SAP Remolds Itself as a Dot-Com Co.

Large applications vendors are increasingly finding themselves surrounded by hundreds of tiny competitors in burgeoning marketplaces. Some choose to fight, but ERP giant SAP AG ( has chosen to work with them.

To do so, says Vinnie Mirchandani, vice president of business applications at GartnerGroup Inc. (, SAP has shifted its entire business model to the Web and host or support electronic marketplaces., unveiled at the recent SAPphire users' meeting in Philadelphia, represents what some observers believe is a long-overdue Web-enablement of the SAP environment. A client-side component, Workplace, is to be delivered at the end of the year. It presents an enterprise portal for end-users to access and interact with applications and business partners. SAP intends to position itself as a dominant enterprise portal player, says cofounder and CEO Hasso Plattner.

SAP also rolled out Marketplace, an electronic hub that helps companies buy, sell and communicate among vertical industry and cross-industry horizontal markets. currently contains 22 horizontal and vertical business communities, such as banking or human resources. The communities support online catalogs, auctions, news reports, chats and online price quotes. About 1,000 SAP customers are participating in the initiative. While access is open to companies that are not SAP customers, users with the firm’s R/3 will be able to take advantage of back-end integration of order management functions.

"The Internet has become the major focus of everything SAP is doing," says Peter Graf, director of technology marketing at SAP. "There's a lot of demand from our customers for Internet solutions. There's a new market coming up, the fight for new market share is going on. That's where we see a significant chance for SAP to be the one that delivers new ways of doing business in a very seamless fashion."

While the features of R/3 are retained, SAP executives are presenting as the company's most significant product rollout since its founding. "This is clearly a vision announcement that affects the way the product is used, and it is integrated with other technologies and other products, rather than more features," says Robert H. Dorin, research director, enterprise business applications, at Aberdeen Group ( "This is as much a paradigm leap as going from R/2 [a mainframe-based application] to R/3 [client/server]."

Early adopters have found to be a more responsive alternative to electronic document interchange (EDI) systems. is "a lot easier to manage and a lot cheaper than EDI," says Ed Draper, manager of enterprise systems at Compaq Computer Corp., which has linked its electronic catalog and order management process to "It's a cleaner, more elegant way of doing business." Compaq's link into was built off its current R/3 system and deployed within two weeks by three employees, he relates.

At SAPphire, Compaq demonstrated a two-way transaction through the portal with its major customer Enron Corp. Enron purchased Compaq servers and received order configuration information over the Internet within minutes of placing the order. "Customers have direct and easy access to our R/3 system," Draper says. Product, customer and pricing master data are maintained in R/3 and migrated to the product catalog, he explains. Compaq's catalog can be customized by the customer and administered by the customer. The system "supports customer-created standards and customer-configured products. Our customers also control a great deal of what happens on Compaq's site in regards to who can order," Draper says.

Aerospace giant Lockheed Martin's missiles and fire control division also implemented as a way to set up accounts with vendors’ catalogs, says Cal Scott, director of systems operations. Lockheed employees can access Hewlett-Packard Co., Dell Computer Corp. and W.W. Grainger Inc. catalogs to procure new computers or peripherals. The portal system has changed the role of procurement managers at Lockheed. "They don't have to place orders on a day-to-day basis, just administer the system," Scott says.

SAP intends to offer seamless transactions between back-end R/3 systems of electronic trading partners. "There is so much more going on between enterprises than just buying and selling," SAP’s Graf says. "Many companies are engaging in collaborative forecasting, collaborative project management and collaborative engineering. There's a million things that happen between corporations, where they need to have systems working together."

SAP may be overselling the advantage of back-end systems integration to electronic marketplaces, Gartner's Mirchandani says. Such integration "is important from a CIO's perspective, however, people join an electronic community for specific medical equipment information or professional services information," Mirchandani explains. "They're not worried about how well it ties into their payroll or materials management systems." The primary advantage to SAP is the number of eyes it gets by positioning itself as a leading portal, he adds.

An additional SAP initiative, Application Hosting, offers customers the option of accessing SAP R/3 modules through a third-party hosting service. "Now a customer does not need to buy the hardware, does not need to employ the specialist for system maintenance and does not need to have all the application skills," Graf says. "All they need is a Web browser." While SAP will not take on the role of ASP, it will initially configure new customer applications on its own systems, a practice it originally provided in its early days.

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