"SAP understands that its customers are inclined toward a single vendor strategy," he notes, "and it intends to capitalize on this tendency."

3. Platform Strategy. Shepherd traces the roots of SAP's platform strategy back to 2003, when SAP packaged up its technology components and unveiled the NetWeaver product set. (For the latest on NetWeaver, see "SAP Unveils Its NetWeaver Business Process Management Tool.")

"The idea was that this technology and architecture would no longer simply be the invisible engine that powered the application products, but that SAP could expose it as a platform and allow customers and partners to use it to extend SAP applications or even build brand-new applications," Shepherd writes. "SAP had to build the platform anyway in order to develop its service-oriented architecture (SOA)-based product line. Management believed that making it publicly available would enhance SAP's reputation as a technology leader, and it could potentially become an additional source of product revenue."

SAP has continues to refine and market the idea of a "business process platform," which is made up of SAP's Business Suite applications, a repository of enterprise services, and the NetWeaver technology platform, Shepherd notes. "While there is no indication of a groundswell of demand for a business process platform," he notes, "NetWeaver has been successful." NetWeaver had sales of nearly $1.5 billion in 2007, according to the report, and more than $450 million in standalone software revenue.

What's important for SAP customers to understand, notes Shepherd, is that SAP customers "have to use NetWeaver because their applications won't run without it, and, over time, they tend to begin using the optional components, such as business intelligence, the portal, and integration," he writes. "The attraction of tapping into the SAP installed base has encouraged a large number of other software vendors to incorporate enough of the platform to gain the coveted 'Powered by NetWeaver' certification. This market acceptance, SAP's continued enrichment of the modeling and composition tools, and the services repository is building momentum."

4. Industry Strategy. Shepherd attributes one reason for SAP's success over the years was that executives realized the importance of offering products to key vertical industries that had unique needs in their applications.

"Using a combination of internal and customer sponsored development, partners and clever packaging, SAP now has 25 separate industry solutions across a range of industries from mining and manufacturing to higher education and financial services," he writes. "Many of these are supported by product management teams, dedicated developers, and industry value networks (IVNs) of customers and partners that collaborate with SAP on defining requirements and building extensions." This strategy has enabled SAP to garner tons of market share in the oil and gas, chemicals, and life science industries, according to the report.