The Third Era of SAP

In his opening keynote, SAP CEO Henning Kagermann set the tone for what would be a philosophical three days. He described "silent transactions" in which orders are fulfilled automatically, with maybe 1 in 100 causing an exception handled by an actual person, powered by adaptable business networks. He talked about enabling not only the electronic network of information but also the "people network", using "wikis or blogs to harness brainpower". But most importantly, he talked about SAP's roadmap, in which the company plans to transform its own business network and innovate on not only products but also business models. Over the course of the show, I got the sense that SAP is laying the groundwork to enter its third era.

To my mind, the first era of SAP was characterized by complexity and (as Kagermann said) "consultants, consultants, consultants". During the era, SAP was fantastically successful but made mistakes which it now acknowledges, including out-of-control implementation projects, poor quality, and lack of executive oversight.

The second era of SAP has been defined by "de-coupling" applications, SOA, and NetWeaver. Huge investments in time and money have been made in re-architecting products to be more flexible and minimize required changes to the core. As Kagermann's keynote slide shows here, SAP considers Enterprise SOA to now be established, and NetWeaver to be established as the platform of choice. The second era is drawing to an end. So what's next?

For current SAP customers, it's "innovation without disruption"—a series of measured improvements and new application components planned for the next three years. But SAP sees much of its future growth lying outside of the existing customer base. The third era of SAP depends on new customers, a new product, and what Deputy CEO Leo Apotheker called "a whole new business model".

SAP plans to address what SME SVP Hans-Peter Klaey called "a net-new segment of the midmarket" with a new on-demand suite of applications codenamed A1S which will be sold through a pull-not-push model. While several bloggers were frustrated that we didn't see more of the actual product, I found the demo of the "See-Try-Buy" user experience quite compelling. Even the most curmudgeonly of our group grants that A1S—if done right—will be game-changing, not only for SAP but also its competitors—both large and small.

Getting it right, however, could prove to be quite a challenge. Where are the small systems integrators who will provide services around this new low-end product? When pressed on the point, SAP executives demurred. How will the CRM component of A1S relate to SAP CRM On-Demand? SAP's CRM chief Bob Stutz said he didn't know, and suggested I ask the A1S team. And finally, how will SAP's traditional enterprise software culture adapt to this new business model? Kagermann admitted, "It's an education internally."

But if SAP does manage to successfully bring to market a comprehensive business suite delivered in an on-demand model, marketed over the web and sold over the phone, it seems reasonable to assume that these questions will have been answered. The company has promised a "volume-ready" product by 1Q08. Next year's SAPPHIRE promises to be fascinating.

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