SAP Locks Up Hitachi

The electronics giant becomes the first Japanese company to sign a long-term contract with SAP for enterprise resource planning software and enterprise SOA.

SAP late this week announced that Hitachi has signed a global enterprise agreement to provide enterprise resource planning (ERP) (define) software and services to facilitate the electronics manufacturer's transition to a full-scale, enterprise-wide service-oriented architecture (SOA) (define).

The deal, confirmed just ahead of next week's SAPPHIRE 2007 conference in Miyazaki, represents the first of its kind for SAP in Japan and signifies what the company is calling "a lighthouse" customer for the entire region.

Financial terms of the deal were not disclosed.

SAP said the agreement clears the way for the deployment of end-to-end business applications based on its NetWeaver platform throughout all of Hitachi's group companies.

"Our global enterprise agreement with Hitachi is another strong example of a strategic customer standardizing their business software applications on SAP," Holger Fritzinger, acting head of SAP's Industry Business Unit, High Tech, wrote in an e-mail to "This expansion of our relationship illustrates the business value of our high tech solutions and proven enterprise service-oriented architecture roadmap—and how ultimately both will support their global IT strategy."

Landing Hitachi, which reported more than $87 billion in sales last year, as its first enterprise SOA customer in Japan could portend much bigger things for SAP as it continues to build momentum in markets outside Europe and the U.S. In its most recent quarter, the Asia-Pacific region accounted for only 13 percent of the 2.4 billion euros in sales it recorded in the third quarter, compared to 50 percent and 37 percent, respectively in Europe and North America.

Last month, SAP confirmed its plan to invest $1 billion in India by 2010. The money will be spent to create a "strategic hub" in the region from which it hopes to build on its recent success selling software into the booming India market. The company said it more than doubled its total customer base in India to 2,000 accounts this year, an impressive feat considering it took SAP more than nine years to attract the first 1,000 customers.

SAP executives expect Japan, India and China to play a critical role in its ambitious quest for 100,000 customers by 2010. With more than 43,000 customers already onboard, analysts say SAP needs to branch out from its traditional, large-enterprise base to emerging international markets and small- and mid-sized (SMB) companies if it's ever going to meet its goal.

On Oct. 18, SAP narrowly topped analyst profit estimates in its third quarter, pocketing $579 million on sales of more than $3.44 billion. Ten days earlier, it announced its intention to acquire Business Objects for $6.8 billion.

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