Our European Correspondent
We are proud to introduce to Short Takes readers our mystery
European correspondent. A man who grew up in Walldorf and has
been covering the European applications market ever since the
days of punch cards, he is our go-to guy when we want to
understand anything east of Iceland. (We split
the Icelandic coverage.)
DD. I have to confess, I still don't understand
what R/3 Enterprise is. In fact, I'm not even
sure I know what mySAP.com is.
EC. Do not worry, my little friend. No one
else does either. Do you remember, at
the Nice conference, mySAP.com was the name of
a business. That year, Hasso and his staff
gave out lovely, multi-colored
business cards that said they worked for mySAP.com.
Later, it became clear that this was SAP's product for
the Internet age, the successor to R/3.
With a successor announced, SAP was quick to
arrange for a transition. Termination of maintenance
for R/3, credits for the R/3 license, the normal
transition program.
There was resistance, though.
DD: Was this because no one quite knew what
the product would be or what advantages it offered?
EC: I leave that up to you. Let's just say that
by popular demand from the German user organization,
the life of R/3 got extended. R/3 Enterprise (what
had been R/3 version 4.7) was announced at Sapphire
2001 for shipment to existing customers only.
DD: This is like R/2 and R/3. R/2 continued to get
some upgrades, but R/3 was sold to new customers. But
won't that slow upgrades?
EC: The story isn't over. After Sapphire, SAP secretly
started to backpedal. Early this year, R/3 Enterprise
started to be sold to new customers, but only in the
U.S. Then in April, SAP announced a new option to
extend maintenance for older versions by one year against
an increased fee. And some time in the second quarter,
SAP started to sell R/3 Enterprise to new accounts in the
UK. As of today, it can be sold to anybody who wants it.
DD: In this climate, doesn't that make sense?
EC: It's certainly pragmatic. These are tough times. I'd
say that SAP thinks that small steps are better than
no steps.
DD: Then what's the downside?
EC: This new behavior (I hesitate to call it
a strategy) has three potential consequences.
- It prolongs the life-time of older modules driving
up cost for SAP.
- It reduces the ability of the customer base
to absorb new technology.
- It raises the bar for mySAP.com
With R/3 Enterprise available, the value proposition
of mySAP.com must become even clearer and more
compelling before the older and larger accounts
will migrate. At the same time, if R/3 Enterprise
is selling, SAP will be tempted to defer the
difficult task of articulating its strategy and
the mySAP.com value proposition. My guess is
that this will not occur until January. Business
is too tough, and SAP is busy making concessions
to make the numbers.
DD: Thank you, EC. I may not be any clearer, but
I feel better about it. Anything else going on?
EC: Oracle has been able to snatch business away
from SAP in the
Middle East. (That's well to the east of Iceland.)
As you know, SAP has been struggling there. In the
giant region between Morocco and Iran, SAP has
been operating for six years and has won some 70
customers--not too many. Although SAP has
attractive verticals such as Retail
and Oil and Gas that address some of the needs of that
region quite well, some
things are missing that hamper sales.
There are no public sector solutions, and,
worst of all, SAP has not been successful in creating an Arabic version.
Oracle, with its usual persistence, has an Arabic version
and has been able to snatch some business away.
We expect Leo Apotheker to address this situation at some point,
but in the interim, there is no clear strategy. If and
when the region sees more peace (we Europeans see
the pending action against Iraq as a potentially key
event), some dormant markets like Iran could wake up, and
something will have to be done.
DD: Thanks, EC
EC: You are welcome. I'll be back in September with the news of the summer.
We are about to release a report on Strategic Sourcing. The
next issue will present a short summary.
Remember, a more readable version of this report is at
www.b2banalysts.com/new/research/shorttakes/7112002.html.
For a full list of recent Short Takes, look at
www.b2banalysts.com/new/research/shorttakes/recent.html.
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