Is Business Objects an Opportunity in Emerging Markets like Central Eastern Europe?

The economic downturn is altering the nature of demand for software solutions in CEE (Central Eastern Europe), leapfrogging mature markets. Early last year BI was a marginalized topic in CEE, and everyone was focused on functionality creation and systems construction. Only the very IT intensive sectors like telecom and financial services in the more mature CEE countries were playing with BI tools, but there was a very limited market opportunity for the SI community, as many end users were working at those tools by themselves, independently.

Once the economic crisis settled in, many of the SAP development projects in CEE were put on hold, or even substantial budget de-allocation occurred, e.g. in Russia. Since beginning of the year – and just as valid as my post – a visible shift in demand emerged among many SAP installed customers. Now the focus is on understanding the existing operations and getting quick answers about the critical operational parameters and customers. Essentially, better data visibility. Now, BI and analytics are definitely a hot areas these days in CEE, while one year ago such a topic was considered only as a luxury in many IT environments.

Local SAP offices in CEE have high hopes to leverage depressed demand for classic ERP with Business Objects in the near term. Actually certain CEE markets have seen a spike in the BO business since November-December, while since March interest in BI has become mainstream across the key countries in CEE.

I am PAC's lead analyst for the SAP Services market in CEE, and would love to hear your take... as SAP customers considering roll-outs in CEE, as well as IT services suppliers trying to expand and improve on this market. So please, leave your thoughts & feedback!

Does SAP’s SaaS News Impact Their Java Strategy?

A couple months ago, I wrote a blog entry entitled “Oracle, Sun, and the Triumph of ABAP Over Java” which raised a bit of a ruckus. I stand by the research and fundamental message of the piece. However, the title of the blog (“Triumph of ABAP”) might have been misleading. My intention with that blog title was to make clear that ABAP was the programming language SAP had settled on for the Business Suite. I was not trying to imply that Java had no relevance to SAP development. I always felt that Java would retain relevance on the “edges” of the Suite, as well as in third party plug-ins and service composition. My recommendations in that piece that SAP developers acquire a “hybrid” of ABAP and web-based skills reflected my views.

Two months forward: with the recent developments in SAP’s SaaS market play (see Peter Russo’s entry on the developments from John Wookey's internal SaaS group), Java has returned to the center of the discussion. So does this change anything I said in my last piece on ABAP versus Java?

To get to the bottom of this, I talked to a few folks inside of SAP to find out if the Wookey announcements had changed the conversation inside of SAP. Bottom line: not much - except for some surprised folks who were not in the loop with what Wookey was up to until he went public. “I was just as surprised as you were” was one such reaction. (For those who are interested, Wookey’s entire keynote for the SIIA On Demand Europe Conference has been made available online)

One of the people I contacted was Thomas Jung of SAP Labs, who is also part of the “Enterprise Geeks” team that issues regular podcasts on SAP technical trends in a very listenable style (they just posted a podcast that delves into the latest Wookey/SAP SaaS news). Before I share Thomas’ view on this from inside SAP, we should note: Wookey’s group is basing its SaaS development on the Frictionless Java technology SAP acquired in 2006 by purchasing Frictionless Commerce, which is a Java-based platform.

“This is perfectly in line with the development strategy we’ve been using,” said Thomas. We went on to discuss some of the nuances of this strategy, almost all of which I have already published in the “ABAP Triumphs” blog. Add this to the mix: SaaS will present another way for companies to plug into the ABAP-based Suite. Originally, the vision of SAP Java was centered on composing on top of the suite using the tools of the NetWeaver Composition Environment (CE), a Java-based platform. But SaaS adds another way of enhancing the core ABAP-based Business Suite functionality using Java-based SaaS apps. As Peter stated in his SaaS piece, this may mean two routes to SOA and SAP's future...

The only change I would add is that in some cases, these SaaS apps will not be about competitive differentiation, which is at the heart of SAP’s vision of service composition. For SaaS, we may be talking more about cost savings or ease of deployment. In these cases, it’s possible we will see more overlap between SaaS services and what SAP offers on premise, SAP CRM On-Demand being an obvious early example. Whereas the original view of service composition is intended to extend the Business Suite functionality, SaaS may also present overlapping functionality that would win out based on ease of use, cost factors, or cloud convenience.

However, that doesn’t change the fundamental approach to “ABAP in the Suite and Java beyond the suite,” it's just two different delivery models. We can expect some twists, though, such as SAP’s “Blue Ruby” project, which involves embedding Rich Internet Applications (RIA) inside of ABAP programs. Another surprise came from Leo Apotheker in a recent Wall Street Journal blog interview, suggesting that putting the entire Business Suite in the cloud (or a version of it) remained a possibility: “Apotheker will also push SAP to develop more online software, saying that efforts are already underway to make SAP’s entire portfolio available this way.”

So does this mean that I should title this new blog entry “The Triumph of Java Over ABAP?” Not so fast. The Business Suite has hundreds of millions of lines of code. Many inside SAP, including CTO Vishal Sikka, point out that customers are cautious about which kinds of data they want to put into the cloud. ABAP is here to stay, but then again, so is Java and many other web-based standards like Ruby and Adobe Flex. Whether you’re an SAP customer, service firm, or individual, you’d be well-advised to pursue the same ABAP/web hybrid model that SAP itself is adopting.

That leaves us with one final piece of business: does SAP’s SaaS strategy play into Oracle’s hands given the Sun acquisition and SAP’s obvious continued dependence on Java? If you poll those inside SAP, you will hear a wide range of views on this controversial topic, but the consensus is that it’s either a small concern or a non-issue. Certainly Wookey has not adjusted his team’s approach post-Oracle/Sun. However, I continue to believe that Oracle is going to seize the opportunity with Java to stick it to SAP a little bit.

Think of it this way: Oracle doesn’t operate any free highways. They operate toll roads. Could Oracle legally charge only SAP a Java toll? Of course not. But could they decide to place some tolls on a Java thoroughfare that SAP drives over frequently? You bet your Oracle stock they could! So my prediction is that SAP (and other companies) will eventually pay an ongoing financial price as Oracle attempts to monetize Java in some way. However, this will simply become a cost of doing business for SAP, which I suspect is how the current lawsuit with Oracle is viewed internally as well. SAP and Oracle have a “cooperate when necessary” policy – I simply don’t see the Java part of their relationship as falling into that cooperative realm. But this is pure speculation, and if the two companies collaborate on future Java standards for the benefit of all, I’ll be glad to be wrong. What is not speculation is that ABAP is alive and well inside of SAP, and so is Java.

SAP and HCL Axon's iMRO Offering

The SAP World Tour in Paris in the beginning of June gave me the opportunity to know more about the iMRO solution released at the end of 2008 with a new version expected soon. iMRO is a co-solution from SAP and HCL AXO to address industry specific functionality around Maintenance, Repair and Overhaul (MRO). It is a complimentary software product to SAP, which extends SAP ERP MRO specifically for this segment.

Maintenance and general maintenance of the operational conditions of major systems in the aerospace, defense and railway segments are complex industrial issues. For this reason, these activities have rarely adopted packaged software. However, operators in this segment must constantly reduce their costs while increasing asset utilization and reliability of their systems.

The release of iMRO is intended to meet more closely the needs of this segment. In this field, the solution players include Oracle, Lawson, IFS, IBM (Tivoli/MRO) and various best of breed's.

SAP has strongly invested to cover the requirements of the manufacturing industry: expanded its offerings in the field of SCM and PLM, invested in the MES (acquisition of Visiprise), verticalized its MRO solution, etc.

The increasing demand for these tools meet the need for manufacturers to gain flexibility, productivity and quality while reducing costs and complying with regulations. To achieve these primary objectives, these different tools positioned on the value chain must communicate. The first step is the simple exchange of data, but this may be through the implementation of SOA technologies or work on repositories with MDM technologies. If we take the example of Airbus, even in the functional area of PLM, the company uses many different tools and versions (SAP, Dassault, PTC, etc).

Thus, even in the manufacturing industry, which is considered as mature, there are still opportunities in a context of rationalization around the standard .... In order to reach these core industry needs, SAP will have to work closely with its partners which have niche competencies, and this new solution with HCL Axon is an excellent example.

Wookey Announces SAP's New SaaS Strategy... for Large Enterprises Only!

Today, SAP's EVP of Large Enterprise SaaS, John Wookey, (formerly of Oracle) announced the company's new SaaS strategy for the large enterprise. This is opposed to SAP's much maligned Business ByDesign SaaS solution that has been relegated to the SME (small and medium sized enterprise) "box" by SAP... even if this was a rather artificial target in my view...

For the large enterprise, Wookey announced that SAP would begin offering SaaS solutions, by functional area, as off-shoots of the on-premise products. (Sounds a lot like Microsoft's Software+Services, huh?) The first set of solutions will be focused around CRM, e-sourcing and carbon emissions management; which are all already available, but will be rearchitected to be multi-tenant. Additionally, it seems that there will be a big push in offering these SaaS extensions as mobile applications as well, leveraging SAP's very recent acquisition of SkyData Systems, and the the platform of its Frictionless acquisition as the new SaaS platform overall, which itself brought the SAP e-sourcing solution.

What is unclear in my mind thus far is... what is the purpose of this co-exisiting between SaaS and On-Premise? Will it be a new way for SAP to deliver new and specific functionality more quickly to all customers? By extending functionality, will it only be to offer the same modular applications in a SaaS environment, like is the case with SAP CRM? If the strategy is to do more of the latter, the release of SAP CRM On-Demand, (which was artificially relegated to the large enterprise "box," when actually it is most interesting for SME's) was an utter disaster... Then SAP went ahead and got it backwards again by offering core ERP on a SaaS platform to the lower end of SME, when it is clearly most interesting for the mid- to upper-mid-market. But why label every single product for a segment? It may help for internal hierarchy but it doesn't mean a thing to the customer!

If we consider the other path, and that the new SaaS platform will focus on extensions to SAP's core application modules, then this puts into question whether Netweaver is the platform going forward to extend and develop new applications from within the suite, when at the same time a SaaS solution covering a niche area can be quickly added and integrated (as they say) through this new SaaS platform... so which one is it? I guess both!

Finally, will this new SaaS platform based on Frictionless be available to partners and customers to develop on? In my mind, this is pretty crucial, since without much interaction with the ecosystem (especially IT services companies), this is DOA.

It's nice to hear that SAP is putting together a concrete SaaS strategy; it is just my hope that SAP will not try to keep this "new thing" called SaaS in a box where they feel it should belong ("just for SME"; "just for LE"; "just for niche extensions"; "just for us to develop")... part of the true value of SaaS solutions are their openess, the ability for the ecosystem to take solutions further than one company every could and the ability for all companies, large and small, to find their own value in leveraging this new architecture!

Does SAP Have a Social Media Strategy?

A few months ago, an SAP employee who was a well-known Twitter presence left SAP. It was widely reported that this person was part of SAP’s 3,000 person layoff that occurred during that period. What I found interesting (though hardly surprising) was the aftermath to this event on the blogosphere. The subsequent “commentary frenzy,” much of it rampant speculation, reminded me that amidst a blog-and-Twitter-hypefest, the essence of a story can be obscured. At this year’s Sapphire, I had a chance to sit down with a couple of the leaders of SAP's social media presence. My goal? To get a clearer sense of the realities beneath the hype.

Before I share a few thoughts on what I learned in Orlando, it’s important to separate what SAP is doing on the product side versus the community interaction side. On the product side, SAP continues to “socialize” its applications by embedding unstructured data access, customer “sentiment analysis,” and other Web 2.0 approaches across the product line. Other social networking product experiments are underway within SAP, without a formal connection to product rollouts. The product side of social media is *not* the focus of this blog entry. For that side of the issue, Susan Scrupski of ITS Insider has already written a detailed post on her views of SAP’s ongoing “socialization of the enterprise.”

One of the criticisms that came out of the pre-conference blogs was that “SAP doesn’t have a social media strategy.” That much is dead-on accurate. SAP’s aggressive, sometimes frenetic approach to putting flags in the ground of communities like Twitter, LinkedIn, and Facebook is not, in most cases, centrally coordinated as part of a documented strategy. This lack-of-strategy leads to the phenomenon of certain individuals/areas within SAP popping up on Twitter, seemingly at random.

For example, “SAP CRM” is on Twitter, and doing a pretty solid job, in my opinion, of being conversational and not just Tweeting marketing verbiage. But you won’t find SAP SRM, SCM, or PLM on Twitter. I also like what sapbrasil is up to, but there aren’t many geographic equivalents on Twitter currently.

The problem with not having a coherent strategy is that there aren’t many rules of the road or formalized best practices, which leads to the occasional frantic burst as new SAP personalities hop onto Twitter and get a brisk lesson in the differences between pushing product and engaging in conversation. But Twitter has an effective way of self-policing stuff that stinks. Unless you’re a celebrity, if you don’t have either good information or good conversation (hopefully both), no one who matters will follow you.

Yes, the “SAP doesn’t have a social media strategy” argument is fundamentally correct; two of SAP’s leaders in social media voluntarily conceded this in Orlando. But here’s where the blogosphere mostly got it wrong: just because there isn’t an overall strategy doesn’t mean that some of the “legs” of that future table aren’t already well developed, and well run within their context. Consider a key component, perhaps overlooked because of its obviousness: The SAP Community Network, or SCN for short. Despite the inevitable growing pains, SAP is ahead of most enterprise peers when it comes to online community building. A published strategy may be lacking, but six years of trial and error on SCN, from managing wiki disputes to addressing overly commercial blog postings - while 1.6 million members buzz through the site - is far more valuable than a white board exercise.

Beyond SCN, there is the SAP Mentor initiative (disclosure: I am an SAP Mentor). Although the SAP Mentors are not required to be on Twitter, many of them happen to be. To find them, follow @SAPMentors on Twitter, and then browse through the SAP Mentors that Twitter Id is following. SAP Mentors are also active on Facebook and LinkedIn; many of them are SCN stalwarts also. SAP Mentors are an unruly bunch; they can be as tough on SAP as any other blogger or analyst. To empower “evangelists” who do not consider themselves as such, and would probably reject such a term, but who are well informed on SAP trends by virtue of the initiative – that’s a pretty brilliant effort on SAP’s part. I don’t know of an equivalent program at a large enterprise vendor.

Similarly, SAP’s Blogger Relations program, increasingly tied into the Mentor initiative where appropriate, is another means of putting influential voices front and center with SAP executives. These bloggers are a pretty ornery group, not likely be swayed by their arguments with SAP executives, but their work is certainly more informed based on this kind of access. Being part of this program, I can attest to the well-thought philosophy behind it. For what it’s worth, analysts who participate in other enterprise blogger programs have told me SAP is definitely ahead of the curve in this area.

Neither of these initiatives are perfect, but they are examples of how the apparent chaos on the surface can be misleading. It’s always tempting to make fun of SAP when a social media “noob” from inside the company hits Twitter - heck, I’ve done so myself - but it would be unfair to allow such satire to obscure a deeper analysis. In all the criticism I have seen of SAP’s social media efforts, not once have I seen a mention of the SAP Mentor initiative as being relevant to SAP’s social media strategy, but what could be more relevant?

When taken with the other legs of SAP’s social media approach (and I didn’t mention some successful Facebook experiments and a serious - and still growing - connection to LinkedIn), it’s clear that SAP’s lack of a formal social media strategy does not correlate with missing the boat. You could even make the argument that SAP’s willingness to encourage, or at least tolerate, an anarchic edge to these activities is actually a strength.

That doesn't mean that SAP doesn't deserve its share of criticism in this area. Here’s a better target: Why doesn’t the transparency touted in keynotes by executives and board members translate into their own involvement on SCN blogs, and possibly even Twitter? (Exception granted to CTO Vishal Sikka and his SCN blogging). Nor does that transparency necessarily carry over to crucial customer issues, the management of the Enterprise Support rollout being an oft-cited example.

Along those lines, I have personally worked with a couple of SAP product managers in the last year who intentionally avoided getting involved in public conversations about SAP product issues for fear of their own professional standing within SAP. I would hope (and expect) that an internal “employee policy” regarding participation in social media would be another aspect of SAP’s social media strategy that will appear before too long. I hear through the grapevine that one has been “in the works” for months, and may be finalized soon - let’s hope so.

Perhaps those employees’ fears of repercussions for participation weren’t valid, and perhaps those I came in contact with were the exceptions rather than the rule. But in my view, it underscored that there are cultural issues within SAP between those who want to engage in open, transparent conversations (and see their essential value) versus those who perceive such endeavors as time wasting, competitively problematic, professionally risky, or even subversive. That type of criticism against SAP is absolutely fair game, though I could say the same of many other behemoths, including Web 2.0 darlings Google and Amazon, both of which borrow more from the ruthless secrecy of Microsoft than the openness of open source. (Though Microsoft has opened up more than expected in recent months, so I may need another foil soon).

We can add Facebook to the list. The Facebook Terms of Service fiasco was instructive for SAP. SAP announced a new Terms of Service (which they call “Terms of Use” or TOU) for SCN two weeks ago; you may have noticed little controversy. That’s because SAP consulted influential community members behind the scenes, including the SAP Mentors. The result of those intense discussions bore fruit for SAP. You can bet those consultations included talks with SAP Mentor Anne Petterøe, herself instrumental in organizing the groundswell that compelled Facebook to alter its new Terms of Service after a very unflattering public outcry.

This conversation on SAP’s social media direction reminded me that beneath many overhyped blog explosions is a more serious story deserving a more serious analysis – not devoid of criticism, but bolstered by rigorous reporting.

What to Buy With $7 billion?

In a recent interview with Le Figaro, reported by Bloomberg, SAP CEO Leo Apotheker, stated that the company could spend 5 billion euros ($7 billion) on future acquisitions. Stating that “We have 2.5 billion euros at our disposal and could raise a similar amount.”

While the $6.7 billion acquisition of Business Objects in late 2007 was a 180 from SAP's former strategy focused on organic development, Leo's comments make it clear that the strategy change is permanent going forward, stating "We have built a model of mixed growth. SAP will continue to have organic and non-organic growth."

The obvious next question is who, if anyone, could be interesting as an addition to SAP? On one hand, SAP has become more aggressive by acquiring a large company like Business Objects, but this certainly was more about targeting a new growth opportunity, than entering a space controlled by any chief rival (yes, everyone bought a BI company, but no one is a clear market leader!). Will SAP continue this path, and foray deeper into areas of BI, SaaS or a combination of niche acquisitions...? ...or could they take the plunge into a segment like database software and try to hit Oracle where it hurts? This wouldn't be the first time SAP has tried, but it could be much more serious effort with $7 billion at its disposal. This could be done of course with an acquisition like Sybase, where the two companies have been upping the ante by collaborating around mobile apps; or perhaps on the fringes with a company like Teradata, in the data warehousing space. Or it can be an alternative model, being cooked up with the engineers from Coghead... One thing's nearly for sure, I don't see them copying Oracle's more recent lead and buying Unisys or Dell ;-)

SAP's Recent Developments in the Dutch Market

SAP has continued to strengthen and forge new relationships in the Dutch market. Among its key partners, the strong local Dutch IT services players include Atos Origin, Capgemini / Sogeti, Ctac, Logica, Ordina and Uphantis, as well as the larger global players and the very small niche specialists. More recently, SAP and PinkRoccade Healthcare announced a partnership in March 2009 to develop solutions for Dutch healthcare organisations.

Partnerships are crucial even more so in a country like the Netherlands where businesses tend to favour working with local software and IT services players over the larger international/global providers to address local requirements. The large multi-national companies such as ABN AMRO and Shell however tend to be more open, working with different types of local, global and offshore players and these tend to leverage the global/international SAP services partnerships.

While a large part of SAP's business stems from manufacturing (just over 40%), there has been growing activity in the public sector. SAP has made some significant progress through its partners, such as the recent deal signed with the Ministry of Defense in February 2009 that was secured by Capgemini consortia and Logica to redesign processes around materials management and logistics and translate these designs into a SAP-based system.

However, on a more negative note, there has been bad publicity surrounding the deal with the Province of Noord-Holland, which was undertaken by both SAP and Ctac. Last year, the province of Noord-Holland announced that they had spent €500,000 on a SAP accounts module Grantor Management. According to the province, the implementation of this new grant module failed and exceeded the initial budget - an additional €500,000 was still required to complete the project and thus, was put to a stop. Last month, the province of Noord-Holland revealed that they would no take legal action against SAP nor Ctac.

The deal comes as a blow to SAP, particularly as the public sector presents major growth opportunities compared to other vertical markets in 2009. This deal will inevitably impact SAP's reputation as well as its partner Ctac among local provinces. However, SAP has plenty of reference in other parts of the Dutch public sector to try and offset this negative publicity. Also, the fact that no legal action will be taken against SAP or Ctac implies that the province was unable to concretely prove SAP/Ctac as liable. In addition, there will continue to be some ongoing cooperation with the software and IT services players.

The Dutch market relies heavily on the manufacturing and export business, and consequently the recession has hit the Netherlands particularly hard due to the strengthening Euro against the pound sterling for instance. Despite the impact this has on the IT services in 2009, the SAP services still presents opportunities particularly in the outsourcing space.

In addition, the Dutch government is focusing on open standards and open source initiatives, and as one of the few growing sectors in 2009, it is important for both SAP and its services partners to articulate a clear message and marketing campaign about the openness of SAP solutions. The Dutch SAP services market is expected to grow by 3.5% this year, according to latest PAC figures. The decline in consulting and systems integration activities will be offset by strong growth in application management and hosting.

PAC will be publishing its InBrief reports shortly, which provides an graphical/analytical overview of the SAP services market for key countries including the Netherlands. Also look out for "SAP in the Netherlands" profile to be published in the coming weeks!

A Little Humor for the Weekend: "Vendor-Client Relationships"

It's fair to say that since the recession started last year, pricing pressure in the SAP Services market (and the IT services industry overall!) has picked up a fair amount once again, as well as some SAP customers leveraging in-house IT staff more than before.

This also places even more importance on relationship managers at IT services suppliers, and their ability to properly manage client expectations as well as reaching the right balance of profitability and project value between the IT supplier and the customer.

Here's a very funny clip of real world situations of the vendor-client relationship from a friend of mine at Accenture... I hope it gives you a laugh going into the weekend!

Our 1 Year Blogaversary!

Today is officially the 1 year anniversary of the Feeding the SAP Ecosystem blog, and I just wanted to thank our thousands of viewers, customers, market contacts and PAC contributors (especially Jon Reed (PAC Fellow, USA), Rajeena Brar (PAC London), Tobias Ortwein & Klaus Holzhauser (PAC Munchen), Eric Menard (PAC Paris) and George Mironescu (PAC Bucharest)) for making this a big success! Despite the tough times, I have been glad to see our viewership to continue to grow in the high double-digits every month since we started out, along with PAC engaging with the cream-of-the-crop IT Services suppliers and large SAP users with our SAP Services Research Program!



As a special thank you, I would like to offer a free PAC country report from our upcoming "SAP Services InBrief" reports, which are due out in June. These reports offers a comprehensive view on the SAP Services in 20 countries covering:

• IT maturity and status
• SAP services market maturity and situation
• Local characteristics
• SAP’s local positioning
• Local and Global competitive situations

Email me your selection from the following list of country reports that PAC is producing with your name, title, company, and when the report is released, you'll receive your free copy:

Australia
Austria
Belgium
Brazil
Canada
China
Czech Republic
Denmark
Finland
France
Germany
Hungary
India
Italy
Japan
Mexico
Netherlands
Norway
Poland
Portugal
Romania
Russia
Slovakia
South Korea
Spain
Sweden
Switzerland
Taiwan
UK
USA

Sapphire '09 (Part II): The High Stakes of NetWeaver BPM

Since Peter Russo has done a nice job of hitting the high points of Sapphire 2009, I want to hone in on one of the less-reported stories of the show: the gradual emergence of NetWeaver BPM (often still referred to by its “code name” of Galaxy). Yes, SAP BusinessObjects took center stage at Sapphire; the press conference following Leo’s keynote felt more like a BusinessObjects Explorer demo than a press event, with little discussion of the guts of back-end data cleansing, save for one potent question on whether SAP is ready for prime time when it comes to Master Data Management. But with all the hubbub over BusinessObjects, BPM is still very much a part of SAP’s product strategy going forward. I think the stakes of BPM are actually rather high.

I was able to attend ASUG’s pre-conference seminar organized by Marilyn Pratt entitled "A BPX Guide to Business Suite Value Scenarios." While much of the day was geared towards making sense of SAP’s Value Scenarios, the day ended with some useful sessions from key BPM product and strategy leaders within SAP. I was able to continue those conversations over lunch later in the week. My goal? To understand how BPM fits into SAP’s value proposition it is pushing to customers. At the heart of that proposition lies the question: when do you go with standard SAP functionality and when do you customize to differentiate?

The answer to that question has changed dramatically in the last few years. While it would be going too far to say that altering SAP source code has been discredited as a winning approach to ERP, I would expect SAP to actively discourage this practice going forward – at least for customers on the ERP 6.0 platform. So what’s the alternative?

SAP has been tackling this on two fronts: first, SAP aims to provide a rich collection of pre-configured, industry-specific ERP content. SAP would say that “standard SAP” is no longer vanilla, but a tested collection of industry best practices which can be supplemented with “plug in” solutions from certified partners via that little-mentioned new marketplace known as EcoHub (yes, I was joking about the little-mentioned part).

The biggest change to core ERP content? SAP now envisions its pre-configured content in a process-driven context. In other words, instead of shipping an improved version of, say, CRM, SAP aims to ship, via enhancement packages, continual improvements to end-to-end processes, such as “order to cash,” which would impact the functionality in ERP, CRM and other areas. Trivia question: where will that business process content be stored and accessed? If you were able to catch the Bill McDermott/Jim Snabe keynote, you already know the answer: Solution Manager. When in doubt, the best answer to any SAP question these days is, “It’s in Solution Manager somewhere.”

So on the one hand, we have SAP providing business process “best practices” to its customers via Solution Manager. Whether they will be perceived as such, or welcomed out of the box, remains to be seen. In the longer view, these end-to-end processes will be presented as “Value Scenarios” that span from core ERP into SRM, CRM, and the like. SAP is thinking: no more functional silos, follow the process where it needs to go, and give the customers as much “plug and play” process content as possible. But the pressing question returns: “If all customers have access to the same business process content, then how do they differentiate?” SAP’s answer involves SOA, process modeling, and innovating around the small percentage of processes that directly relate to a company’s competitive advantage. Composing services on top of the suite therefore replaces custom coding as SAP’s recipe for competitive edge.

Perception problem: SOA has become somewhat of a clunky acronmym these days, implying tech-driven projects with scope creep issues. Enter BPM, which is both a philosophical approach to managing businesses through process monitoring, a tool to do this with (Solution Manager), and in the case of NetWeaver BPM, an actual application, now in general release, that allows SAP customers to visually model differentiating processes that can be integrated with existing SAP functionality. Unlike other process modeling tools, BPM generates executable, SAP-ready code. SAP would say that BPM would allow such processes to be “seamlessly integrated” – another proof point that customers will surely investigate for themselves.

For a product that went into general release right before Sapphire, BPM did not get a lot of fanfare at the conference. However, I see NetWeaver BPM as much more important to the future of SAP than the BusinessObjects Explorer tool that got all the demo time, but with this caveat: “only if it works.” I have no doubt that BPM basically functions properly. By “only if it works,” I mean “only if business users embrace the tool to model processes that integrate easily into the SAP core.” While we’re on the subject of user adoption, we should note that BPM is NOT part of the standard NetWeaver license but a premium pricing product.

The tool looks friendly enough, though some business users have told me they find the UI more like a techie composition tool than something they would plop down in front of an executive. The BPM team is conscious of this criticism, and they are working to pull NetWeaver BPM out of the NetWeaver Composition Environment (CE), though it will still be tightly integrated. What they are trying to do is to hide the complexities beneath a simple interface, rather than simplify the processes. It’s a worthy challenge.

During his presentation at the ASUG pre-conference session, Thomas Volmering, who is the Senior Product Manager for Business Process Management at SAP, previewed some very interesting NetWeaver BPM functionality. The most compelling? The long-term plan for complete integration with Solution Manager. This would be a powerful addition to the BPM tool: existing processes could be pulled in from Solution Manager, enhanced within BPM by adding additional services (either from the Enterprise Service Repository or built from scratch), and then integrated back into Solution Manager.

As I write this, it seems almost like science fiction (perhaps that’s why they called it “Galaxy”?), but if it works, it will be worth watching. BPM-Solution Manager integration is currently planned in two installments, with version 7.2 shipping towards the end of this year, and 7.3 sometime in 2010. The 7.2 version is currently envisioned as “read only Solution Manager content,” and the release dates are subject to change, but that gives some idea of the timeframe. (If you want to test-drive a preview version of NetWeaver BPM, Volmering has a useful blog on this topic.)

Of course, SAP would say that you should only focus on a small percentage of competitive processes with this “service composition” approach. The figure varies – during the McDermott/Snabe keynote, I heard the percentage “less than 10 percent.” Ann Rosenberg, BTC Global Practice Ownership for Business Process Management and co-author of the book Business Process Management: The SAP Roadmap, often says that of a company’s processes, twenty percent are automated, and of that twenty percent that are automated, twenty percent of those are typically key to competitive advantage and thus candidates for service composition. By my math, that amounts to six percent of the total.

The BPM team I talked with are a talented bunch. Between Rosenberg, Volmering, and their colleague Wolfgang Hilpert, that’s a pretty sharp team. But lest we assume that BPM is just a case of a few over-enthused product evangelists pushing their case, I would also refer you to a blogger session we had with Pascal Brosset, Chief Strategy Officer with SAP.

Pascal sketched SAP’s product strategy on the back of a program schedule; Vinnie Mirchandani later published the official version in his blog. You can see from the illustration on Vinnie’s page that BPM represents the cutting edge of SAP’s product vision. If you’re wondering where SAP currently sees cloud solutions fitting into this visual, it’s closer to the expanding circle of BPO (Business Process Outsourcing), with the "cloud" tackling on-demand processes in areas like HR and procurement (what SAP calls “standard but non-commodity processes”) and moving outward. BPM is far away from that core, in the area of custom innovation, albeit using as many reusable components as possible.

If SAP’s BPM approach works, it will help to justify the years of hype SAP has invested in SOA, allowing users to build competitive apps by “innovating on top of the core,” as opposed to the expensive and difficult path of custom development, which brings with it support and upgrade-related hassles. If the BPM/SOA approach doesn’t work, it will be back to the drawing board, though by then, we may all be lost in a different kind of hype, likely somewhere in the clouds.

Talking to the BPM team, it was clear to me that they realize the stakes of what they are up to. Though the spotlight isn't on them now, if they can pull this off, they will surely find themselves in front of a Sapphire press conference before too long, showing how business users can team with technical composers to alter business processes on the fly, with the transactional ERP system humming along, no interruptions. For now, they’ll be back in Walldorf, playing the high stakes game of trying to realize this vision!