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

4. Industry Strategy. Shepherd attributes one reason for SAP's success over the years was that executives realized the importance of offering products to key vertical industries that had unique needs in their applications.

"Using a combination of internal and customer sponsored development, partners and clever packaging, SAP now has 25 separate industry solutions across a range of industries from mining and manufacturing to higher education and financial services," he writes. "Many of these are supported by product management teams, dedicated developers, and industry value networks (IVNs) of customers and partners that collaborate with SAP on defining requirements and building extensions." This strategy has enabled SAP to garner tons of market share in the oil and gas, chemicals, and life science industries, according to the report.

Now, SAP is aiming to use the same "blueprint" in going after non-manufacturing industries, such as retail, insurance, education, banking and public sector. "Over the next several years we expect to see SAP devoting a great deal of effort to increase its presence and enhance the applications in these segments," Shepherd writes. "It is also likely that SAP will use acquisitions, investments, and partnerships to address industry requirements and buy some customers and industry expertise."

As SAP aims to solidify its offering in these industries, Shepherd predicts that customers in industries where SAP is very well established "may find that their enhancement requests have a somewhat lower priority than industries that SAP has designated as strategic." On the other hand, he notes, "customers or prospects in those non-manufacturing industries are likely to find SAP very willing to commit resources and sponsor joint development projects in order to fill holes in industry applications. Companies in these industries that are willing to be highly visible lighthouse accounts will have lots of negotiating leverage if they are willing to tolerate applications that are still rather immature."

5. Product Strategy. Before 1999, SAP was known as a one-product company, which a much less confusing naming convention for its products and releases (R/1, R/2, R/3).

"Since then, SAP has accumulated dozens of products with a bewildering set of options, variants and names," Shepherd writes. "One of the reasons for this product proliferation is the software industry consolidation that has resulted in large ERP vendors like SAP competing in many other adjacent software categories, such as CRM, supply chain management, and product lifecycle management." SAP has also brought to market other complementary products not named ERP and not aimed at the CIO and IT but at the business users, he notes, in areas like performance management, regulatory compliance and analytics.

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