Five things about SAP's strategy you need to know

Many don't pay enough attention to the German software giant's strategy for updating bet-your-business applications

2. Growth Strategy. In the AMR report, Shepherd writes that SAP has a business strategy that is fundamentally focused on organic revenue growth and that SAP has always been confident about its organization's ability to develop new products and improve existing ones.

However, SAP execs also have realized that the company has needed to both expand its product offerings to its customers as well as move into new markets. Shepherd writes that this market expansion can be seen in getting new customers, expanding the product scope, moving into new geographies and industries, and going after not just the large enterprises but the SMBs as well.

What SAP customers should realize is that, like its competitors, SAP derives most of its revenue from its installed customer base. "Its objective is to ensure that customers never stop buying licenses, maintenance, and services," Shepherd writes. "SAP is constantly working to move ERP customers onto the full Business Suite, and it has invested heavily in products aimed at information workers who don't necessarily use transactional applications."

Therefore, customers should expect their SAP sales reps to be pitching: self-service applications, financial and business performance management, integration, and much of the Business Objects portfolio of reporting, business intelligence, and analytics, Shepherd writes.

"SAP understands that its customers are inclined toward a single vendor strategy," he notes, "and it intends to capitalize on this tendency."

3. Platform Strategy. Shepherd traces the roots of SAP's platform strategy back to 2003, when SAP packaged up its technology components and unveiled the NetWeaver product set.

"The idea was that this technology and architecture would no longer simply be the invisible engine that powered the application products, but that SAP could expose it as a platform and allow customers and partners to use it to extend SAP applications or even build brand-new applications," Shepherd writes. "SAP had to build the platform anyway in order to develop its service-oriented architecture (SOA)-based product line. Management believed that making it publicly available would enhance SAP's reputation as a technology leader, and it could potentially become an additional source of product revenue."

SAP has continues to refine and market the idea of a "business process platform," which is made up of SAP's Business Suite applications, a repository of enterprise services, and the NetWeaver technology platform, Shepherd notes. "While there is no indication of a groundswell of demand for a business process platform," he notes, "NetWeaver has been successful." NetWeaver had sales of nearly US$1.5 billion in 2007, according to the report, and more than US$450 million in standalone software revenue.

What's important for SAP customers to understand, notes Shepherd, is that SAP customers "have to use NetWeaver because their applications won't run without it, and, over time, they tend to begin using the optional components, such as business intelligence, the portal, and integration," he writes. "The attraction of tapping into the SAP installed base has encouraged a large number of other software vendors to incorporate enough of the platform to gain the coveted 'Powered by NetWeaver' certification. This market acceptance, SAP's continued enrichment of the modeling and composition tools, and the services repository is building momentum."

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