SAP’S PLATFORM STRATEGY IN 2006

ABSTRACT

SAP like any other high tech business has had its shares of business difficulties and competition challenges. ” In face of globalization, outsourcing, changing regulations, and rapid technological innovations, companies in the 2000s were increasingly challenged to devise and implement adaptable business models. This entailed putting in place enterprise applications that were open-source, simple to implement, and easy to integrate within and without the organizational bounds” (Farhoomand and Tsang, 2006). SAP, the leading company in this space, faced this challenge by transforming itself from a closed-source software developer to an open-source software integrator. By opening up its proprietary software products as an open development and integration platform, SAP allowed its customers to modify their Enterprise Resource Planning (ERP) to suit their specific needs.

SAP is a world leader in business solutions, offering comprehensive software and services that address the unique needs of customers around the world. Customer Relation Management (CRM) is one of the unique services that are afforded by SAP to its customer as a way to bring more customer satisfaction from SAP products and set a dividing line from competition. SAP CRM helps organizations differentiate itself and grow by capitalizing on its customer insights – providing a superior customer experience and making the most of its business advantage.

POLITICAL AND REGULATORY INFLUENCES
Multinational ERP implementation introduces another dimension of complexity one of them is national differences into the already complex nature of ERP implementation in the context of global information management. Political and Regulatory influences especially in countries such as China and India affect ERP implementation practices across nations. Understanding such effects will enable companies to be more proactive in planning project budget and duration. In China the rate of business corruption and political influence makes it difficult for an international business entity to have a level playing field. Politicians and business authorities take bribes for granting business licenses for simple approval. Both China and India do not respect proprietary materials and are not bound by the copyright or patent regulations. According to Velasquez, “India’s patent law allowed companies to manufacture a drug or software so long as it used a different process” (Velasquez, 2006). So with China and India as the major growing economy in the world, SAP’s ERP losses profit from unscrupulous businesses that copy, manufacture and sell SAP’s products without government intervention.

ECONOMIC FACTORS AND INFLUENCE
The software market continues to consolidate and the competition is getting more stiff due to the fact that most players wants to commoditize. “The announcement by Oracle in Sept 2005, that it will purchase CRM applications provider Siebel is the beginning of the final phase of the commoditization of the transaction-centric CRM and ERP applications market. The acquisition, if completed, will impact significantly the future direction of CRM efforts. More importantly, it will limit global organizations’ vendor choices to Oracle or SAP, while providing some room for Microsoft Business Solutions and smaller suppliers Onyx and salesforce.com to service larger organizations.” (Smith, 2005) Organizations that currently own or plan to purchase upgrades or new applications from Siebel should take precautionary measures to mitigate their financial and operational risk. Ventana Research believes this event provides a useful opportunity for organizations to reassess their planned IT investments in CRM to ensure they are on track to deliver value by improving the operational and financial performance of their businesses.

SOCIETAL AND CULTURE INFLUENCES
Society has placed greater accountability on organizations, their leaders and participants. High technology products have an advantage in being able to identify compliance and regulatory patterns and issues. Investor’s attitudes towards organizations have shifted to one of greater accountability raising the demand for products such as SAP’. Industry members are facing the societal pressures to provide a fun, interesting, employee-centric workplace with opportunity to grow. The demand for high technology products and the ingenuity required to create it has fostered a youthful, employee-centered atmosphere at many software, ERP and high tech companies. This quality plays into the level of talent that an organization attracts.

TECHNOLOGICAL INNOVATION
The SAP products all use the same technology as a solution provider. This may be a positive or negative environmental factor. Competitors may see a weakness in it and counter with another option. On the other hand, the technology may be so strong that no other company can better it. Since SAP entered the business of software and ERP analytics in 1972, they have continually improved the way organizations evaluate, manage, predict and maximize usage of their data. As organizations have grown, the volume of data to analyze has grown as well. Technology clearly is an advantage for SAP in the process of providing relevant output to facilitate business improvements.

SAP CUSTOMERS
SAP has set its sights on bringing enterprise SOA to the midmarket in 2008, additionally, by 2010, the company aims to have two-thirds of its installed base using enterprise SOA. "In general, with SOA, SAP is the furthest along, and they're in the right position because they own the applications layer," said Ray Wang, principal analyst for enterprise applications and business process platforms at Cambridge, Mass.-based Forrester Inc. However, he also said comprehensive SOA is "five to seven years away." While SAP does not give target figures for the number of users, SAP set a goal of reaching 100,000 total customers by the end of the decade, as well as an addressable market of $70 billion worldwide.

SAP NEW OFFERING
SAP NetWeaver is the latest of new products that SAP has been able to design, develop and market to its customers. With the SAP NetWeaver platform, you can align IT with business requirements. SAP combines composition technologies and application functionality to reduce IT complexity and increase business flexibility. “With SAP NetWeaver, you can compose applications using enterprise services, orchestrate business processes and events, manage enterprise information, and deliver applications and content to users more quickly and cost-effectively.”
(sap.com/netweaver)

SAP MOBILIZING RESOURCES
Successful organizations are those that can maximize business value, achieve balance, and align their overall portfolio with strategic objectives. The first thing that SAP does well in mobilizing its resources is by making sure that its employees are taken care of. From the SAP website, I found this information that paint a picture on compensation and incentives that SAP is committed in extending to its employees. SAP's most important assets are its employees, whose innovation and entrepreneurial thinking will drive the company's continued success. The STAR Plan, LTI Plan, SOP Plan, and Incentive Plan 2010, which complement the existing compensation system, are examples of how SAP offers additional incentives for employees, managers, and top performers. SAP's incentive plans are well balanced, transparent, and focused on the long term. These aspects help ensure that SAP remains an attractive employer now and in the future for qualified, ambitious new recruits as well as for experienced industry professionals.” (sap.com, 2008). SAP has aligned its resources such as finance, IT and human resources so that it can be efficient and be able to stay ahead of competition by doing the following:
· Prebuilt integration with SAP and non-SAP systems provides out-of-the-box transparency into project-cost actuals, forecasts, baselines, and other KPIs across the entire portfolio.
· Deep integration with HR system, including visibility into the organizational structure to support both line and pool management, enables resource allocation and strategic capacity planning based on up-to-date information on skills, availability, and approval workflows.
· Flexible dashboards and sophisticated analytics drawn from disparate systems to enable continuous monitoring of portfolio's performance.

SAP STRATEGY
SAP strategy for internal and external forces is a strategy that is widely in the daily communications within SAP that is sometimes referred to as the "Attack Oracle" group–because Oracle is SAP’s largest competitor in enterprise applications. “And with Oracle’s acquisitions of PeopleSoft and Siebel, Oracle is getting serious about its so far lackluster applications business and is eyeing SAP’s huge 32,000+ customer base” (Foremski, 2006). SAP business strategy and goal is to make sure that SAP develops a strategy that enables it to compete against Oracle, whether it is through acquisitions, investments or just pure communications of SAP’s message–the goal is to rise above any noise that Oracle produces.


References:

Farhoomand, Ali F., Tsang, Samuel. (2006) SAP's Platform Strategy in 2006. Harvard
Business School, Feb 2006. Boston, Harvard Business Press.
Velasquez M.G. (2006). Business Ethics: Concepts and Cases (6th Edition). Pearson:
Prentice Hall. Upper Saddle River, NJ
Foremski, Tom. (2006) Talking IT Strategy with Jeff Nolan. California
http://www.sap.com/compensation retrieved 01-27-2008
Smith, Mark. (2005) Building a Business and IT Foundation for BI. Volume 1. April 20,
2005
Wang, Ray. (2007) SOA and ERP Business, Massachutes, Cambridge-Forrester Inc.