Posted by [IP Address: 192.83.224.17] 'Ramnath' on September 17, 2001 at 00:23:46 EST:
I just found a interesting article on state of SAP on the Fortune site at http://www.forbes.com/global/2001/0723/025_print.html
A fresh image for SAP won't restore the German software designer to its former glory.
A few years ago, it seemed that nothing could stop SAP, the German software developer. Net income skyrocketed from $88 million to $555 million between 1993 and 1997, mostly from U.S. sales of its back-office software. The first company to introduce applications that would do everything from managing payroll to tracking inventory, SAP became the top software provider for nine of America's ten largest companies. "No one could touch us," says Hasso Plattner, its cofounder and co-CEO.
Not so any more. SAP, based in Walldorf, has stagnated in the very market it created. Sales in the U.S., which contribute 30% of the company's $6 billion revenues, have slowed from an average 40% annual growth in 1996-98 to an average 9% annual growth between 1998 and 2000. That's still good for a 452 ranking on the FORBES GLOBAL 500, but the stock's price, $70 in the fall, now hovers at $35.
How did it happen? For one thing, a maturing market left SAP struggling to develop innovative software. Then SAP missed the opportunity to develop such front-office products as customer-relationship-management software. A botched internet strategy didn't help: In May 1999 SAP introduced mySAP.com, which started as a vague enterprise-portal strategy that evolved to link back-office operations with front-office capabilities. But it was too little, too late.
SAP started to repair the damage last year. Plattner, a former IBM engineer who left that company in 1972 to establish what became SAP, and Henning Kagermann, his co-CEO, increased expenditures on marketing to 24% of sales, from 22%. And they moved the global marketing headquarters from Walldorf to Manhattan. They also hired a new global marketing boss, Martin Homlish, who, as marketing director at Sony, promoted the hugely popular PlayStation. Homlish has already enlivened SAP's image. A new campaign touts: "The best-run businesses run SAP." Last month Homlish hired Aerosmith to perform at Sapphire, SAP's marketing and promotional conference.
But SAP is going to need more than slogans and rock stars to impress the chief technology officers of the world. The better part of marketing is anticipating a customer's needs, a weak point for SAP. As demands for supply-chain management (SCM, or software that can track orders, assess raw material availability and set delivery dates) became more complicated, for example, such niche players as Manugistics of the U.S. moved in.
Not long ago it was expensive and time-consuming to integrate multiple software programs into one system. An SAP customer remained one for years, in every area of back-office software. These days a client can easily pick and choose from the best providers in each category. Emerson, a U.S. electric giant, for instance, runs ten separate products from such niche providers as i2, Manugistics and J.D. Edwards.
To adapt, SAP is now making concessions it would once have balked at: if a customer is using Oracle's customer-relationship-management program but wants to use SAP's portals, for example, that's okay.
SAP has also started to reach for other outlets. In April it announced a joint venture with Yahoo to develop an SAP workplace portal. "We're not talking about visionary leadership here," says Joshua Greenbaum, an analyst at Enterprise Applications Consulting in the San Francisco area. Earlier this year it acquired TopTier Software and entered into an agreement with CommerceOne, both attempts to gain a foothold in e-business software. What could differentiate SAP from its competition, Greenbaum says, is its marketing strategy. Five years ago SAP was the leading name in back office software. But today Oracle, SAP's biggest full-service rival, has superior marketing.
Plattner and Kagermann admit their mistakes. "We didn't develop our internet strategy as promptly as we should have," says Kagermann. And Plattner concedes that SAP should have been faster to go to the front-office side of software development: "Okay, forgive us," he says. "We are a little late." It might not be that easy.