SAPPHIRE US: Commerce One deal reflects SAP strategy shift

SAP AG's plan to invest in and team up with online marketplace software developer Commerce One, announced on Wednesday at SAP's Sapphire user conference here, is seen by analysts as proof positive of a major business strategy shift on the part of the German applications vendor.

The sales and joint development deal with Commerce One indicates "that SAP has crossed the divide of buy versus build, which is significant", said David Alschuler, an analyst at Boston-based Aberdeen Group. Until recently, he added, SAP had come down firmly on the side of developing virtually all the applications it sells.

But that's now changing, and the agreement with Commerce One -- which includes a planned $US250 million investment by SAP in the Pleasanton, California, business-to-business e-commerce vendor -- expands on a trend started earlier this year in which SAP is reaching out for help from other software makers.

For example, SAP last month announced that it would resell call centre management software developed by Nortel Networks' Clarify division. Also in May, at the European version of the Sapphire conference, SAP announced an open integration strategy under which it will incorporate and support other vendors' software as part of its internet-based mySAP.com applications framework.

As part of the latest deal, SAP plans to resell Commerce One's MarketSite Portal software along with its mySAP.com applications. The two companies also agreed to jointly develop a set of XML-based online procurement and business-to-business exchange applications. In addition, SAP said it will invest $250 million in Commerce One over the next three years.

SAP has developed its own software for online exchanges and internet-based procurement, but it has mostly watched from the sidelines as rivals such as Commerce One, Ariba and Oracle announced deals to set up business-to-business marketplaces in various industries. But some observers said the combination of SAP and Commerce One should be a potent one.

For example, Alschuler said research by Aberdeen Group shows that Commerce One has signed on about twice the number of customers for its online marketplace software than both Ariba and Oracle have for their respective applications. The deal announced yesterday puts SAP in a leadership position in that market, he added.

Meta Group said in a report issued Wednesday that the range of functionality promised by SAP and Commerce One "will be difficult to match" by other vendors, provided that the two companies deliver on what they're promising. The SAP/Commerce One team is likely to battle it out with Oracle and a group including Ariba, IBM and i2 Technologies for the top spot in the online exchange business, the report added.

SAP also used the opening day of Sapphire to announce what co-founder Hasso Plattner billed as the company's biggest software contract to date -- a deal to implement its mySAP.com software for 230,000 end users at R/3 user Nestle SA in Vevey, Switzerland.

The deal also marks Nestle's largest-ever software and services purchase, according to Jean Claude Dispeaux, Nestle's global CIO. Nestle has multiple implementations of SAP's R/3 software across its global enterprise, but they are all different versions of the enterprise resource planning software, Dispeaux said. With mySAP.com, "we want to go to one common global image", he said.

SAP and Nestle officials said mySAP.com applications will be installed at more than 500 Nestle facilities worldwide. Nestle employees will be able to access the applications via the company's intranet and through the internet using SAP's end-user portal software.

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