The new SAP
By Randy Weston
Staff Writer, CNET News.com
September 25, 1998, 4:00 a.m. PT
profile LOS ANGELES--SAP has lost its religion,
blaspheming its once-holy message of tight
integration between software applications as the key
to enterprise resource planning.
Beyond breaking up its tightly integrated package of
applications--designed to automate corporate
functions such as general ledger, order entry
management, and inventory management--the
German software giant it is now preaching that
integration is no longer even important.
So what is important now? According to SAP, happy
users and "pretty looking" applications.
SAP is launching a two-pronged campaign to change
its image and make its applications easier to use and
to understand. The move comes on the heels of
SAP's stretch into new territory--that of front-office
applications, whose end users are unlikely to tolerate
gray screen applications and complex user
instructions.
The company is trying to shed its image as a maker
of a highly technical software system that requires a
master's degree in R/3 to understand. It also is trying
to outgrow the perception that
implementation of it its system is
likely to drain all IT resources and
take five years, requiring
companies to spend up to $10 on consultants for
every $1 they spent initially on the software license.
To accomplish those lofty goals, however, SAP is
going to have to wipe five years of memory from the
minds of corporate America, or at least persuade
potential buyers that this is not their father's R/3.
SAP--short for Systems, Applications, and Products
in Data Processing--was formed in 1972 by IBM
Germany consultant Hasso Plattner and four other
colleagues who saw a need for packaged software
to run on the hardware they were setting up for IBM
customers.
"That was a time when people were leaving IBM to
start consulting companies," Plattner recently said in
an interview with the Smithsonian Institute's division
of information technology. "But we left with the sole
goal to develop standard software, and only 18
months after we started in 1972, we released our
first standard software."
That was System R, which in subsequent years
became known as R/1 and later was followed by
R/2 and R/3. But SAP's first contract wasn't for its
standard software. Instead, it was for a custom
software development project for Imperial Chemical
Industry, a British-based multinational chemical
maker.
Nevertheless, the deal was the shot in the arm SAP
needed. SAP has been a major player in the
chemical industry ever since, following the Imperial
contract with ones from Dow Chemical, DuPont,
and Eastman Chemical. All of those companies still
are employing R/2, and are slowly migrating to R/3,
the client/server version of the software.
R/3 first materialized in the late 1980s, when IBM
rolled out its systems application architecture.
Plattner immediately undertook the project to
develop what eventually would become R/3, but he
and his coworkers quietly decided to build it on the
Unix platform rather than IBM's. Development
efforts went of for five years, and in 1992 R/3 was
born.
The system was first installed at the Danish offices
of a small Finnish company. It was targeted toward
small companies while SAP continued to push R/2 to
higher-end corporations. Then, in 1992, the market
fell out of the mainframe industry and sales of giant
computers stalled. R/3 had to scale up in order to
meet the needs of large companies if SAP was to
stay afloat. The company's founders knew that
Europe alone could no longer support their needs, so
it was time for the company to take its new product
to America.
Plattner flew to Los Angeles with hopes of landing
some of the region's small manufacturing firms as
his first American clients. He did better than he
could have hoped, signing his first deal with Chevron
Oil, which has been a key SAP customer ever since.
SAP happened to land in America in the midst of a
corporate revolution called business process
re-engineering. All the Big Six software firms were
racing to fix what ailed corporate America, which
turned out to be its old style of doing business. SAP
then entered the scene with a product that
implemented many of the new business processes in
the software, and hooked up with consulting firms
such as Andersen Consulting to match its software
to their business process consulting.
Today, SAP owns 32 percent of the ERP market
and is shooting for 40 Percent market share. It is a
$4 billion company, the fifth largest software firm in
the world with 17,000 sites worldwide running R/3.
Nearly all of the Fortune 500 companies run some
piece of their vital business processes, such as
monthly accounting or order entry, on R/3.
And now SAP is gunning for the front-office market,
aiming to be all things software to corporations. It
seems to be on the right track. The firm quickly is
becoming to business what IBM was to business
during the '70s and '80s, illustrated by the recent
comment of one SAP customer who said, "We use
to be an IBM shop. Now we are an SAP shop."
As for SAP's shift in philosophy regarding the need
for tight integration, Plattner credits his change of
heart to a grade school teacher who once told him
that, "When you reach the point that you don't
change your mind anymore, you know you're old."
Related news stories
• SAP strategy extends scope September 15, 1998
• SAP tries to go user-friendly September 14, 1998
• SAP aims to make it easy September 14, 1998
• IBM offers services for SAP, others September 10,
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