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SAP's new software strategy exposes new challenges

SAP will have several issues to address as it carries out its enterprise services architecture vision, according to a new IDC report.

SAP's transition to a services-enabled architecture is prompting new challenges for the software maker, according to researchers at analyst firm IDC.

SAP needs to address the entire work flow about how tasks get done. Applications have to be able to adapt to people rather than people adapting to applications.
Henry Morris,
group vice president IDC

The midmarket is growing increasingly reluctant in SAP's strategy and a growing customer base of technical users are seeking a complex mix of applications.

Despite the challenges, researchers at analyst firm IDC remain bullish about SAP's enterprise services architecture (ESA), highlighted earlier this year at its Sapphire user conference. The new architecture will leverage NetWeaver and Web services to service-enable all SAP software by 2007.

"SAP doesn't want to be marginalized," said Henry Morris, a group vice president and general manager at IDC. "Rather than SAP being integrated by a systems integrator or another company, they want to be the definers of broader and extended processes."

The architecture will support a slew of new composite applications that will leverage SAP's existing core software to broaden functionality and bring together disparate IT systems and multiple SAP instances.

But SAP's new approach is being met with some reluctance among small and midsized businesses (SMBs), a market segment growing increasingly important for SAP as it tries to expand its customer base.

SMBs are typically dominated by customers that look for simple installation and ease of use in software products. Moving to a service oriented architecture (SOA) sounds complicated, but SAP says that most changes will be a progressive evolution, not a lengthy rip and replace project.

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SAP could change its delivery model for SMBs, setting up a hosted service for its scaled down All-in-One and Business One software suites, according to IDC.

"SAP will be looking at different kinds of pricing and delivery models to get broader access," said Morris, in an interview with "From a business point of view it makes sense to offer these alternatives, but it makes it more difficult for SAP and puts pressure on pricing."

Morris and members of IDC's Integration, Development and Application Strategies research group laid out the challenges in a report, "SAPPHIRE '05: Where Is SAP Going with Its ESA Strategy?" While SAP is moving forward with its software strategy, competitors, including rival Oracle Corp., have similar initiatives, Morris said.

Also, SAP will also have to address a new generation of business workers that are very keen on collaboration. The SAP-Microsoft Mendocino project, which integrates some SAP applications into Microsoft Office products, is a step in the right direction, Morris said.

"It's not just about making their applications work under a new architecture," he said. "SAP needs to address the entire work flow about how tasks get done. Applications have to be able to adapt to people rather than people adapting to applications"

The third challenge is SAP's relationship with systems integrators, which is beginning to chill under the new architecture strategy, Morris said. SAP's shift to ESA could result in several new jobs, including that of a business process designer -- an individual or group of individuals who help change business processes in an enterprise to match the new architecture.

"SAP is treading in the space of integrators while at the same time they need them to be partners," Morris said.

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