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February 15, 2006

Newer open source software doomed in enterprise says SAP

As CIOs look to consolidate their IT operations, relatively immature open source software has little chance of surviving in the enterprise, said an SAP AG executive during a speech at the Open Source Business Conference in San Francisco.

By CBR Staff Writer

That consolidation wave has already begun, both with vendors and among enterprise customers that seek lower operating costs and complexity, said Peter Graf, SAP executive vice president of solution marketing.

The question for customers is, Is this [software] stable enough to bet the farm on? They cannot afford to risk their companies on a technology that may not be stable enough to carry their business in the long run, he said.

This is the situation for CIOs today, Graf said. Every customer of SAP engages the company in consolidation conversations, with the aim of having better business processes and lower costs, he said.

The mess that companies have with their IT today is unimaginable, and the larger they get the more mess they have, Graf said. Some SAP customers have as many as 3,000 systems, for example. They would be happy with just 1,000, he said.

While open source software is known for bringing enterprise costs down, that alone may not be enough, according to Graf. What really matters is the business value you provide and how much you can provide IT value to the organizations, he said.

Open-source startups and relative newcomers must target a new breed of CIOs, which Graf dubs chief process innovation officers. Rather than old-school CIOs who focus on a company’s data management, these guys design processes with the company’s network. If you want to become strategic to the company, you need to deal with business processors.

The key question for open source is, Which open source technologies are mature enough to survive the consolidation that’s coming? Graf said. Linux? Definitely. Eclipse? Definitely. Mozilla? Most likely.

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However, more immature open-source software won’t have time to improve before an enterprise CIO, for example, decides to consolidate platforms, Graf said.

We believe that open-source business applications do not have enough time to mature before this consolidation wave, Graf said.

Of course, it’s the customer, ultimately, who decides how mature an open-source application is.

On the vendor side, Oracle Corp seems to best exemplify current industry consolidation. Oracle buys everyone who doesn’t get up the trees quick enough, Graf joked.

The guys who consolidate never make it to the next wave as a big player, he also said.

SAP’s approach to IT’s consolidation wave revolves around its proprietary NetWeaver business process platform and Enterprise Service Repository, an applications composite that sits atop NetWeaver.

The strategy has been to have application partners build deposits for the NetWeaver platform, he said. He likened NetWeaver to being a common language among interoperable technologies.

Graf implied SAP’s NetWeaver had no serious rivals. IBM doesn’t have the applications to build into such a platform, while Microsoft doesn’t have the ability in the upper end of the market to compete, he said.

And Oracle has, I think, about nine or 10 problems to figure out, he quipped, alluding to Oracle’s recent acquisitions.

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