SAP 'Ecosystem' Is a Booming Economy Unto Itself

So says an IDC analyst who cites SAP's expansive list of partners (developers, resellers and integrators) and its huge market share. Is this a good thing for the rest of us?

If you're wondering just how big SAP is becoming, IDC's Albert Pang has this nugget for you: "The recent rise of SAP as the leading enterprise applications vendor across multiple customer and product categories has created a booming economy whereby an increasing number of developers and resellers are jockeying for the attention of the market leader and its installed base of more than 41,000 customers," he wrote in a recent IDC report.

In other words, SAP is a Goliath of Epic Proportions. SAP is The Man. SAP is King. Basically, it's SAP's world, and the rest of are just living in it.

Is that over the top? Hardly. "We have reached a stage where a number of tech vendors, including SAP and IBM , have amassed enough of a base of customers and business partners that could really reshape how companies are going to be implementing the next generation of business applications," Pang said. "So, in that respect, [this news] is very significant."

As of now, Pang, who's IDC's research director of enterprise applications, can't put a dollar figure on just how much the SAP ecosystem is worth (he says he's working on it). But he uses system integrator Satyam as an example of the expanse of SAP's universe. Satyam has nearly 5,000 consultants and developers working for its SAP practice, and it has plans to grow its ERP practices by 50 percent during the next few years, according to Pang. "The average deal size of a SAP implementation at Satyam is about $1.6 million, just on professional services," Pang writes in his report. "With 150 active customers including the likes of Caterpillar, Mittal and Nestle, Satyam could be doing hundreds of millions of dollars in SAP-related projects in a given year."

Oh, by the way, SAP has another key partner on its team: Microsoft. Pang reports that the two-year-old Duet deal alone could pull in at least $100 million a year. "While SAP is on a run-rate to post more than $13 billion in total revenues in 2007, the real size of the SAP-induced economy could be many times that amount," Pang writes. "After all, the vendor has amassed a global network of more than 800,000 SAP service partners and developers whose livelihood will be irrevocably shaped by the SAP ecosystem, which appears to become a thriving economy in its own right."

(Of course, SAP has a long way to go to equal the value of Microsoft's ecosystem. IDC estimated that value—which includes more than 640,000 hardware, software, services and distribution companies and employs 42 percent of all IT industry workers worldwide—at $425 billion in annual revenue.)

So what does all of this mean for CIOs? Good question. Pang doesn't think CIOs have to worry much about SAP's god-like influence. "In the past, there was tremendous segmentation in the enterprise applications space, creating a lot of inefficiencies and incompatibilities among ERP systems and underlying technologies," he says.

Now, CIOs can expect to see the establishment of "technology camps" among vendor partners, which he thinks will become "vital forces for end users." While CIOs have been trying to standardize and integrate enterprise systems for many, many moons, Pang is confident that this consolidation will make CIO's lives easier. "[CIOs] will now find a reliable set of vendors that they can turn to," he says. "And what I see is that the emergence of the SAP economy will facilitate that."

CIOs better get used to this new way of thinking. "I can say with a great degree of certainty that this is the future," Pang notes, "and there's no turning back."

Copyright © 2007 IDG Communications, Inc.

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