Commerce One Deal Reflects SAP Strategy Shift

LAS VEGAS (06/15/2000) - SAP AG's plan to invest in and team up with online marketplace software developer Commerce One Inc., announced yesterday 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 vs. build, which is significant," said David Alschuler, an analyst at Boston-based Aberdeen Group Inc. 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 US$250 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 center management software developed by Nortel Networks Corp.'s 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 applications framework.

As part of the latest deal, SAP plans to resell Commerce One's MarketSite Portal software along with its 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 mostly has watched from the sidelines as rivals such as Commerce One, Ariba Inc. and Oracle Corp. 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 Inc., in Stamford, Connecticut, said in a report issued yesterday 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 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, "we want to go to one common global image," he said.

SAP and Nestle officials said 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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