The inherent tension in the Microsoft-SAP alliance was spelled out by Microsoft CEO Steve Ballmer during his keynote at yesterday’s Convergence 2008 event: “SAP is sometimes a collaborator, sometimes competition.”

Competition is the aspect of the relationship that is coming to the forefront right now, as Microsoft’s ongoing interest pits Redmond against Walldorf for high stakes: The small and medium-sized business market. Convergence 2008, for example, has highlighted Microsoft’s ERP and CRM products, both of which play to the mid-market.

Cooperation between the two companies is largely in the form of Duet, the technology partnership that allows Microsoft products to serve as a front end for SAP applications. Duet has several hundred thousand customers and is generating revenue for both companies.

With both Microsoft’s business applications and Microsoft-SAP Duet going strong, the question is when the existing ‘co-opetition’ between the two companies will tip over into full-fledged rivalry. The mid-market is a hugely lucrative space for e-business software providers and may yet break up the Duet.

Finally, it’s interesting to see how Microsoft’s messaging geniuses managed to pull one over on SAP on Microsoft’s SAP partnership page. Here, Microsoft defines itself as making SAP “People-Ready,” as if SAP on its own is not people-ready. It’s a subtle point, but it illustrates the scope of Microsoft’s ambition and calls into question Redmond’s ability to sustain a long-term partnership with a ‘co-opetitor’ such as SAP.

Demir Barlas, Site Editor

The peculiar SAP-Microsoft partnership continues to deepen. We’ve written about this in the past, but I think Jon Reed summed up the situation best with the image of “one set of hands shaking and another set in a thumb war“. In the upper end of the market, SAP and the ’softies are best buds, as evidenced by their solid Duet commitment. Last I heard they were well past the 300,000 user mark and it was one of the big stories at Sapphire Atlanta last month.

This week was Sapphire Vienna, and sure enough, another big SAP-Microsoft story dropped: SAP and Microsoft are setting up a joint German lab to marry SAP’s Business Suite with SQL Server 2005. That makes a lot of business sense, and it doesn’t take much imagination to see this as another way of teaming up and sticking it to Oracle. Ellison had a pretty big week too by the way — the Agile acquisition alone is enough to keep SAP on it’s toes.

But then there’s this midmarket business, the elephant in the room neither company seems to want to talk about. Microsoft is serious about Dynamics, and they’re starting to get nods of recognition. But SAP is betting hard on A1S, the upcoming on-demand ERP solution targeting the niche of customers that fall between the already existing SMB solutions BusinessOne and All-in-One. Furthermore, SAP made the public commitment that it will nearly triple its customer base by 2010 — a goal that puts it squarely on a collision course with its friends in Redmond. Indeed, as 2010 and the inevitable SMB surge SAP needs in order to hit the magic 100,000 customer-mark draws near, I predict considerable friction at just about the same time Duet 2.0 rolls out.

But for now, everything is peachy. Kumbaya, and so on.

Matt Danielsson
Editor

Sapphire has been a little odd this year. Not just because Shai Agassi quit and left a sizable keynote spot open (since filled by Philip Lay, managing director of The Chasm Group Advisors,) but because of the uneven pacing. Rather than start with a big bang with all the key announcements on day one, most of the good stuff was withheld until the second day when Henning Kagermann finally took the stage.

But let's not complain too loudly; there were some interesting tidbits to be found. For example, Harmony is an internal collaboration tool that help SAP workers workdwide connect today. It's not unlike IBM's Lotus Connections, and Jeff Nolan said he covered Harmony last year, but we got a glimpse of what's in store for later this year when regular users get to play with these features… And judging by the application product demo, it's pretty darn slick. Assistant Editor Eric Samuels is on the case and hope to have more details on this shortly, so stay tuned.

Another point of interest was SAP and Microsoft's deepened partnership regarding Duet. We've long said Duet is promising, but a tad light on features. If the promises made here today hold water, that may soon not be the case as we look towards Duet 2.0 in 2008 and even Duet 3.0, slated for the next release of SAP's business suite (which will also include Microsoft's next gen Office, including Sharepoint). But for the more immediate future, Duet 1.5 and its Q4 2007 release seems to be the big game in town.

Speaking of Duet, one perhaps less than earth-shattering but notable announcement was the inclusion of Duet as a pre-loaded feature on HP ProLiant servers. There are no new features or clever synergies in play, but it seems like a case where ease of use and availability could make a big difference in helping Duet dig its heels in over time. 

Read Sapphire 2007 quick takes, part 2 here.

Matt Danielsson
Editor

Following the predictions of Logos GmbH founder Axel Angeli and Ventana CEO Mark Smith, it is now time for veteran SAP expert Dale Young to put forth his take on the major SAP trend of 2007. Like Axel's most recent post, Dale chose to do it in the form of a guest editorial.

The key question
Why is the upgrade to mySAP ERP different than those that came before it?

Many SAP customers are at a crossroads for supporting future business needs and realizing the next wave of value from their SAP investment. First of all, today's business environment is VERY different from when they originally put in R/3. There is an increasing amount of business competition, collaboration, globalization, standardization, commoditization and change.  They are likely are faced with new competitors, markets and products and their enterprise solutions must serve a new generation of customers, employees and partners (from generation Y) for whom technology is a normal life skill.

More complexity
Secondly, their original application strategy and enterprise architecture are likely more than five years old.  The ideal "clean" hardware, software, OS and database environments that were targeted with the first install have likely been more complex and less heterogeneous.  Business needs have changed; technology and Web services have matured; and SAP has entered into the architecture, Web enablement and integration space.  Computing infrastructure capabilities have also evolved.  There are significant new opportunities to optimize your enterprise infrastructure. 

Finally, SAP has undergone a "Step Change" in its architecture and solutions.  NetWeaver and Enterprise SOA have emerged as the foundation for all SAP solutions; there are increased capabilities in the areas of data and information management; and new third party capabilities such as Microsoft Duet and Adobe IAF have been introduced. For the first time, the core business content that has been developed over the last 30 years by SAP will be available for an open, standards-based world. Also, SAP functional solutions have evolved and matured.  There are opportunities to take advantage of new functionality across the entire SAP solution suite and to simplify your overall enterprise architecture through additional legacy solutions retirement.

What does all this add up to?
When looking at all these factors together, you can see that this upgrade is different.  SAP customers are at a unique point in time where they can set the direction for their enterprise solutions for the next decade.  At first, this may seem to be a daunting task and very few enterprises have the luxury or can afford the risk of a wholesale rebuild.  Most organizations are following an "evolutionary" approach to dealing with this business revolution.

Dale Young, Vice President
North American SAP Alliance Leader

Editor's comment:
Do you agree with Dale on this being the number one trend for 2007? Is it really that vital to upgrade? Do you trust the new lineup of feature-packed NetWeaver toys, or do you prefer to sit back and see what happens? Sound off and send your thoughts to mdanielsson@techtarget.com today!

Matt Danielsson
Editor 

I'm Jon Franke, the new news editor here at SearchSAP.com. Just for a little background, I got my start in technology installing Web Content Management software early in my career. Since then, I have been an analyst covering "Dynamic Content Software" for InfoTrends here in MA.

I'm excited to be covering SAP in more detail and I look forward to hearing from all of you out there. I recently wrote my first news article for the site on the progress of Duet. Please feel free to send press releases, comments, story ideas, and anything else on your mind to me at jfranke@techtarget.com.

Jon Franke
News Editor

What do real-life SAP users think about Duet? We recently asked our readers to share their two cents on the new product. The vast majority of the 100+ readers who were kind enough to submit comments to us were overwhelmingly positive. No doubt about it — the buzz we saw around the Duet booth at Sapphire 2006 is alive and well.

However, buzz does not automatically translate into actual implementations — at least not this year.

"I think Duet looks like a great way to deliver SAP functionality to end users," said Paul Krier from Johnsonville Sausage, Sheboygan, Wisc. "We may be able to use Duet in the Portal we are putting together, but at this point we use Lotus Notes as our email server, so I think we are a ways off from implementing Duet into our systems."

Colin Ross from Austrialian steel firm OneSteel echoes the positive sentiment. He considers the ability to run quick and easy reports directly in MS Outlook as the biggest benefit of Duet, and foresees his company getting on the Duet bandwagon in 2007.

"[This is a] nice product. I think it will be especially useful for users who only interact occasionally with SAP," Ross said.
Dan Amend from Tuthill corp., Burr Ridge, Ill. likes what he has heard so far but isn't ready to get in the game quite yet.

"We do not use much of the HR functionality in SAP," Amend said. "Most of the early Duet demos focused on T&E-type functions, so we have not gone too far with it. As it moves more into the financial arena with budgeting and analytics, we will get more interested in it."

Based on the responses we've seen, it seems many have choosen a slow and careful approach to Duet — but they'll probably get Duet with it in the end. This cautious angle has the proven benefit of having the early adopters clear the inevitable land mines before they take the plunge in 2007 and beyond. There were some downsides to Duet, however.

Bryan Beasley from CMC Steel Group is currently working the blue-printing of their SAP implementation. He works largely with Microsoft development, so this is a natural area of interest to him. Still, he has some reservations about Duet at this point in time.

"Based on reading and nothing hands-on, from what I can tell, the feature set is still somewhat limited," Beasley said. "In other words, it seems it may be hard for enterprise to cough up the bucks for a product that will have limited impact and will probably increase support costs in the short term.

What I have not seen from SAP is really how is it cost effective to develop something in Duet versus other environments such as Sharepoint, VS.NET or something more custom to SAP. And what about distribution and management of Duet solutions?"

Fellow SAP professional Sunil Aghi is generally very positive to Duet, but he did point to the Achilles heel of cost. This was something of a common thread as cost and excessive upgrade requirements on the SAP end appears to be the most frequently mentioned concern for SAP professionals.

"I see the success coming gradually, over a medium term horizon of 2-3 years," Aghi said. "[However,] cost, and upgrades, could be a deterrant."

Another question that came up was that of Exchange. What if you don't want to use Exchange? Many companies don't because of security concerns, one reader pointed out.

General distrust of Microsoft and its history of occasionally playing hardball with customers is another sticking point. The old Microsoft vs. Open Source debate appears to be alive and well.

"My biggest worry is that Duet is tied into Microsoft and does not allow for any latitude in the Open Source area (e.g. open office)," said Carl Cavendish-Davies from Barloworld Equipment. "This will heavily influence our decisions here as we are in a three-year cycle of migrating and proving the use of an Open Source Operating System."

So what's the final verdict on Duet? You be the judge! Check out our Special Report: Duet in a nutshell for a rundown of the benefits and technical specs you need to know. Tune into our latest podcast for an interview with Duet skeptic Jim Murphy of AMR Research. Then test your Duet knowledge in our Quiz: Duet 101.

Matt Danielsson, Editor

I recently interviewed Jim Murphy, a research director at Boston-based AMR Research Inc. about his recent survey of SAP customers on the jointly developed SAP-Microsoft Duet software. Overall, respondents saw the value that could be gained using the software, which melds SAP data with the familiar front-end Microsoft Office tools. Still, 27 out of 74 survey respondents – had reservations about adopting Duet, according to the AMR survey.

In this podcast, Murphy explains why he believes customers should be cautious about the costs and long-term viability of Duet.

-Rob Westervelt
News Editor

AMR Research recently surveyed a group of SAP customers who were familiar with the new Microsoft-SAP Duet software and came out with some interesting albeit very preliminary results.

There aren’t a lot of users because Duet has only been made generally available for less than a year. But already Lotus Notes users are debating the viability of the product as well as SAP’s integration with Notes. Notes has many of the same scenarios covered by Duet.

The AMR survey found that at best only about 29% of customers surveyed have the software and hardware requirements in place for specific Duet scenarios. The Lotus folks are arguing that Notes can be installed and integrated with SAP at a lower cost and without upgrading to the latest version of SAP.

In addition, 27 out of 74 survey respondents – had reservations about adopting Duet, however. Some cited the need to upgrade to the latest version of SAP, some saw substantial hidden costs, and others were using IBM's Lotus Notes for groupware processes.
SAP clearly isn’t yet making the case that Lotus users should even consider Duet. The majority of its user base are Microsoft Outlook users. And I’m not sure it’s SAP’s aim to target IBM’s Lotus Notes users with Duet.

I asked the question of whether a Lotus Notes user would see enough value in Duet to make the switch. SAP’s Kevin Fliess said that it would be an evaluation over groupware and went on to tout the various Duet scenarios. I don’t think it’s a question of which integrates better with SAP – Duet or Notes. If you are an SAP-Lotus shop, chances are you’ll look into its SAP integration features.  If you are a Microsoft shop, you’ll look into Duet.

-Rob Westervelt
News Editor

Developer tools that allow companies customize unique scenarios and enable independent software vendors to develop new features will be released. SAP plans to make an announcement in September at SAP TechEd in Las Vegas, according to Kevin Fliess, SAP's vice president of product marketing for emerging solutions.

Duet, formerly code named Mendocino, was jointly developed by Microsoft and SAP. The software allows end users to tap into SAP back-end data through the familiar Microsoft front-end Office products.  

The additional Duet scenarios due out by the end of the year include Travel management, recruiting, analytics integration, sales contacts management and procurement integration. But additional features go beyond new scenarios, according to Fliess.

Fliess also did not rule out extending Duet to other data sources beyond SAP back-end systems. For example, companies running Siebel or Salesforce.com would be able to tap into the data in that familiar Microsoft environment using Duet.

So how do you buy Duet?

Fliess said that most companies are talking with both SAP and Microsoft sales reps to get the best deal. There’s no server component associated with it when you buy it through the SAP channel, Fliess said. But depending on a company’s architecture, you have to shop between the two software vendors to get the best deal.

Microsoft sells the software at $125 per computer, plus an additional $125 license per server. Duet requires the use of Microsoft Exchange Server 2003 and Windows Server 2003.

Fliess said SAP is also using Duet as an incentive to upgrade. It often falls into conversations around upgrades, he said, since customers must be on the latest version of mySAP ERP in order to use the software.

There has been a lot of buzz around SAP's composite applications, xApps, lately. SAP claims big marketing success with 800+ customers, 100+ showcases and 80+ references to sing xApps' praises since its introduction in late 2002. As we enter the "second generation" of xApps, with Duet functionality, Project Argo and hundreds of new xApps on the horizon, we decided to check in with veteran SAP guru Josh Greenbaum to take stock of where we are and what we can expect from xApps in the years ahead.

SearchSAP.com: Is it still too early for xApps?
Josh Greenbaum: No, in fact there a number of them being deployed by a large number of customers. XRPM and XMII are two good examples that I know of. The use cases are customer-specific — meaning that there isn't an xApp for every customer. But there are definitely reasons to be deploying xApps today.

S: What will it take before composite applications become truly mainstream?
JG: They already are, insofar as there are lots of composites out there. Composites based on NetWeaver — particularly those developed in-house — will become mainstream once NetWeaver is deployed at a critical mass of customers and those customers understand the developmenent requirements for composites. I think critical mass will come in the next three to five years, possibly sooner, if the upgrade rate increases.

S: Is SAP doing enough to foster xApp development?
JG: Yes, and it's important that SAP not force-feed xApps on its customers. The use case has been built on real ROI, not a cool-technology justification. There are lots of mini-xApps on the way, and lots of partners who will be deployed to push these new xApps into the market. This eco-system approach is the right way, and it will yield the necessary results in due time.

S: Do you think ISVs will take an interest in xApps for the NetWeaver platform?
JG: Absolutely, now that the partnership and eco-system models have been well-defined and there are good examples of successful deployments in a number of industries.

S: Has SAP done a good job educating the user base about xApps?
JG: Is there anything they could do better? I think they need to keep pushing the concept, there are still customers who don't understand these applications' role or their relationship to SAP's ESA strategy. But in general, this education process doesn't happen overnight, nor should it.

S: SAP said they're gunning for 100+ analytics, 50+ personal productivity and 30+ mobile xApps in the year ahead. Do you think this is the right direction for SAP? Should they consider other areas that may benefit from xApp technology?
JG: This is a good start, a very good start. More specifically, I think a key direction will be towards fulfilling vertical industry requirements, and a number of the analytical xApps will fit the bill. When it comes to industry-specific xApps, there can't be too many xApps out there.

Matt Danielsson
Editor