7/27/2019 SAP Growth Strategy

http://slidepdf.com/reader/full/sap-growth-strategy 1/2

CUSTOMERRELATIONSHIPMANAGEMENT | DECEMBER 2007 17wwwdestinationCRMcom

Insightbasically buy-what-you-want type package

at a pretty reasonable rate.” But he ques-

tions the market’s acceptance of an ERP

product delivered via SaaS.“We have yet to

see whether or not buyers will really accept

a full [SaaS-based] ERP package,” he says.SAP Business ByDesign could add a

much-needed credibility boost for SAP

in the on-demand market. The new 

product “is really a major stake in the

ground for SAP in the on-demand space,

in the midmarket, in the model-based

development space, and in the services-

oriented architecture space—all four of 

those converge with this one product,”

says Josh Greenbaum,principal at Enter-

prise Applications Consulting (EAC).

That on-demand market is heating up.SAP must now contend with a field of 

competitors with much longer histories

in delivering SaaS functionality, such as

on-demand specialists Salesforce.com

and NetSuite, a company that has been

lauded for its on-demand integrated

ERP, CRM, and e-commerce capabilities.

SAP’s announcement happened to coin-

cide with Dreamforce, Salesforce.com’s

annual user conference,and came just one

day after NetSuite announced that man-

ufacturer Asahi Kasei Spandex America

had replaced SAP R/3 with ERP func-

tionality from NetSuite.

Greenbaum, however, says that SAP is

a substantially larger and better-known

company than NetSuite, putting the onus

on NetSuite to retain its market position.

He also sees challenges ahead for Sales-

force.com:“One of Salesforce.com’s main

problems is it lacks direct out-of-the-box 

integration with the rest of the back 

office, and for companies that have toweigh the choices of having a full on-

demand suite versus a best-of-breed CRM

solution that has to be connected to the

back office, the [SAP Business ByDesign]

story can be a very compelling one.”

But much of the success of SAP Busi-

ness ByDesign rests with its channel

strategy, Greenbaum says. “All the great

technology in the world won’t work in

the midmarket unless you have a strong,

very motivated channel bringing [it] in

front of the customers.” —Coreen Bailor 

Historically, SAP has shied away from gobbling up large

software companies, but by announcing on October 7 its

intent to acquire business intelligence (BI) and analytics

player Business Objects, the German software giant

delivered the biggest indication to date that it has its eye

on leveraging a merger-and-acquisition strategy to

secure new business. While SAP has made its share of 

smaller acquisitions, the Business Objects deal—valued

at about 4.8 billion euro or $6.8 billion—will, if approved

by shareholders, be the largest in SAP’s 35-year history.

Products going forward will be designed to enable companies to strengthen

decision processes, increase customer value, and create sustainable competi-

tive advantage through real-time, multidimensional BI, according to the com-

panies. Moreover, the companies believe that customers will gain

significant business benefits through the combination of enter-

prisewide BI solutions along with embedded analytics in trans-

actional applications. Business Objects will operate as a

standalone business as part of the SAP Group.

“It’s a change in strategy for them,” says Dave Kasabian, a

research director at AMR Research. “Business Objects is a market

leader in business intelligence and has a very broad client base,

bringing a lot of clients to the table for SAP.” However, product overlap on the

performance management side of the equation must be ironed out, Kasabian

adds. “They’ll have to do some product rationalization around the products that

are currently available in that market.”

On his blog, Ray Wang, senior analyst for enterprise applications at Forrester

Research, described the bid as “a not-so-surprise move to insiders.”

Organic growth, according to Wang, is not sufficient to meet SAP’s stated

goals. “Despite great success with organic growth, Oracle’s acquisition strategy

is making a dent,” he wrote, referring to Oracle’s dozens of acquisitions since

the turn of the century. “Henning Kagermann’s quote from the press release says

it all. ‘The acquisition of Business Objects is in keeping with SAP’s stated strat-

egy to double our addressable market by 2010 as announced in 2005,’ said Kager-

mann. ‘SAP will accelerate its growth in the business user segment, while

complementing the company’s successful organic growth strategy.’ What kind

of [other] acquisitions will SAP make to meet this self-imposed target?”

Moreover, SAP evaluated Business Objects for more than just BI, according to

Wang. “After Oracle’s takeover of [BI vendor Hyperion Solutions, earlier this year],

SAP evaluated the impact to its overall solution-centric ecosystem,” he writes,

citing Business Objects’ “strong partner ecosystem.” Wang also noted that “Busi-

ness Objects users may be forced onto NetWeaver in the long run.”

Dan Sholler, a Gartner vice president, says that the SAP Business ByDesign

and SAP–Business Objects announcements have dramatically increased the com-

pany’s complexity. However, “having better BI capabilities baked into all of SAP’s

products is going to be a benefit,” he says, “but that’s something that will man-

ifest itself over the space of several years.” —Coreen Bailor and Marshall Lager 

A Shift in SAP’s Growth Strategy:Buy Big to Get BiggerThe company’s planned acquisition of analytics powerhouse

Business Objects represents the largest in company history 

What kind of oth

acquisitions will

SAP make to mee

its self-imposed

growth target?

7/27/2019 SAP Growth Strategy

http://slidepdf.com/reader/full/sap-growth-strategy 2/2