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xApps bring in $200 million in 2006; partners a key

SAP reported that xApps license revenue reached $200 million in 2006 and says partners will continue to be a key development force in the future.

Despite recent disappointing earnings, SAP's xApps strategy is showing momentum, according to executives with the company.

SAP announced this week that xApps license revenue reached approximately $200 million in 2006, and the company touts partners as a key force in continued xApps business growth.

The xApps license revenue news came on the heels of the recent earnings call in which SAP announced that its operating margin will be between 26% and 27% in 2007, lower than in the past. The company's stock dropped almost 7% on the news and is down 16% since the January 11 announcement that it would miss its fourth-quarter profit target.

Dennis Moore, general manager of SAP's emerging solutions group, says that the company now counts about 60 branded xApps -- not including mobile business -- about 50 of which are from partners. Moore also points to more than 120 analytic xApps from SAP and several hundred smaller xApps embedded in other solutions. At the end of 2005, SAP product and technology group president Shai Agassi cited more than 100 analytic and 50 productivity xApps.

Partner development of xApps is not an accident, according to Moore. Partners were a focus at the very beginning of the program, even before the applications were called xApps.

"We knew that there were almost unlimited opportunities for these types of applications and that we could never build them all ourselves," Moore said. "That led to the strategy of bringing in partners for xApps and opening up the services on our platform."

Joshua Greenbaum, principal with Berkeley, Calif.-based Enterprise Applications Consulting, thinks SAP is doing a good job of seeding an ecosystem of partners and that these partners will continue to develop a lot of the sheer volume of xApps.

One example of the way in which SAP has encouraged partner development is through the new "floor plans" that can be used by partners in the xApp development process.

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Check out some of the big xApps announcements of 2006

"Partners and customers were challenged with quick, templatized approaches for starting points to build new xApps," said R. "Ray" Wang, principal analyst with Cambridge, Mass.-based Forrester Research Inc. "The 11 floor plans simplify the process and represent the 80/20 rule in design."

SAP is usually tight-lipped regarding products' performance in the market, but in the future, Moore said, there may not be so much mystery surrounding how the xApps business is going.

"With Duet, SAP is trying to establish a more transparent model of reporting status," Moore said, "and we will continue that with xApps as well."

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