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December 6, 2006

SAP plans aggressive growth to 2010, targets mid-market

SAP AG is bullish about its ability to migrate at least two-thirds of its current R/3 ERP base onto its new service oriented architecture-based mySAP ERP 2005 business applications suite by 2010 and is confident of tripling its customer base in four years as it taps into more markets including small and mid-sized businesses.

By CBR Staff Writer

Speaking at SAP’s fourth analyst conference in Las Vegas earlier this week, SAP CEO Kagermann said the company is well on its way to achieving both goals.

SAP pointed to around 500 customers that are already live and running on mySAP ERP 2005 today. The company however claims to be seeing roughly 600 to 700 new ERP activation keys per month over the past four months. But SAP admits it will take some time for those keys to result in a live production rollouts.

Overall Kagermann expects SAP’s newer SOA products to grow its customer base to over 10,000 customers by 2010, and account for 50% of revenue. Today it has around 35,000 customers.

SAP believes the best way to achieve this migration and growth is not to issue any major new product versions of mySAP ERP 2005. But rather to evolve customers to new functionality gradually over time using so-called enhancement packages that are optional and easily implemented as enterprise service upgrades.

Deeper penetration of the small business and mid-market is key to SAP achieving its aggressive growth targets. SAP’s definition of mid-market is firms with $100m to $200m in revenue and 100 to 2,499 employees.

Kagermann said the company will be targeting the mid-market with newer and more simplified SOA-offerings. This basically means re-architecting its All-in-One ERP business applications suite for mid-market firms to leverage the service-enablement design of mySAP ERP 2005.

We’ll be offering our proven enterprise services design to the mid-market with a similar simple consumption model.

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SAP said a new version of All-in-One is currently in beta testing and is expected in mid-2007. The likely branding of the product is All-in-One 2007 and it will be available as either a hosted (on-demand) service, on-premise license or a plug and play appliance.

SAP will initially launch the first release at the manufacturing vertical sector.

Kagermann also said SAP is preparing a new SOA-based application suite for what he called the low-end of the mid-market, that will be tailored for businesses with have less than 200 employees.

He expects around 40% of new ERP revenue to come from small businesses and the mid-market by 2010.

During his keynote address Kagermann said SAP was financially stable and strong, pointing to 11 consecutive years of double digit growth. He also said that SAP is getting used in more core areas of the business beyond its traditional strengths in material management and financials.

We’ve shown the market that you can grow organically without having to buy companies.

That’s of course an indirect swipe at arch-business applications rival Oracle Corp which has been buying companies right, left and center over the past year.

Like SAP, Oracle is also fleshing out an SOA-based business applications platform around its Fusion initiative. But that is still work in progress and Oracle has the added disadvantage of having to integrate the multiple applications it has acquired over the past two years.

Shai Agassi, president of SAP’s product and technology group, weighed in with a comment about Oracle’s aggressive acquisition strategy suggesting that best of breed applications like PeopleSoft and was dead.

Best of breed died a long time ago. Larry [Ellison] bought the bodies, he said at a media luncheon at the conference.

Agassi also explained that SAP’s SOA approach is different in that it runs process-driven composite business applications across infrastructure like databases, operating systems and hardware, rather than having applications reside on the middleware (like Fusion does).

SAP asserts that its strategy is to build applications functionality upwards from a core foundation of NetWeaver-driven enterprise-services, internally or via partners, rather than buying it in as Oracle has done.

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