SAP CEO faces many challenges

Business-applications vendor SAP faces plenty of challenges these days. Competition from rival Oracle is intensifying, especially after Oracle's acquisition of PeopleSoft; partner Microsoft is expanding into business analytics, an area in which SAP also aims to be a major player. In addition, new open source offerings are emerging in the area of CRM, while hosting companies, such as Salesforce.com, continue to make inroads. The list of challenges facing SAP CEO Henning Kagermann appears endless. Despite his heavy workload, however, the friendly, straight-talking executive found time to discuss these challenges with John Blau of the IDG News Service.

How has the Oracle buying spree affected you so far? Are customers who use the Oracle stack to run their SAP applications in jeopardy of being caught in a competitive crossfire?

Our customers have no disadvantages. We will continue to support products from competitors as we have done in the past. We are professional enough to handle co-opetition, a situation we have not only with Oracle . In applications, we're strong competitors but, on the other hand, our software runs well on Oracle databases.

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Business-applications vendor SAP faces plenty of challenges these days. Competition from rival Oracle is intensifying, especially after Oracle's acquisition of PeopleSoft; partner Microsoft is expanding into business analytics, an area in which SAP also aims to be a major player. In addition, new open source offerings are emerging in the area of CRM, while hosting companies, such as Salesforce.com, continue to make inroads. The list of challenges facing SAP CEO Henning Kagermann appears endless. Despite his heavy workload, however, the friendly, straight-talking executive found time to discuss these challenges with John Blau of the IDG News Service.

How has the Oracle buying spree affected you so far? Are customers who use the Oracle stack to run their SAP applications in jeopardy of being caught in a competitive crossfire?

Our customers have no disadvantages. We will continue to support products from competitors as we have done in the past. We are professional enough to handle co-opetition, a situation we have not only with Oracle . In applications, we're strong competitors but, on the other hand, our software runs well on Oracle databases.

And the impact of Oracle's acquisitions?

The acquisitions were forced by market changes. Over the past four years, we gained market share and created a bigger distance to Oracle. So Oracle bought some market share to reduce this distance. As a result, they now try to compete on price.

You held merger talks with Microsoft, but these amounted to nothing. Are there ways for you to cooperate over and above your new joint product Mendocino?

Nothing has changed. We have a good working relationship with Microsoft - Mendocino being a prime example - but there are others, such as improving the interconnectivity of .Net and NetWeaver. We have a relationship that works well, and we have no intent to change it.

How serious is the threat of hosted services? And are you still planning to launch the hosted service announced earlier this year?

We said in June that some announcements will come, and this is still true. Today, we already offer hosted services after having started more than a year ago to partner with hosting companies.

What portion of revenue do these services generate?

I would say less than 5%. Most customers still prefer to buy a license and give it to their hosting company.

But what about the new service? What is it?

We will be offering a service that will help customers deploy certain functions of our software products much faster. This is similar to what Salesforce.com does. The real benefit of Salesforce is not the hosting opportunity, but rather the fact that the company has selected some functionalities that it can deploy very fast. This is what we're planning.

Will customers be able to run SAP on virtual environments?

Virtualization is about separating the underlying hardware infrastructure so users can switch resources dynamically. Initially, we offered it as a separate capability, with Fujitsu Siemens as a development partner. Then we extended the offering for other key players in the market and their hardware. Finally, we decided to make it a standard feature of NetWeaver because this is our platform for running all applications.

SAP is expanding its business-intelligence functions in NetWeaver. How does this impact your partnership with Business Objects and others?

This is another example of co-opetition. We have extended our analytics capabilities with SAP Analytics. We have made it very clear to the market that embedded analytics is the future and that analytic capabilities are part of end-to-end business processes. On the other hand, there are specialists, such as Business Objects, who are interested in working closer with SAP because we have joint clients. We're not fighting them in this area. Although we will continue to bring more and more of our own analytics to the market, we are committed to openness and not closing our products to others.