IBM and SAP: Commoditize this!

The world according to IBM has been consistent since IBM first trotted out its On Demand strategy. How SAP fits into that strategy has also been relatively consistent: The world of commoditizing enterprise software is SAP's to inherit, while IBM marches off to innovation glory, building new functionality on top of the soon-to-moribund applications layer. It's been a position that has strained relations between IBM and SAP -- and strained credulity with analysts such as myself -- ever since On Demand first saw the light of day.

When IBM unveiled the latest update to its On Demand software strategy at the end of 2004, SAP was in a familiar position: relegated to the IT side of the "business transformation and IT" dilemma facing enterprises today. Innovation, according to IBM, takes place at the "higher" business process level where, by implication, SAP has no business.

There has always been a problem with this worldview and, in light of SAP's push toward business process modeling and NetWeaver, it's become even more shortsighted. IBM contends that the key to success comes from middleware -- WebSphere, Lotus, DB2, Rational.

With IBM competing in SAP's own customer base to define the parameters of next-generation innovation -- and cash the checks that SAP thinks should have NetWeaver written on them -- it's important to understand the difference between IBM and SAP.

In the IBM world, business processes -- the building blocks of innovation -- are created out of a consulting project that uses underlying applications the way a bakery uses flour -- a raw material with a purely commodity value. In the SAP world, business processes are part of the core functionality of mySAP that, along with new processes and services, form the building blocks of next generation applications.

IBM's worldview is an attempt to gild the lily by making middleware look more strategic than it is. It's one that only makes sense if you're a company that eschews packaged apps. The real value-add is in packaged business processes that can be reused at will -- either by a SAP NetWeaver or whatever IBM decides to call its services architecture. Those packaged processes -- many of them already sitting in mySAP waiting to be service oriented -- represent the building blocks of innovation. The middleware layer that IBM proposes is much more like the flour in your bread. If you want the whole loaf, you're better off talking to SAP.

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