The Future Of Enterprise Software (Again)

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What if I told you that your next software purchase would cost less than $500,000, would install in less than 30 days, provide a return on your investment in less than six months, all without requiring a new infrastructure or radical new business processes?

What if that software not only came with its own ROI, but, by depending on and leveraging the heterogeneous applications and infrastructure in your company, actually helped increase the value of the existing IT environment? And, just to ice the cake, what if this new application was targeted at fixing a specific line of business problem instead of waging war against a vague, generalized enterprise-wide issue?

Wait, there’s one more: what if this application was sold to you by SAP?

If you were a stockholder you’d be wondering how SAP, the champion of the mega software deal, was going to make a living selling bite-sized chunks of software that made use of someone else’s software environment. We’ll discuss that problem in a moment.

But if you’re like most SAP customers I’ve talked to, you’re probably nodding your head right now. Their thinking goes like this: If I can get this discrete problem in my line of business solved by adding a small amount of software that actually makes use of my SAP and Oracle (or PeopleSoft or Siebel or i2) software investment, I can make my numbers and make the CIO happy too (He’s still trying to justify his last $10 million acquisition.) My board will like the idea because they don’t want to spend any more money on big-bang implementations, my boss will be happy because I’m fixing a major functional hole in my supply chain (or customer service, or order processing, or logistics, or supplier management system), my CFO will like the new revenues and cost savings, and my users will be happy because I’m making an incremental improvement that won’t force them to sit through 40 hours of training. Did I mention that my CIO will be happy too?

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This, in a nutshell, is the business rationale behind SAP’s new new thing. They call it the Cross-Application, or X-App, and it first got mentioned at an analyst conference last February. This June, SAP started showcasing prototype X-Apps at their Sapphire user conference in Orlando, and in September they will launch a major X-App push at the Sapphire Europe show in Lisbon.

What SAP is doing is nothing short of a radical sea-change in how the company develops and markets software. The strategy presupposes that, for the most part, you’ve already got as much classic enterprise software as you need: CRM, SCM, HR, finance. It also presupposes that there’s a lot of data, functionality, and process in those applications that could be better used if they were interconnected. And, most radical of all, it assumes that this software could be coming from any vendor on the planet. That means that SAP is now in the application integration business, something that no big enterprise software vendor would have admitted to in the now far-off 20th century.

Don’t think that this is all based on altruism and pure customer love, however. While SAP is being a little cagey about what X-Apps they’ll bring to market first, Ill wager that SAP is going to focus on two functional areas — CRM and SCM — and target two potentially vulnerable customer bases: Siebel in CRM and i2 in SCM. Because an X-App is also a software Trojan horse: SAP would love to be the vendor that sells the incremental add-on functionality to the Siebel and i2 customer — remember, many of these companies were originally SAP customers who “fell from grace” by expanding beyond ERP using non-SAP products. That Trojan horse capability, and the potential for a high-volume market for X-Apps, is what should keep the stockholders hopeful.

Of course, they may have to wait. SAP has been busy building X-Apps, but I’m not sure they will have a lot of them to demo in Lisbon. Shai Agassi, SAP board member and X-App proponent, says there are some 200 processes he would like to see be turned into X-Apps. That could make for a helluva software portfolio someday.