Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. SAP All-In-One Competitive Profile Harald Freudendahl January 30, 2006 SAP AG All-In-One Corporate Statement All-In-One is SAP’s midmarket solution offering of to companies or divisions of larger corporations with revenue between $200 Million and $ 1 Billion. All-In-One is currently based on the SAP R/3 4.6 version. SAP has announced an update for 2006 that is based on mySAP ERP. The All-In-One business suite offers the typical ERP-functionality of Financials, Cost Mgmt., Sales and Distribution, MRP II based manufacturing and Reporting. vSAP offers pre-configured vertical and pre-configured country versions to accelerate the implementations and reduce costs. The All-In-One solutions are sold via VAR channels as well as directly via SAP midmarket sales reps in the higher end of the market. This document covers the following: Overview Corporate History & Statistics Senior Management Financial Viability Business & Strategy Target Markets Strategies Positioning Customers Partners Strengths & Limitations Technology Product Families Architecture Platforms Scalability 3rd Party Interoperability Other Analyst Reports (C) 2005, Oracle. All rights reserved. This document is provided for information purposes only, and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor is it subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document, and no contractual obligations are formed either directly or indirectly by this document. Page 1 of 7 Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. Overview URL Corporate Statistics & History http://www.sap.com/solutions/sme/allinone/index.epx All-In-One is SAP’s product offering aimed at the middle of the SMB market. The low-end of the SMB market – below $200M revenue – is covered by BusinessOne; the high end from $ 1.0 Billion to $ 1.5 Billion revenue companies is covered by mySAP ERP. Because SAP AG serves primarily large Enterprise customers, only a fraction of its business is SMB. Click here for the general corporate overview. Corporate SMB facts: Senior Management Organizational SMB Structure 10.4 Billion US$ revenue with 30% SMB (< 1 Billion revenue segment) 35,000 employees – number of dedicated H/C to SMB not published 50 country versions of All-In-One as of 10/2005 730 VAR partners for All-In-One as of 10/2005 7,100 All-In-One customers as of 10/2005 SAP announced for 2006 a mySAP ERP based version on Netweaver2004 SAP launched many unsuccessful SMB initiatives over the last 14 years Leo Apotheker heads-up worldwide sales, field marketing and professional services. The senior management for the SMB division and all country GM’s report into Leo. Donna Troy, SVP SMB Channels, joined the team in Q1-2004 to beef-up SAP’s floundering SMB initiative. Putting her SMB channel expertise to work, she re-designed the VAR program into PartnerEdge and hired her management team. Troy runs an overlay organization and the Field Sales organization reports to the country GM’s. Rodney Seligman is the SVP at SAP America for what they call the Territory Sales Organization. It combines all SMB-sales, not just the Business One VAR-channel. This new structure was created in July 2005. Andreas Naunin leads the German distribution channel and reports to the German GM Hoechbauer (ex PSFT GM Germany). Naunin succeeds M.Schmitt as of 01.01.2006 due to mediocre results. The German distribution channel and partner solution offering will be expanded to better address the SMB space and to increase market coverage. For other non-SMB related players see the SAP AG OrgChart here Financial Viability and M&A activity The four Enterprise software heavyweights are Oracle, IBM, Microsoft and SAP. SAP is the only non US-based company and is financially stable and profitable. It is unlikely that SAP will be acquired, although, SAP and MSFT conducted a comprehensive M&A exercise in Q4-2003. Following those discussions SAP decided to stay independent and the two companies will collaborate more. In the past SAP has not acquired software companies to “buy marketshare” or to buy channel expertise. SAP believes in building from inside the organization. However, SAP does acquire smaller companies/boutique software companies to round out it’s business solution offering. For the latest Financial Facts & Figures click here. Page 2 of 7 Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. Target Markets All-In-One Business & Strategy Customer size: SAP keeps changing the SMB-target definitions over the last three years in order to increase the “SMB revenue” they show. Previously their SMB-space covered <50 Million to 700 Million. Now they expand it to up to $ 1.5 Billion sized customers. The Route-to-Market slide published in 11/2005 to financial analysts does not capture all details. The three tiered customer sizes SAP has drawn in the SMB-space positions All-In-One in the middle of their SMB solution offering. See the chart below for the Route-toMarkets (RTM). As a result, All-In-One targets companies with $200 Million to $1.0 Billion annual revenue and similarly sized branches and divisions of global and national enterprises where other SAP products are installed (RTM3 – green shaded area). Industries: SAP requires VAR-partners to develop and distribute at least one software-add-on. By forcing VAR-partners to comply, SAP claims to offer 550 micro-vertical and country-versions – virtually covering all niches. In January of ’06, SAP announced an additional 39 partner solutions for AllIn-One. Geographies: All-In-One is marketed worldwide with special focus on emerging markets in India and China. SAP’s midmarket presence in EMEA is sizable. The VAR-channel and implementation partnernetwork in North America is lacking bandwidth and will be expanded on 2006 to increase geographic coverage. Strategies SAP’s stated SMB goals as stated by Leo Apothekar are as follows: 1. To grow its SMB business faster than the industry average. 2. To double it’s installed base of SMB/Midmarket customers (SAP aims for 20,000 midmarket customers in 2006). 3. To build the infrastructure and programs to become the most partner-friendly software vendor in the industry. There are two strategic questions that are key to achieving these goals: How to reach and expand the SMB market and How to expand the product solution set with limited direct SAP R&D investment. SAP’s so-called Route-To-Market is shown in this graph, which tries to solve the channel conflicts between direct and indirect sales channels and territory or competency assignments of multiple VAR and software partners for the same space. Page 3 of 7 Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. Target companies are between $10 Million and $1.5 B in SAP America and EMEA. In emerging markets SAP has a lower target. The SAP SMB-market solutions consist of 3 different solution sets and a hybrid “direct vs. indirect” model to reach the different market segments. Product Strategy expansion Since early 2002, SAP has required every VAR-partner in the partner-contract to develop, expand and maintain strong micro-vertical solution sets. By 2006 SAP will refocus on the quality of the software solutions and will weed out weaker offerings. Those solutions that survive the quality assessment will gain access to the marketing and sales channel of all VAR’s. Currently SAP is undergoing a major revamp of the 550 add-on solutions offered and intends to increase the quality of the solutions, not the quantity. PartnerEdge Channel Partner program SAP relaunched its VAR SMB prorgam to better reward the commitment of smaller partners. SAP does not only reward the large VARs which drive sales volume and revenue, but also VAR who invest into staff education, referenceable customer implementations and quality best business practices. By collecting credits the VAR gets increasing benefits and is promoted from Associate level to silver and gold level. Marketing messages AllIn-One Positioning SAP uses a series of consistent messages to promote the benefits of All-In-One: “The power to drive value and to increase revenue for SMB enterprises” “Pre-configured solution sets, pre-packaged industry versions “ “Leverages over 30 years of best practices expertise – enhanced for SMB”. “Cost-effective turnkey implementation.” “Affordable: Defined Scope. Defined Price. Defined Timeframe.” The value play is now also at work in SAP’s marketing messaging in the SMB-space. The widespread concern of costly, timely implementations is countered with the messages above and culminates in the marketing message: Accelerating the implementation process saves time and money while minimizing risk and disruption to business. Page 4 of 7 Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. Customers Watch for these companies to be references SAP claims ~ 7,100 All-In-One customers as of 10/2005. SAP claims a run rate of adding 20 customers per day worldwide in the SMB-space. The following customers are known references. Their selection appears to be random by geography, industry and company-size. Additional customer success stories can be viewed on SAP’s web site. Partial Customer List: Anthro Corp. Brezelbckerei Ditsch Bookham Technology Chordus Cosmtique Active Crestron electronics Dairy Industries Daryl Industries DITAN Distribution Eclipse Aviation ECompany Store Edrington Group Endo Pharmaceuticals Engelhard Arzniemittel Fastbolt Distributors FHECOR Ingenieros Consultores Fredericks Dairies Greenheck Hand Held Products Inc. Hawaiian Tropic Holhl & Co. Indigo Lighthouse Macaw Soft Drinks Microcast Mitsui Chemicals Muntons Nieder-Ramstdter Diakonie Oxford Chemicals Schloss Raggendorf Sekt & Weinhandel Schumacher Elevator Southern Pump & Tank Co. Sparkice SRB Group Tallard Technologies TriVirix Int’nat’l Wictor SpA Note: ca. 40 customer names from 04/2005 Sales Channels & Partners SAP sells All-In-One through channel partners and direct in the higher-end of the SMB-space. There are currently ~730 Business One partners worldwide in 50 countries. India was launched in 01/2006. Some are traditional SAP implementation partners with an All-In-One practice, and others are VAR’s in the SMB space who are adding All-In-One to their portfolio of JD Edwards and Microsoft Dynamics/ MBS offerings. Issue: Existing loyal R/3 clients complain to SAP AG that the license price per user for the AllIn-One suite is only 25% of the licenses they were charged in the 1993 – 2002 timeframe and that their annual maintenance fees are still based on these high prices. (Source: DSAG German user group 10/2005 survey and interview with Chairman). For a look at the complete SAP All-In-One directory click here. Please choose the country and the category you want to locate an All-In-One partner for. Other Partners SAP has enlisted software partners to address the different micro-vertical and country specific requirements. As of 10/2005 there are 550 software add-on solutions. Strengths The All-In-One solution has several key competitive strengths: Mature business application suite built on the old and proven SAP R/3 4.6 release By investing in pre-configured solution sets and a so-called building block structure, SAP may indeed achieve more efficient implementations SAP achieves coverage of geographies by adding the VAR channel to its existing highend enterprise sales presence The All-In-One solution benefits from SAP’s R&D investment into 50 country versions The micro-verticals are covered by 550 partner add-on solutions SAP offers a wide implementation partner network and expands its reach with the benefits of the PartnerEdge Channel program Page 5 of 7 Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. Limitations and Weaknesses Product Families There are several inherent weaknesses with the All-In-One offering: SAP’s track record in the low-end SMB space is poor The market perception that SAP solutions are complex, costly and time-consuming to implement hurts SAP SAP does not know how to do business down-market and, according to disenchanted VAR-partners, is in true ramp-up mode. Until the sales volume can sustain the infrastructure costs, the low-end market is economically challenging for SAP SAP faces challenges from it’s old R/3 customers who complain about the four-times higher license costs they paid between 1993 and 2002 vs. the All-In-One price points today. Their annual 17 % maintenance fees are also still based on these four times higher net-software values. The All-In-One product is based on proprietary SAP-technology (e.g. ABAP programming language) and customers who implement today are forced into the 12 year old client/server baggage of the multinational enterprise functionality that is buried under the covers The major burden for cost effective turnkey implementations is on the SAP implementation partners. Only time will tell if they are able to succeed where SAP failed in the past. Technology SAP AG offers Business One as the entry-level solution for SMB. This is a standalone solution based on MSFT platform technology. SAP so far does not offer any upgrade to their other SMB solution, All-In-One. For so-called high-end SMB they offer the All-In-One solution which as a pre-configured R/3 edition. This runs on the SAP Netweaver platform. The announced plan for 2006 is a version of All-In-One, which better integrates with Netweaver. In the Enterprise Business SAP offers mySAP ERP 2004/2005, the mySAP BusinessSuite and for existing customers R/3 Enterprise. Please refer to the extensive coverage of the SAP coverage on the CI-website. Architecture 3-tier client-server architecture from 1992 All major operating system and database combinations are supported Low requirements for scalability due to low-end of Business applications market-space Runs on inexpensive commodity hardware Platforms Operating systems: Microsoft 2000, XP, Server2003 and the like Databases: Microsoft SQL Scalability SAP addresses the scalability more in terms of site support: Ability to support multi-plant Ability to support larger enterprises (more importantly for SMB, what size org. can the software support) 3rd Party Interoperability All-In-One integrates with all R/3 based partner add-on solutions via the SAP-proprietary BAPIinterfaces. Complexity inclusive. Other Analyst Reports Gartner: SAP Capable of challenging SMB market leaders? ID COM-20-1751 June 2003 Gartner: SAP partners with HP to target SMB in EMEA ID M-18-5719 IDC: SAP launches PartnerEdge blueprint Doc.No. #33454 May 2005 IDC: SAP SMB partner update – Gaining critical mass Doc.No. #SN52M June 2005 Number: E-22-3973 Number: E-22-3973 Page 6 of 7 Oracle Confidential For use by Oracle employees and authorized partner only. Do not distribute to third parties. Contact Harald Freudendahl if you have any questions regarding SAP in SMB or contact Charles Homs as the SAP Lead on the Competitive Intelligence team. Page 7 of 7