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Five Things About SAP's Strategy That You Need to Know

An AMR Research report details SAP's strategies for its enterprise software product releases, areas of growth, evolving platforms, industry and vertical specialties, and new product suites.

By Thomas Wailgum

May 15, 2008 — CIO — Enterprise resource planning (ERP) systems are a career-defining decision for many IT executives. And yet, says an expert who follows SAP and its base of corporate customers, many of those executives don’t pay enough attention to the German software giant’s strategy for updating these bet-your-business applications.

But here's the thing: They should be.

As AMR senior vice president of research Jim Shepherd describes in a report from earlier this year, "The Five SAP Strategies That You Need To Understand," few companies buy SAP for best-of-breed or one-off applications. More than likely, these companies (and the CEO, CFO and CIO who sign off on what is typically a multimillion-dollar contract with SAP) have "bought into the idea of deploying a broad, single vendor business suite," Shepherd writes. (For the latest on SAP, see "News and Views from SAP's Sapphire Show and User Conference 2008.")

"These companies have a huge investment in SAP," he says, "and they're most likely going to keep it for 20 to 25 years or longer." That likely commitment, combined with the fact that it takes a long time to realize value from an SAP implementation—and it's prohibitively expensive to replace it once it's in—mean that most IT executives are betting their careers, in a sense, that the rollout will work out, Shepherd says.

So with all that at stake, it behooves enterprises and their IT staffs to have a good understanding of exactly where SAP is headed—its upcoming product releases, areas of growth, evolving platform and partnership strategies, planned industry and vertical specialties, and new product suites on the horizon. Changes in any of those, Shepherd contends, could have significant implications for the business. (To see why companies don't care, see "Why SAP's Own Customers Don't Know Enough About the Enterprise Software Giant.")

"These kinds of vendor strategies will have an impact on them at some point," Shepherd says. "And forewarned is forearmed."

Five SAP Strategies to Know

1. Product Release Strategy. SAP has traditionally released products and made major changes to underlying functionality on a five-year schedule, Shepherd notes. So twice a decade, SAP's customer base faced a tough decision.

"They could either ignore the product improvements that their maintenance fees had helped to fund, or they could invest a significant amount of time and money in an upgrade project that is often disruptive, expensive and deeply unpopular," Shepherd writes. "It became quite common for companies to delay or defer releases. However, that approach carries enough risk and cost that most organizations didn't dare go longer than eight to 10 years between upgrades." (For more on SAP's maintenance fees, see "SAP Raises Software Maintenance Fees for New Customers" and "The Man Behind 'Half Off' Third-Party Software Maintenance.")

 

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