If you Google "SAP" and the phrase "business process management," you get more than a million hits after excluding SAP.com as a search site. So why is a leading analyst firm marking marking down SAP in business process management (BPM)?
In my opinion, SAP is a leader in the BPM market because it has already done the hardest part of building the software. With its ERP experience, SAP has identified almost all of the possible business process sets. However, my opinion does depend on how you define the term and what I think SAP is trying to achieve in the market.
What is BPM middleware?
BPM is a hard concept to get your arms around because there are two fundamentally different ways to view it.
Analyst firms and breadth-and-depth-challenged software suppliers want to make their market measurements and forecasts discrete and their products differentiated, respectively. So they define BPM from fairly narrow functionality and architectural perspectives. For example, it's not human-centric; it has to be based on BPEL (Business Process Execution Language).
On the other hand, users -- working from a real-life point of view -- consider BPM a value proposition. That value can be achieved using many different types of software with various functions and architectures -- for example, everything from Microsoft Project to Houston-based BMC Remedy's ARS; the value is event driven as well as data driven.
I work from the real-life perspective. For me, classic R/3 is a piece of packaged BPM software. So is an in-house-developed CRM application built with IDS Scheer's ARIS, Oracle portal, and an Apache Web server.
Most analysts and suppliers do not take my broad view. Typically, when they talk about BPM, they are referring to BPM middleware, including:
BPM middleware is an extension of the enterprise application integration (EAI) software that became popular in the late 1990s. Some of these BPM products, such as Cary, N.C.-based Ultimus' BPM Suite, work only with selected infrastructure software. Others, such as the iProcess suite from Palo Alto, Calif.'s TIBCO, are neutral as to platform and architecture.
In my discussions with users, I find that most BPM middleware products are still used to tie one packaged application to another -- or to an in-house-developed application -- inside a firewall. Often, a merger or acquisition kicked off an EAI need, and adding rules was a nice extra.
But everyone agrees that the real advantage of BPM middleware lies in tying together processes outside the firewall among customers and suppliers. In the SearchSAP.com article noted above, electronic data interchange (EDI) was important. The article also said SAP "lost points" because of a lack of high-volume NetWeaver XI references. (To be clear, I am depending on the SearchSAP.com article itself and not the analyst-firm report to which the article refers.)
If I were a client of that analyst firm and making a BPM middleware decision, I would ask to see the list of high-volume integration references from all the other suppliers. Each vendor introduced BPM integration features around the same time, in 2005, making it unlikely that any one company has a significantly larger reference list.
Looking at the BPM market broadly, SAP is the winner hands down. But even looking at the narrow definition, I can't think of BPM middleware that surpasses SAP NetWeaver in pure breadth and width of features. Of course, many are bells and whistles that you may not need. Analysts can take these features, weight them, and plot them on a quadrant, but that gets pretty subjective.
Of more meaning to me, SAP announced 2006 NetWeaver revenues that place it near the top of the BPM market as measured by market share. In my analysis, SAP has moved from 40th in 2005 into a tie for third with BEA, Oracle and TIBCO in 2006, behind IBM and Microsoft.
Am I giving too much weight to market share? Maybe, but like Cuba Gooding's character in the movie Jerry Maguire, I say, "Show me the money!" Over time, users voting with their pocketbooks represent the best indicator of user acceptance.
What SAP is trying to achieve in the BPM middleware market
NetWeaver's rapid rise in BPM market share is only part of the story. SAP's experience with similar products must also be considered. SAP BPM features and experience include:
I am not an apologist for SAP. I do not mean to say that each NetWeaver BPM feature is better than a similar feature in every other BPM middleware product. But of the companies mentioned in the SearchSAP.com article, only Oracle offers a similar array of features.
One advantage both Oracle and SAP have over totally neutral BPM middleware products is that their users tell me they are willing to accept 80% to 90% of the functionality if it lets them use a single vendor's products for both ERP and BPM. On the other hand, users should make sure they clearly understand all their enterprise needs before simply settling on their ERP vendor's solution.
SAP has another advantage in addition to rising market acceptance and experience: The company has tens of thousands of customers that think in terms of process. That is why it was easy for SAP to build a BPM Expert (BPX) community, a key ingredient for a value proposition where inter-organizational rather than intra-enterprise connectivity is the key.
I recently conducted a "serial focus group" with some members of the BPX, and their feedback is included throughout this analysis. According to SAP propaganda, business process experts have the "business knowledge and IT savvy to make business process innovation happen in real time by adapting, composing and executing end-to-end business processes using composition software tools and enterprise services." That's PR spin for being equally line-of-business-centric and IT-centric.
The group of BPX community users I talked to, which included consultants as well as direct end users, confirmed that everything they do is increasingly business process focused, even if it is IT driven. The days of adding more software just to have the latest and greatest technology are gone.
One criticism I have of the BPX Community is that it is still too technical. BPX was started in an attempt to give non-developers a place to collaborate, but it is still not as line-of-business oriented as I would expect. The Americas' SAP Users' Group (ASUG) provides much more industry centricity than BPX. SAP seems to recognize that there is a continuing overlap between BPX and SDN (SAP Developers' Network) and has started surveying in the blogger community about the problem during February 2007.
So when it comes to BPM, SAP has growing market acceptance, proven experience, and a process-savvy user community. The final step involves understanding what SAP plans to do in the future.
In my opinion, SAP does not intend to compete head to head with neutral BPM players such as TIBCO in the near term. But SAP will do almost anything to make sure it does not lose any more longtime SAP users to TIBCO or anyone else. That is the best news of all for the SAP user community and almost guarantees success for NetWeaver BPM.
In my research, I found that before NetWeaver 2004S, as much as 10% of the otherwise happy R/3-mySAP user base grudgingly chose a neutral BPM offering to handle a major enterprise need. Most of them are going to be tough to win back for NetWeaver. Despite its pre-2006 limitations, however, another 20% began using NetWeaver in production for specific functions such as Portal or Business Warehouse. These users are going to be an easier up-sell.
In 2007 and beyond, that leaves 70% of the satisfied SAP applications base that has not had to make a hard choice either way. In terms of what SAP called "standalone NetWeaver revenue" in its earnings call, 2006 results proved that for SAP to become king of the BPM hill, it needs only about 10% of that group to choose NetWeaver BPM each year for the rest of the decade.
And if you don't agree with my 10%/20%/70% customer split and likely conversion rate, plug in your own numbers; any number of likely new NetWeaver BPM users you come up with is large. Assuming SAP delivers promised functionality in subsequent versions -- integrated modeling, better deployment methodology and systems management of the processes, a stronger tie-in with analytics, more templates -- I don't see how it can miss.
After 2008, SAP will begin to go head to head with neutral BPM suppliers even if a prospect is not currently an SAP applications customer. This will happen in the midsized market via SAP partners and will serve as a door opener for All-in-One.
Dennis Byron is the analyst for IT Investment Research (www.itinvestmentresearch.com) aimed at institutional and individual investors in information technology (IT), or just anyone who likes to peer under the covers of "the financials," where both large companies and emerging IPOs like to bury their most interesting facts. Byron blogs about open source software at ebizQ. In his published analysis, he has already declared SAP a leader in the BPM market.
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