SAP to resell Commerce One B2B platform, sources say

As SAP kicks off its Sapphire user conference in Berlin this week, industry sources confirmed that the software giant will be announcing a reselling agreement with Commerce One that fills out SAP's e-commerce, business-to-business offerings. Sources also said negotiations for this deal have been underway for months.

However, industry observers cautioned that the agreement might prove problematic for SAP's mySAP.com initiative. Although not denying that an agreement is imminent, officials from both vendors declined to comment upon any aspect of the forthcoming agreement.

An official from SAP competitor Manugistics said the alliance will only cover two-thirds of what's needed to participate in B2 trading exchanges, and it will serve as an admission that the market has rejected the mySAP.com approach.

"What we're seeing is that's a failed strategy," said Chad Quinn, Manugistics' vice president of e-business strategy, in reference to mySAP.com, which requires buy-side and sell-side participants in exchanges to use the same proprietary technology from SAP.

If, as anticipated by both SAP and Commerce One, customers adopt the front-end, e-commerce technology from Commerce One and the back-end ERP (enterprise resource planning) software from SAP, they will still need web-based forward planning, logistics, replenishment, and analytical services, Quinn said.

In addition, the agreement is SAP's recognition that users "are not looking to SAP for indirect procurement software," said David Yockelson, an analyst with Meta Group. "[SAP won't be] snagging the procurement market any time soon [because] mySAP.com is not a credible play for the Net market-marker software market," he said.

While seen as a necessary step by SAP, the integration of the SAP and Commerce One environments will have its challenges, Yockelson said. "[SAP's R3 is not] flexible, malleable software, [while] to some extent [Commerce One] is more dynamic, easier to work with," he said.

Also, the operating system environments of the two are different -- the Commerce One software "is still only Microsoft Windows NT-based", and not many in the Unix-oriented SAP camp have migrated to NT, Yockelson pointed out. The Unix-NT divergence could be a potential issue, he said.

With the Commerce One agreement, the argument for mySAP.com may be less intense, said Dave Boulanger, an analyst with AMR Research in Boston. The reselling agreement will strengthen and supplant SAP's B2B efforts and will signal to customers that they should use Commerce One for "heavy lifting", Boulanger said. "It also makes a dent in the upgrades for mySAP.com," he said.

"It's an admission of reality," Boulanger added, because SAP is acknowledging that it cannot create all of the software relevant to its ERP customers. Another reality is that SAP needs to make strides to guarantee that it has a strategic role in the future, he said.

"You could say that 2000 is a make or break year for SAP. If it doesn't sign up partners like crazy, the rest is going to be history," Boulanger said. SAP must make more partners in the CRM (customer relationship management), B2B, and trading exchange platform market spaces, he said.

If SAP is relegated to a non-strategic role, it will "die a long and slow death", Boulanger said. The main reason for SAP's slip is a shift in ERP's role, he said. "It's important, but not strategic," he said, adding that this wasn't the case five years ago when SAP was a thought leader.

B2B procurement, CRM, and supply-chain management have become the strategic focus of SAP's customer base, and SAP's users are building these systems around their SAP ERP platforms, Boulanger said.

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