Architecture have so far taken the equivalent of 250,000 days of work spread across engineers in Bulgaria, France, Germany, India, Israel, Japan, and the United States, at a cost of more than $1 billion.

And it's not yet complete, with a target date of 2007 for SAP to retool its entire software suite to run on NetWeaver and the Enterprise Services Architecture. SAP engineers still are researching better ways to build applications from the ground up on its Web-services architecture. "Typically, you think from within the existing application outwards, and so you add to the application in increments," Agassi says.

Engineers trying to build a highly scalable invoicing-notification function, for example, created a design that notifies the right people, provides specific recommendations, and "takes away the need to focus on the 99% of events that are insignificant," Agassi says. "It is proactive ERP, where the system drives forward to the user all the events in [that user's] world."

For some customers, at least, SAP's intense development efforts already are paying off. Whirlpool, which closes 95% of its books on an SAP ERP system, is ready to leverage the NetWeaver components and SAP's first wave of NetWeaver-based composite applications, called xApps.

Scalability of those applications is critical for the $12.2 billion-a-year company, which uses SAP's xApp Resource and Portfolio Management to track and manage product development around the world among 800 engineers. Its users work in an integrated platform; product development can be viewed across the company or in categories (such as refrigeration or air conditioning); and Whirlpool can quickly assess which resources are allocated to different initiatives, as well as what stage of development each project is at, Sezer explains. With anywhere from 300 to 500 product ideas in play at any given time, SAP's xApp Product Definition helps Whirlpool generate and track hard-to-manage innovation. "XPD helps us initiate and create a pipeline for a new product and to look for alignment among brands. It helps move an idea to concept level," Sezer says.

SAP has acknowledged Microsoft's and IBM's platform power by deepening integration between NetWeaver, .Net, and WebSphere. Just last month, for example, SAP and Microsoft extended their development partnership, and it's spilling over into efforts for individual customers. Microsoft is funding research to help chewing-gum maker Wrigley Co. connect Office apps under SAP's Enterprise Portal, the umbrella user interface that's built on NetWeaver. Both Microsoft and SAP realize there's a lot of potential revenue to be shared between the two--as much as $7 billion, estimates Applications Consulting analyst Joshua Greenbaum--and the ongoing partnership is all about protecting it. "Nobody wants to kill this golden goose, even though down the road they'd like to eat each other's lunch," Greenbaum says. SAP's biggest competitor in the platform space, he adds, "five years or even two years from now could be Microsoft."

Agassi, a dark-haired, dark-eyed man who's quick with a smile, argues there's plenty of opportunity for all platform providers in this market because companies will want to buy the simplified, highly functional application components that flexible ecosystems built on Web-services-based architectures can create. Competitors and third-party vendors "can take 80% of the revenue, and SAP only takes 20%," he says. "That's what this market needs, a benevolent center of gravity."

Calling one's company benevolent sounds like hyperbole, especially in the cutthroat software industry, but analysts and customers are listening. "Shai is very sincere about that," Greenbaum says. "SAP wants to define a technology platform that's not just valuable to SAP but to other software companies as well."

This year, SAP plans to deliver enterprise "services" software that Agassi says will help companies better collaborate with their customers and business partners. Next year, SAP will roll out more services and also will deliver an initial version of an Enterprise Services Repository, which will serve as a directory for all the services that leverage NetWeaver, even those developed by third parties. "This is a big commitment from SAP," Kagermann told a crowded auditorium at SAP's Sapphire conference last month in New Orleans. "And we will deliver."

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