SAP Moves to Clarify

Creates B2B, e-commerce unit; combines Portals, Markets subsidiaries.

SAP AGs move last week to transfer business-to-business and e-commerce product development to a newly consolidated subsidiary is part of a bigger plan to make sense of an increasingly confusing portfolio.

The Walldorf, Germany, software developer last week announced plans to merge its Portals and Markets subsidiaries and transfer components of its emerging B2B and e-commerce products to the as-yet-unnamed merged subsidiary.

Observers last week said the move made sense, given SAPs awkward attempt over the past year to extend its reach from enterprise resource planning to e-business development. In particular, frequent product name changes have left customers confused not only about the products themselves but also about the companys strategy.

"Were trying to understand what is SAP Markets and how it relates to Portals—hopefully, the consolidation will help clarify that," said an SAP administrator with a large electronics company who requested anonymity. "They definitely understand it; theyre just struggling to put it all together."

The merged subsidiary will deliver integration technology and collaborative applications through the mySAP Technology offering that SAP announced last fall. It will also license mySAP Technology back to the parent company, as well as to other developers for distribution with third-party software offerings, according to officials.

The new subsidiarys application development will focus on anything that involves collaboration and reaches outside the enterprise. SAP will continue to develop software that runs inside the enterprise.

If an application addresses users both inside and outside a single company, as with supply chain management, the subsidiary will likely develop that functionality and sell it back to SAP, according to SAP officials.

"The value does not come from technology per se, but in a new breed of apps you can build on top of [the mySAP Technology] platform," said SAP Portals CEO Shai Agassi, who will head the new subsidiary. "Its an organizational change at the same time; we will have 400 people dedicated to building [applications] on top of that."

"The real question is, Why is [the new company] still a separate company and not just folding into SAP? My guess is they will quietly fold it in later," said analyst Bruce Richardson, with AMR Research Inc., in Boston. "My guess is its easier to keep it separate now. If you took all the [1,700 employees of SAP Markets and SAP Portals] and folded them back into SAP, it would be chaos, with everyone jockeying for position."

Focusing on integration is critical as customers look for ways to integrate external applications with SAP software. "We are working with a lot of solutions that need to be connected," said Scott Dawson, senior director responsible for exchange strategy within the IT department at Enporion Inc., a utilities exchange. "We need to connect to any procurement system ... and we need to be able to connect into our MarketSet platform."

But simply shifting B2B software development into the new subsidiary will not alone solve SAPs identity crisis. Dawson said he will look at the mySAP Technology platform for integration with outside applications, although it remains to be seen if the new subsidiary can get its product to market fast enough.

The subsidiary "is going to have to catch up. But they have the resources and understand the technology. It remains to be seen if they can do it quick enough," said Dawson, in Tampa, Fla.

The SAP administrator at the electronics company agrees. "We worked with them early on with [Drag and Relate, a component of mySAP Technology]. But we didnt implement it," he said. "By the second or third release, they sort of get their act together."