By Glenn Drexhage

Inside the cavernous Orange County Convention Center in Orlando, Fla., Hasso Plattner, CEO of the German software giant SAP, confidently addresses an audience of thousands attending SAPPHIRE ’01, SAP’s flagship event.

The Internet economy may be smarting, but at SAPPHIRE, the atmosphere is heady and hyped. Touted the "largest wireless-enabled e-business event in the world," the occasion comes complete with free Palm Pilots for all attendees. And the silver-haired Plattner, flanked by two huge video screens that lend an evangelical quality to the show, exudes energy and excitement. "The new, new economy is here," he said. "Allow me to welcome you to it."

It’s an impressive performance, but only part of the story. While SAP pitches itself as a leader in this latest iteration of the new economy, the reality is that e-business is young and much of the spoils remain up for grabs.

In Canada, SAP has had its share of success, but the vendor has also endured stumbling blocks. In addition, some of its chief rivals, including Oracle and PeopleSoft, are striving to portray themselves as the best providers of e-com software for companies small, medium and massive.

But in these early days, the winners are far from decided. "All three [companies] are making the transition to becoming e-business application players," said Kevin Restivo, an analyst at IDC Canada. "It’s a very young game right now." And other players, such as Siebel Systems and i2 Technologies, are also out to claim victory.

Evolving for e-com

Peter Blackmore, SAP Canada’s managing director and senior vice-president for the Americas, describes the software firm’s approach as evolutionary. While SAP has traditionally been viewed as a major provider of enterprise resource planning (ERP) software, which focused on automating a company’s back-office processes, it is now adopting a more outward-looking approach for the e-business age.

Rather than simply integrating applications within an enterprise, SAP aims to integrate applications between companies. A key platform for this endeavour is mySAP.com, a Web-service that offers supply chain management (SCM), customer relationship management (CRM), e-procurement and other functions.

Last year, mySAP.com registered one million users, and three million more have since signed on. SAP Canada, founded in 1989, has also tasted success, and today it’s the fourth largest global subsidiary. Its Canadian sales revenues for 2000 exceeded $300 million, and it can boast of 38 partners and more than 400 Canadian customers.

Bumps in the road

But there have been setbacks for SAP. In January, Canadian grocery chain Sobeys issued a press release that stated it was ceasing "further development and implementation of the SAP enterprise-wide software and systems initiative" due to "systemic problems" and "insufficient core functionality." Sobeys did continue to use SAP’s financial and human resources software.

As a result, the grocery company took a special charge of more than $49 million. However, Sobeys spokesman John Keizer acknowledged there was a "shared responsibility" for the incident involving SAP software and an internal database.

SAP, however, stood behind its product and maintained that its retail offering could be a success for Sobeys. In June, Blackmore said he was working "in a very constructive manner with Sobeys on a path forward."

Yet in an industry where perception is crucial, such a public incident can have nasty side effects. "A company that comes along in the grocery environment in Canada is going to be less inclined to even look at SAP," said Lee Geishecker, research director for enterprise and SCM at Gartner.

Blackmore, however, remains optimistic. "In the long run, I don’t believe that [the Sobeys incident] will have any lasting impact on us."

Others back up this response. "It hasn’t hurt the company because their revenues are obviously huge in Canada," said Restivo of IDC. "Having said that, it’s a question that they’re going to have to effectively address in sales situations because it was such a public undoing with Sobeys."

Serving the spectrum

Despite the setback, SAP has pleased other clients. When Brenntag Canada—which distributes chemicals, plastics and other materials to Canadian industries—decided on an ERP offering in 1996, it looked at two other vendors but chose SAP.

"Since 1972, [SAP has] had a track record of sticking with it and demonstrating year after year their willingness to reinvest in their own product development and customer service," said Reid Andrews, Brenntag’s information technology manager, adding that the company is now implementing other SAP modules, including an online store, business intelligence software and an online marketplace.

Another company that has signed up for SAP’s services is the Electrical Safety Authority, an entity that was part of Ontario Hydro until deregulation of the utilities industry in 1999. Two years ago it implemented a finance and human resources SAP system; now, its inspectors use laptops that employ the mySAP mobile CRM product. For the future, it is also considering SAP wireless offerings.

But the decision to choose SAP over its rivals wasn’t automatic, partly because of the company’s reputation as being massive, complex and geared mainly toward the biggest corporations. "A lot of mid-market players say ‘We’re just too small for SAP,’" said Gartner’s Geishecker.

For the Electrical Safety Authority, which has 320 employees, this image was a potential concern. "I had heard that SAP was arrogant with small customers, and that was one thing I really checked out," said Dwaine Eamer, the Authority’s president and CEO. But Eamer said his perception has changed and he remains impressed with SAP’s service.

Although SAP’s client list includes many major companies (such as Canada Post, Telus and Royal Bank of Canada), Blackmore said SAP is "very focused" on the small- and medium-sized market; he also noted that up to 30 per cent of the company’s Canadian accounts each generate revenues of less than $250 million.

The contenders

Rivals, including PeopleSoft—which competes in areas such as ERP, CRM and human resources and has about 400 Canadian customers—are also targeting the mid-market. About 75 per cent of PeopleSoft Canada’s deals are focused on companies that have $750 million or less in revenues, according to managing director Andy Aicklen.

With the September 2000 release of PeopleSoft 8, an e-business suite that runs applications over the Internet, Aicklen is confident of his company’s standing. "That really has differentiated us," he said. "I think we give the customer a little bit more flexibility."

Not surprisingly, other players such as Oracle hold similar views. Oracle’s relationship with SAP is a mix of co-operation and competition. According to Dave Rumer, Oracle’s director of e-business solutions for North America, many SAP customers run their applications on top of Oracle servers and databases.

It’s Oracle’s e-business suite that battles with SAP’s offerings. Rumer stressed his suite’s completeness, simplicity and easy implementation; he claimed that 50 new Canadian customers have signed up for Oracle’s e-business offerings in the past year, and that the company boasts more than 500 clients in total. And Rumer doesn’t think his German rival has caught up. "If you look at SAP, it’s kind of an old-style vendor that really moved slowly into the Internet age."

Spread the message

In such a competitive landscape, the boasts and barbs will continue. But what really matters is winning over increasingly savvy customers. "Companies are more aware of what they’re buying now," Restivo said. "[They are] very brand aware and very product aware, and they are going to demand that the applications fit their environment."

So the battle for business is likely to heat up. In the meantime, SAP’s Blackmore has big plans for Canada. Like SAP globally, he’s aiming for increases in revenues and staffing in the coming years.

If he’s to meet these ambitious goals, the company’s message will be as crucial as its methods, Restivo said. "I think where SAP can improve is in getting those mySAP.com stories out there."

It’s an observation that holds true not just for SAP but for rivals as well. Because perception will be crucial in deciding the winners—and the losers.