SAP Execs: SOA Shapes Strategy, Future

The company says its Enterprise Services Architecture plan is on track to be completed in 2007 and it expects its customer base to nearly triple.

SAP is placing a winner-takes-all bet on service-oriented architecture for itself and its customers, according to company executives.

At its annual analyst event in Las Vegas Dec. 4 and 5, SAP executives discussed the companys progress since it began its SOA journey in 2003 with the introduction of its Enterprise Services Architecture, the transformations its road map has brought and how it will carry the business applications giant forward into the future.

"At the end of the day weve moved from a product-centric vertical architecture to a customer-centric architecture," said CEO Henning Kagermann, during his opening address. "That sounds easy, but I can tell you its not."

SAP really began its SOA strategy with two key initiatives: building out its integration platform, NetWeaver, and service-enabling its suite of ERP (enterprise resource planning) applications. The companys ESA strategy has included several additional initiatives, such as creating enterprise services for composite application development, building out an ecosystem around NetWeaver and releasing 26 new products in 2006 alone.

The company said its goal is still to enable more agile business decisions within its own four walls, and for its customers through a services-based applications suite, augmented by an underlying integration platform.

SAP isnt alone in that quest. Oracle, its biggest rival in the enterprise space, is on a similar path with Fusion, as is Microsoft with Dynamics and .Net. Both projects are due around 2008. However, SAP would argue that its in the lead.

/zimages/5/28571.gifRead more here about SAPs enhancements to MySAP ERP.

"In 2006 we shipped all the products needed to make [SOA] happen—the NetWeaver platform, MySAP ERP, 1,000 enterprise services by the end of the year, tools for user interface [customization] and [building] composites," Kagermann said. "Its all in place. Nothing is missing. Now we can talk about what kind of value you can get out of it."

With SAPs ESA road map on target for completion in 2007 with the service-enablement of all the MySAP ERP components, a new SOA-based suite for the midmarket and the evolution of MySAP to a Business Process Platform, the next step is market validation. To date, a very small percentage of SAPs nearly 35,000 customers have actually implemented the NetWeaver platform or the MySAP suite (SAP has 500 "referenceable" customers for MySAP ERP).

In order for SAP to validate and build on its ESA investment, it needs customers and partners to buy in. Kagermann said he expects both to occur in the coming year.

"Next year enterprise SOA [will be] established—thats very important," Kagermann said. "Established means its normal. We will see thousands of companies moving there, and that will help SAP move forward too and achieve its vision for 2010."

Kagermann said that by 2010 at least two-thirds of the companys current installed base will be on SAPs Enterprise SOA—presumably MySAP ERP and NetWeaver. At the same time, SAP will see 50 percent of its revenues coming from new products, and it will have nearly tripled its customer base to 100,000 users, he predicted.

Agassis take

Following Kagermann on stage Dec. 4, Shai Agassi, president of SAPs Product and Technology Group and an executive board member, said he had nothing new to discuss regarding SAPs ESA strategy, but rather he wanted to outline the companys thinking about the shift toward SOA and the milestones SAP expects in the coming several years.

In the ESA process, Agassi said the company had two fundamental strategic decisions to make: whether to use someone elses middleware, such as IBMs WebSphere or Microsofts .Net, to move into SOA; and whether to consume its own technology through Web services, making that the companys "secret sauce" for building innovation, or to open those services up for others to consume.

With NetWeaver, SAP chose in-house middleware development, while with MySAP ERP, it chose to open up its services.

"When we decided to open up, not only did we document standards but we said, Please come in, please cannibalize our processes. Thats a very bold move. It took us a long time to argue that through the board."

/zimages/5/28571.gifClick here to read more about what SAP and Microsoft have planned for Duet.

Agassi said the company recently decided to add simplicity as a design goal and to develop a large number of products. To this end, SAP announced in September that it would hold its core MySAP ERP 2005 suite steady for the next five years, bringing out new functionality and services through so-called enhancement packages. The first package was released Dec. 5.

In the next year, SAP is looking at introducing a slew of new SOA-based products, in addition to the services-based midmarket suite: new enhancement packages, a NetWeaver composition environment, the SAP xApps Hub, SAP eSourcing 5.0, a subscription program for its SAP Developer Network, new corporate performance applications, SAP Supply Chain Management 5.1, SAP Supplier Relationship Management 6.0 and a new service-enabled industry functionality.

"This [continual development] has created a lot of interest in adoption," Agassi said. "Weve gone over the last couple months of activated ERP [implementations]. Our reading right now leads us to believe we will have roughly 10,000 [implementations] either done or within months of being deployed by the end of 2007."

The implementation marker is key for SAP. The company has been criticized in the past for achieving little adoption of its next-generation technology (Oracle often cites the statistic that more than 90 percent of SAPs user base is still on its older R/3 ERP suite).

Joshua Greenbaum, principal of Enterprise Applications Consulting, said he believes that SAP is finally seeing some validation of its ESA strategy.

"The [number of] customers that are actually moving to MySAP is confirmation that they have the right strategy," Greenbaum said. "They cant do anything but talk if [customers] havent moved. This is a pretty big inflection point... that gives SAP very powerful credentials: customers speaking with dollars and implementations."

Agassi said he believes SAP is also on track to at least compete in the middleware market, citing data from Merrill Lynch that depicted SAP as having 1 percent of the middleware market in Oct. 2004, and 11 percent of the market in 2006.

"In three years we will have the same market share in the middleware market as we do in applications—22 percent," Agassi said. "Two years ago there was no chance in hell. Now were seeing where top accounts are adopting NetWeaver."

To further its services-based strategy, SAP plans to come out with several full process scenarios next year, including order-to-cash, logistics execution, procure-to-pay, human capital management, manufacturing and Duet, the joint development project with Microsoft that opens up SAP processes to the Office environment.

The services play is one SAP is counting on to bring in partners and build out an ecosystem around NetWeaver in order to expand its customer base.

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