This looks like a good step in the right direction. From today's WSJ:
SAP Nears Agreement to Resell
Software From Commerce One
By NEAL E. BOUDETTE
Staff Reporter of THE WALL STREET JOURNAL
SAP AG may be about to plug a big hole in its Internet strategy.
After about two month of talks, the German software company is close to signing a deal to resell electronic-commerce software from Commerce One Inc., a move that could help SAP grab a larger share of the expanding business in building online marketplaces, people inside the two companies said.
SAP is the world's largest supplier of software used by corporations to control internal operations like manufacturing and purchasing. Late last year it launched a new version of its product, mySAP.com, to help companies do business over the Internet.
But mySAP.com hasn't yet taken off, crimping overall sales growth and raising concerns about the company's Internet strategy. Analysts think an alliance with Commerce One, one of the top marketplace vendors, could help SAP turn its fortunes around.
"If the deal goes through, the [SAP] sales guy will have some big news that he can pick up the phone and call the customer with," said Bruce Richardson, an analyst at AMR Re search Inc., a software-industry researcher in Boston. "I think this is reason to be excited."
Deal May Be Imminent
The agreement would allow SAP to resell Commerce One software that designs online sourcing marketplaces for large companies, people familiar with the talks said. The companies hope to announce a deal next week at SAP's Sapphire customer conference in Berlin. Commerce One is based in Pleasanton, California.
SAP spokesman Herbert Heitmann declined to comment. "This is a rumor," he said. Commerce One spokesman Kit Robinson also declined to comment, beyond saying the company both cooperates and competes with SAP.
The two companies would also work to leverage SAP's so-called supply chain products that help companies manage the flow of parts and materials from their suppliers, people familiar with the talks said. One of Commerce One's main rivals, Ariba Inc., recently teamed up with supply chain-specialist i2 Technologies Inc. and International Business Machines Corp.
Supply chain support is a key element for linking online marketplaces directly to the computer systems that control a company's purchase orders, production and inventory -- processes in which SAP specializes. Most of the marketplaces that Ariba and Commerce One have set up so far involve procurement of noncritical supplies such as office materials.
A deal with Commerce One would underscore SAP's new willingness to source critical technology from outside its own research labs.
New Approach
Last week co-Chief Executive Hasso Plattner said SAP is no longer as adamant about developing all of its products in-house, adding that SAP is ready to spend $1 billion (1.12 billion euros) or more to acquire companies with vital Internet technology. SAP is also now open to reselling products from other firms. Earlier this month, it agreed to resell customer relationship management software from the Clarify division of Nortel Networks Inc.
SAP has been developing its own marketplace software as part of mySAP.com, but most of the big marketplace deals have gone to Commerce One or Ariba. SAP felt the impact in its first-quarter results. Sales grew only 10% to 1.2 billion euros, while net profit dropped 43% to 56 million euros.
Meanwhile, some customers have started looking at other suppliers. Car makers Bayerische Motoren Werke AG and Volkswagen AG, both major SAP customers, recently chose Ariba for their online trading exchanges, passing over mySAP.com.
Statoil, the Norwegian oil company, initially agreed to use mySAP.com, but three weeks ago joined several other oil companies in a marketplace to be built around Commerce One's product. A Statoil spokesman confirmed the company has dropped the mySAP.com plan. "That was a pilot project and now we have moved on to this new project," the spokesman, Hans-Aasmund Frisak, said.
A group of German chemical companies led by BASF AG and Bayer AG, likewise, agreed to create a marketplace using mySAP.com. But on Wednesday BASF and Bayer joined an international group that intends to build a separate Internet site where members can buy and sell their main products such as polymers and resins. A BASF spokesman said the German companies are still going ahead with the mySAP.com exchange but are limiting its role to procuring technical services and nonproduction supplies.
Reviving a Partnership
These setbacks have persuaded SAP to revive a partnership with Commerce One, SAP insiders said. Before developing its own marketplace products, SAP was a reseller of Commerce One software in 1998 and 1999. In 1997, SAP invested seed money in Commerce One, although it now owns less than 2% of the company.
Joining with Commerce One could also open to door for SAP to take a role in the biggest online marketplace of all: an automotive industry exchange run by General Motors Corp., Ford Motor Corp. and DaimlerChrysler AG. Commerce One is GM's technology partner. Ford is working with SAP rival Oracle Corp., while DaimlerChrysler has not yet named a partner, after initial talks with SAP died down.
Last week Mr. Plattner acknowledged that being shut out of the automotive exchange was a bitter blow for SAP. Throughout most of the 1990s, the secret to SAP's success was a vast development organization in Walldorf, Germany, that seemed to create better software than anyone else.
Confident of its own development skills, the company passed up chances to acquire smaller companies that have since grown to become some of SAP's toughest rivals. A few years ago Mr. Plattner boasted that SAP would develop a product to put the company ahead of Siebel Systems Inc., the leader in customer relationship management applications. But SAP's product has hit several delays and is only just starting to become competitive. Siebel, meanwhile, is nearing $1 billion in sales.
SAP is now trying to loosen the Walldorf development group's grip on product strategy and shift more development work to Silicon Valley. Earlier this year, SAP formed a California-based subsidiary, SAP Markets, to develop "inter-enterprise" applications such as marketplace software. That should lessen interference from Walldorf, Mr. Plattner said. "Now if anybody has anything to say, they have to fly to Palo Alto and go to [an SAP Markets] board meeting," he said, referring to town where the unit is located.
Write to Neal E. Boudette at neal.boudette@wsj.com
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