The only thing that’s certain is that uncertainty is here to stay, declared Henning Kagermann, CEO and Chairman of SAP as he kicked off his keynote address to the Sapphire user conference in Orlando.
It’s a high-flying SAP that is gathering in Florida. Its growth may be relatively flat worldwide, but compared to rivals that means the company’s leading the pack. Meanwhile the firm can look down from the lofty heights as market leader to watch with wry amusement as rivals Oracle, PeopleSoft and JD Edwards tear themselves and the market apart in a bid to become half as big as SAP.
Nonetheless it was clear that the company is aware that to the eyes of many in the market, the sexy stuff going on in the applications market wasn't happening in Florida, but in California where the war of words is getting worse between Oracle and PeopleSoft.
To that end, Kagermann was keen to distance himself and SAP from what he called defensive moves to "consolidate from the bottom". "The strong get stronger, as we say," he said. "We have a strategy within SAP that we don't buy market share. SAP gains market share from quarter to quarter. That brought some of our competition to consolidate from the bottom. That was a defensive move.
“That in no way changes the SAP strategy,” he added. "This will not change the competitive landscape. We have a clear No. 2 [competitor] if it happens. But the combined forces are not more than half of our market share, and there is no need to address anything [further]."
But SAP is set to capitalise on the chaos in the market through its new advertising campaign designed to woo customers away from Oracle, PeopleSoft and JD Edwards. "It is, more than ever, about trust and the ability to deliver on commitments and to understand the constraints of clients," Kagermann said. "We watch [the situation with the three companies] carefully and hope we can give indicators to the market that there are alternatives. I feel that in our industry, it's more than about trust, it's about your ability to deliver on your commitments and understand your constituencies.”
But he was keen to position the company as trustworthy and reliable in a tie of wider economic uncertainty as well as current market turmoil. "I felt that times would be better (this year)," he acknowledged. "That if we'd wait a few months, everything would be better. But I was all wrong. It went worse. Consumers lost confidence, and so much of the wealth built up by investors for years was lost in one year."
This has had a wider knock on effect of sending companies into near-permanent cost cutting. "We are in a vicious cycle," Kagerman said. "We have cut cost and we continue to cut cost. We stopped investing and had an attitude of sit and wait rather than adjusting to it."
The answer, he said, lay in successful deployment of technology. "IT not only enables growth and business transformation, but it can kick off the next revolution and reshape business processes to be more competitive. Without IT, there can be a good vision but no execution.
"IT can kick off the next kind of recovery” he declared, calling for a shift in mindset from the current IT investment allocation of 10 per cent of spending on innovation, 30 per cent on consolidation, and 60 per cent on operations. Kargermann wants to see this replaced by a 40-20-40 breakdown. "Consolidation has no business value," he said. "It's just clearing up the mess you created in the past. Instead of mobilizing, it paralyses. No- one ever saved their way to success. Consolidation should not be an objective by itself, because it has no business value.”
In terms of SAP’s own agenda, Kagermann highlighted the company's MySAP Business Suite, which includes CRM, product life-cycle management, supplier relationship management and supply chain management around SAP's core ERP products.
The next version of the CRM software will be next month and come complete with an updated user interface.MySAP CRM, 4.0, supports more than 280 industry-specific business processes as well as multichannel interaction processes via NetWeaver, including automotive, chemicals and pharmaceuticals; engineering, construction and operations; consumer goods; high tech; industrial machinery and components; leasing; media and entertainment; oil and gas; professional services; public sector; retail; telecommunications; and utilities verticals.
The company hopes that the new release will be enough to help it dominate the CRM market in which it is involved in a head-to-head struggle with Siebel for the top slot. SAP concedes that this sector is dominated by Siebel - for now. "Version 4.0 is a significant one for us," said Kagermann. "We feel very comfortable that with this release, we'll become the market leader in this space by the end of the year."
But when asked about allegations by rivals such as Siebel that SAP counted MySAP customers who did not actually use the CRM functionality as CRM customers, Kagermann admitted that as much as a third of those SAP counted as CRM customers did not actually use the software. But he insisted that the same was true of Siebel. "It's all about market share," he said. "Customers can buy Siebel software and not use it, but they have paid for it."
Meanwhile a new version of mySAP Supply Chain Management adds support for 20 new business processes and more than 30 process enhancements to customers in the discrete, process manufacturing and consumer products industries. Business scenarios supported include vendor-managed inventory, supplier-managed inventory and trade promotion management, linking promotion planning between CRM and SCM. "Our SCM focus is on lower total cost of ownership," said Kagermann. "We've listened to customer feedback and we're very comfortable with this solution."
The company also tightened its ties to IBM with a deal aimed at boosting sales to smaller companies. IBM will sell consulting services tailored to mid-size companies installing SAP's software while SAP has pledged to develop by early next year a version of its software for small companies that will run on a stripped-down edition of IBM's database software, called DB2 Express. IBM and SAP will also create an edition of SAP's BusinessOne applications, which are aimed at companies with up to 50 employees.
There will be a more extensive interview with Henning Kagermann early next week