International Business

GERMANY

SAP S EXPANDING
UNIVERSE
The software giant's ambitious new goal:
To be everywhere business is taking place

or a couple of years now, success

has come to Germany's SAP on a
silver platter The $3.5 billion software giant capitalized on fears
that two looming events, the new millennium and the ci'eation of a single European cun-ency, would wreak havoc on
multinationals' information-technology
systems. Instead of combing through
their computer systems looking for
bugs, many of SAP'S 8,000 customers just
bought new software packages. This
contributed to sales gi-owth of 62% in
1997. But it's getting late for companies to install all-new software before
the yeai" 2000, and now SAP must ftgiu-e
out what to do for an encore.
Its executives have come up with an
ambitious strategy, SAP already dominates the $12 billion market for so-called
enterprise softwai-e. programs that can
manage all of a coi-poration's internal operations in a single powerful network.
Now, SAP plans to branch out beyond its
customers" walls, building bridges to their
suppliers and customers. In this scheme,
a vast SAi'-based network could track an
entire industrial process, from mining
iron ore in Minnesota to steelmaMng in
Indiana to car production in Detroitall
the way to selling autos in showiTionjs on
the Web. The payoff, it is hoped, would
be entire industiies run as efSdently as a
single plant, with razor-thin inventoies
and the leanest of workforces.

and eventually Microsoft Corp. will be

there," says Neil Iscoe, chief executive
of Focus Systems
Inc.,
a maker of
legal software in
Austin, Tex.
Nonetheless, SAP
is plowing ahead. All
around its headquarters in rural Walldorf, in Germany'^
lush Rhine Valley,
workers manning a
forest of cranes are
piecing together a
vast complex of new
SAP buildings. The
company will hire
5,000 employees this
year, expanding its
workforce by 35%,
and is expanding research labs from Palo
Alto to Minsk.

Plattner is keeping
his investment numbers mum. But with
a research and development budget topping $500 million, SAP
can spend more money per year on research than most of
FRIENDLIER SOFTWARE. With time, if coits rivals rack up in
chairman Hasso Plattner has his way, sales.
fAP will grow from a faceless industrial
The challenge for
supplier into a global brand name. The
SAP,
a company long
plan is to push into consumer markets,
from department stores to Internet malls. known only to the
At a Los Angeles users' convention on techies in large com- FOREMAN
Sept. 13, Plattner will unve a strategy panies, is to come up
that could position the company virtually with a stream of Co-Chairman Plattner is
snazzy, customer- looking down the food
everywhere business takes place.
But to gain that stature, SAP must
master new markets where a host of
competitors is already entrenched^and
where more are expected. "There are
loads of little guys in those markets.
wFFk / C;FPTFMHFR

stfiiti'j;\\

IKIS

its

risks, since those pieces

include the computer code
that forms the basis of
friendly applications, chain, to smaller customers SAP'S success. But the idea
is that by sharing the
IS
Here, Plattner -looking for help. In the past year, SAP code with developers worldwide, SAP
has begun placing pieces of its bread- will encoui'age them to build a panoply
and-butter enterprise software package, of applications for its systems.
This spells a fundamental shift for
called R/3, on the Web.

International Business

Plattner plans to put bits of SAP's code on the Web and

make it the lingua franca of global business
the giant. Ti'adition-

force automation company, Kiefer & Veithave been carefully

tinger, to 80%. That
crafted, though often
dves it a foothold
inflexible, marvels of
in technology-aided
German engineering.
sales, a market that
Installing these prois expected to grow
grams, sometimes at
from $1.4 billion to
a price topping $100
-S-1.8 billion in the
million, has blosiii-xt two years.
somed into a $30 bilIndeed, it is in
lion industry. Now,
sales and marketing
Plattner wants to disthat SAP faces its
tribute his system far
biggest hurdles. P'irst,
and wide, hoping to
the company has a
make SAP'S code the
reputation for torturlingua franca of globous installations, deal business. "For the
spite a worldwide
first 25 years of our
team of troubleshoothistoi-y, we provided
(MS. It was a rocky
data to people," he
installation that led
says. "For the next
Dell Computer Corp.
25 yeai-s, we'll handle
to abandon SAP last
interactions between
y((ai' halfway througli
people."
d multimillion-dollar
year. " S i e a uip cum WALLDORF NERVE CENTER
enterprise project.
As a first step, Plattner plans to mg. Plattner says. Ana- . . , , .
.,
And SAP faces a $500
broaden the company's offerings. He is lysts believe that SAP'S SAP IS also bulking up lts
million lawsuit from
preparing simpler, cheaper versions of sales
and earnings overseas Operations, from
the trustee for bankSAP'S enterprise software, providing fi- gi-owth will slow to 35% Palo Alto to Minsk
i*upt FoxMeyer Coip.,
nancial, warehouse, iuid human resoui'ce this year and next.
charging that the failure of an SAP syspackages for small and medium-size That's partly because the giant multi- tem led to the Carrolton (Tex.) drug
companies. Meanwhile, new co-chair- nationals that have fueled SAP'S busi- distributor's collapsea charge SAI' exman Henning Kagerman. a former head ness so far are mostly set up with en- ecutives hotly deny.
of SAP'S European operations, is over- terprise systems. And in the current GATES AT THE GATE. Second, nimble
seeing the development of new soft- market climat, many corj)oi'ations may competitors now occupy all the niches
ware for still uncovered niches within opt for less costly add-ons. Even so, SAP plans to attack. In fact, many of
the 17 industries SAP caters to, from analysts expect SAP to outpace the SAP'S biggest customers have already
utilities to chemical plants. These could competition. "They're still gaining mar- installed other systems for sales and
include programs to reconfigure auto ket share," says Loretta Morris, Eu- marketing applications. But like other
assembly lines for gi'eater efficiency, ropean portfolio manager at Nicholas industry leaders, SAP has the clout
for instance.
Applegate in San Diego.
to bring products to market far later
While SAP embarks on its new path, than its rivals. It can appropriate efUntil the new products start bringing in profits, SAP'S breakneck growth it is also wi-estling with generational fective features from the pioneers, corpace is sure to subside. After a 66% change. Plattner's co-foundersthe for- rect their mistakes, and try to wrest
sales increa.-ie in the first half of this mer iHMers who set up the company 26 away market share by offering seamWm^^^m^^ years agoare moving less integration with its massive infrom executive into ad- stalled base.
visory roles. Dietmar
Eventually, SAI' is likely to run head Developing systems that will let buyers Hopp, the technical
on into that other software titan, Miwhiz
behind
the
enterorder customized cars or other goods at prise software, last crosoft. For now they are partners,
the place of sale
spring switched to a working together on loads of applicaxist on the tions. Microsoft Chairman William H.
Creating software to link all of a compa- lowei'-profile
advisory board. And Gates III, however, has declared
ny's suppliers into a single network
Plattner wants to hire an ambition to build the nervous sysyoung
talent to guide tem for businessthe same goal as
Writing business-analysis programs for ex- the company
in untried Plattner's. For the next few years, at
ecutives on earnings enhancement
markets. In March, SAP least, the world looks big enough for
raised its stake in a both of them.
DATA: BUSINESS WEEK
By Stephen Baker in Paris
small German salesally, SAP'S systems

SAP'S NEXT FRONTIERS

170 iiUSINESS WEEK / SEPTEMBER 14. 1998

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