SAP Debuts ERP Apps, Web Services

SAP is quickening its march toward an application architecture of Web services-based components and services. But its customers aren't keeping pace.

SAP last week unveiled mySAP ERP 2005, a new release of its core applications, and 500 components that run as services with those apps and SAP's NetWeaver application integration platform. IT execs at the company's Sapphire conference were interested in the new technologies, but most of SAP's 35,000 customers still haven't moved off the vendor's aging R/3 suite. Service-oriented architecture looks like the future to IT teams, but SAP and other vendors have a lot of work ahead to sell its business value so SOA doesn't feel like yet another painful software upgrade.

"A lot of our members want to get to that next level of ERP to take advantage of broader services applications," says Mike Perroni, an applications group VP at Halliburton and president of the Americas' SAP Users Group. Halliburton is still using R/3. Many companies that have migrated to mySAP and NetWeaver have done so in limited fashion, implementing them only for a CRM system, for example.

Applications recast as components and services provide the IT flexibility small companies need, says Jim Walsh, VP of IT at luggage and accessory maker Tumi, which uses R/3. Walsh plans to begin discussions this fall about migrating to mySAP.

Migration Plans

SAP won't say how many customers have moved from R/3 to mySAP. Shai Agassi, president of SAP's product and technology group, expects 6,000 to 8,000 mySAP implementations in the next 18 months and predicts that 95% to 98% of SAP's customers will be signed up to upgrade by 2009. For those who groan when remembering their R/3 upgrades, Agassi downplays the complexity, saying most upgrades can be completed in 60 days. "It's not such a big step," he says.

But customers are worried that implementing an SOA will mean big changes and high costs, says Joshua Greenbaum, principal of Enterprise Applications Consulting. SAP, he says, can't let up on the cost-benefit arguments of upgrading.

The ERP market is changing as vendors rewrite their applications and buy smaller companies. Oracle is merging its acquired PeopleSoft, JD Edwards, and Siebel apps under the Fusion development project. And last week, Infor Global Solutions said it would acquire SSA Global Technologies, which comprises vendors such as Baan and E.piphany, for about $1.4 billion, creating what the company says will be the third-largest enterprise app vendor.

With many customers standing pat on upgrades amid major software rewrites, vendors are fiercely trying to poach one another's customers. In March, SAP said more than 200 companies were taking advantage of its Safe Passage program to move off apps acquired by Oracle. SAP's TomorrowNow subsidiary last week added Siebel support to its PeopleSoft and JD Edwards services. Oracle countered with support and maintenance services for SAP R/3 applications. Oracle president Charles Phillips says 94% of R/3 users haven't upgraded.

SAP is stepping up to make what it knows is a tough business case. The 500 services unveiled this week support functions such as finance, human resources, procurement, logistics, product development, and manufacturing. Next year, the final stage of services development will bring a release of NetWeaver with those services built in. SAP also revealed Muse, an improved interface for accessing SAP apps from Linux, Mac, and Windows desktops; SAP will customize Muse by industry over the next 18 months. Duet software, developed with Microsoft this year, links SAP and Microsoft Office applications. It's all part of SAP's plan to make the software easier to use and access. "That could have huge productivity implications," Home Depot CIO Bob DeRodes said at Sapphire.

It also might get a few more IT leaders buying, not just contemplating, SAP's services vision.