In October 2005, SAP finally started to fix this release gap with the shipment of its ERP 6.0 product, Shepherd notes. "Instead of bundling five years of product enhancements and technology improvements into one massive upgrade, SAP has now moved to what it calls a continuous innovation strategy," he writes. "The major applications in SAP ERP and the SAP Business Suite will now be upgraded through enhancement packages issued every six to 12 months. These enhancement packages are shipped at no cost to customers on maintenance, and deployment is optional. Each enhancement package includes new and improved functionality across a variety of product areas and vertical industry applications."

Overall, what's important for SAP customers to realize is that "most SAP customers can upgrade their systems gradually without the kind of massively expensive and disruptive projects that have traditionally characterized SAP releases." (The new approach is available for SAP's ERP 6.0 product, Shepherd points out, which has shipped two enhancement packages already and is due to release its third in mid-2008.)

Shepherd says SAP executives have realized is that "companies with global deployments, multi-terabyte databases, and tens of thousands of users simply cannot afford to do monolithic upgrades anymore."

2. Growth Strategy. In the AMR report, Shepherd writes that SAP has a business strategy that is fundamentally focused on organic revenue growth and that SAP has always been confident about its organization's ability to develop new products and improve existing ones.

However, SAP execs also have realized that the company has needed to both expand its product offerings to its customers as well as move into new markets. Shepherd writes that this market expansion can be seen in getting new customers, expanding the product scope, moving into new geographies and industries, and going after not just the large enterprises but the SMBs as well. (See "SAP Pays Partners, Goes with Gusto for SMB Customers" for more on SAP's SMB strategy.)

What SAP customers should realize is that, like its competitors, SAP derives most of its revenue from its installed customer base. "Its objective is to ensure that customers never stop buying licenses, maintenance, and services," Shepherd writes. "SAP is constantly working to move ERP customers onto the full Business Suite, and it has invested heavily in products aimed at information workers who don't necessarily use transactional applications." (For more on software licensing, see "Software Licensing and Pricing Is Still Too Complex and Costly.")

Therefore, customers should expect their SAP sales reps to be pitching: self-service applications, financial and business performance management, Microsoft Office integration, and much of the Business Objects' portfolio of reporting, business intelligence, and analytics, Shepherd writes.