SAP will establish an R&D center in Seoul, South Korea, according to Korea.net. The deal, brokered by the Ministry of Knowledge Economy and the Korea Trade-Investment Promotion Agency (KOTRA), will see SAP hire 53 employees and invest $21 million over the coming three years.

SAP Korea will be the third R&D center of note in Asia, joining SAP Labs India and SAP Labs China. Korea.net reports that SAP Korea will be dedicated to business intelligence (BI) and database management.

In addition to establishing the R&D center, SAP has signed a partnership with South Korean company Samsung SDS aimed at growing SAP’s share of the Asian ERP pie while expanding the IT service opportunities available to Samsung SDS in the region. Samsung SDS CEO Kim In mentioned China as a big target of the alliance: “The mutual and comprehensive partnership will help us sustain the domestic ERP market of 10 percent annual growth and lay a solid foundation for the rapidly expanding Chinese ERP market.” Analyst David Mitchell of Ovum is bullish on the Chinese opportunity, but sees challenges ahead: “The Chinese ERP consulting, implementation and management services market is going to be an extremely contested ground. Korean companies will attack it.”

Demir Barlas, Site Editor

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

A new report from Aberdeen Research discovered that best-in-class process manufacturers tend to take specific approaches to their ERP strategy by deploying:

• ERP that provides integrated order entry, procurement, planning and production, and financial management.
• CRM, logistics, and delivery management systems integrated with manufacturing operations [themselves owned by ERP].
• Forward and backward traceability.
• Attribute-based rules and routing.
• Supplier compliance and collaboration.
• Enterprise Asset Management (EAM).

Being a good process manufacturer isn’t as simple as your ERP strategy, but the best process manufacturers do indeed have a recognizable approach to ERP characterized by the action points above.

Aberdeen adds that sound business process discipline, knowledge management, performance management, and reporting (e.g. for regulatory reasons) also characterize best-in-class process manufacturers.

SAP was one of the Aberdeen report’s sponsors.

Demir Barlas, Site Editor

SAP PLM (product lifecycle management) is emerging as a growth area in the enterprise in general. This is hardly a surprise, seeing how innovation is becoming the key competitive factor in the global marketplace. That means ERP vendors like SAP, Oracle, IFS and others have to stay on the ball to retain and up-sell existing customers.

Today, SAP upped the ante with a slew of PLM enhancements. We can expect new portfolio planning processes and portfolio management capabilities by the end of this year, followed by an extensive interface overhaul of the SAP PLM interface in 2008. This move will cut down on manual tasks and training time. 2009 and 2010 will see even further integration support, along with tidbits like new product information management capabilities and enhanced RFID/barcode functionality.

This is part of SAP’s plan to outmaneuver arch-rival Oracle, which in turn made headlines with its $495 million Agile acquisition earlier this year. But is SAP equipped to pull this off? Blogger Chris Kelley is skeptical. PLM is ‘messy’ by nature; it has to be flexible, juggle multiple input sources and so on in real time, he said. The strength of ERP titans like SAP has always been that rock-solid structure that prevents messiness.

“PLM is just too different from what they are good at,” Kelley said. “It’s too ‘miscellaneous’. Its too dynamic. Its too creative.”

Roy Wildeman, senior analyst for Forrester, doesn’t agree.

“Manufacturers that are also SAP ERP customers will want to investigate SAP’s PLM offering,” Wildeman said. “[Look closely at] the potential integration benefits from interdependent process areas like project and portfolio management, direct material sourcing, and configuration management.”

Stay tuned as we follow up with SAP career expert Jon Reed’s take on what this PLM growth trend brings in terms of new job opportunities tomorrow.

Matt Danielsson
Editor

Most IT workers I talk to have trouble getting up to speed with Web 2.0. Isn’t it asking for trouble to start talking about Web 3.0 in that case? Apparently, SAP doesn’t seem to think so.

ZDNet’s Dan Farber reports a “dog and pony show” surrounding the opening of SAP’s new Palo Alto lab, where SAP execs predictably talked about stuff like the importance of collaboration, the upcoming SAP A1S ERP on-demand solution, and of course, Web 3.0. From Farber’s post:

“If you look to the services that we are defining with our enterprise SOA and things a bit beyond, we know that these type of enterprise services over time, in collaboration with many customers, associations and partners, a kind of standard can bring the Internet of business services,” Kagermann said. “We don’t have the semantics today that go beyond Web 2.0 and will allow software to to speak to each other.”

There’s the keyword: Semantics. The oft-cited example of Web 3.0 is a “smart” scheduling app that handles the eternal back-and-forth between meeting participants automatically. Problem is, beyond that, Web 3.0 is rather fuzzy. How can you look at a product and say: “This here piece o’ software is Web 2.0, while that app over there is Web 3.0″? More importantly, what does this concept really mean for SAP shops, and what practical benefits vs. costs are we looking at?

While not SAP-specific, David Siegel provides a pretty good explanation on his blog. Everything in the future will be smart, he says, not just scheduling apps but mundane stuff like chasing down the best flight (enter your preferences and let the computer run the two dozen searches on Orbitz). He also uses an example of a team of construction engineers working a lighting challenge to highlight the potential collaboration benefits of Web 3.0.

The key to getting there is enabling computers to interpret “human-readable” phrases rather make a loose guess based on just keywords. For a SAP shop, this could be a boon to areas like analytics and reporting, or bringing truly personalized CRM into the world. Other areas that could use a boost of “smarts” would be logistics, SCM, or pretty much any scenario where you need to tap into multiple heterogenous solutions.

That’s the benefit portion. Cost and maintenance remains largely an unknown at this point. Of course, time will tell how far these theoretical scenarios will play out in reality, but we’re going to dive deeper into this in the weeks ahead. Stand by for a comprehensive Web 3.0 for SAP overview by Eric Samuels!

Matt Danielsson
Editor

DENVER — The last session at ASUG's mySAP ERP Upgrade Symposium was a panel made up of users who had completed upgrades and SAP executives. We took this opportunity to ask what SAP could have done to make each customer's upgrade easier. Here are a couple of the responses:

Scott Petrack, Bayer Corporation
One of the things Bayer struggled with was trying to make decisions about the external environment around SAP. The company has 17 or 18 different third-party, complimentary software products that are interfaced or integrated with the SAP environment. So, it was a struggle for the team to determine whether these third-party products were going to be compatible in terms of the company's SAP upgrade.

"You go to the vendors and they say, ‘Oh, just go to the latest release of our product and everything will be OK,'" said Petrack. "I'm sorry, but that doesn't work for me."

As for what SAP could do to help solve this issue, Petrack said, "I would very much like to see, maybe as part of the certified partner program, SAP step up and say, ‘OK, here's the latest release of the product, and here's what we can report to you in terms of vendor compatibility.'"

Ian Wyatt, Cox Newspapers, Inc.
When Cox was entering into the upgrade, it wasn't entirely clear what it needed, what was recommended, and what options it had around support packs and stacks. This issue reared its head during the upgrade when the project team looked at some functionality in HR testing. That functionality changed with mySAP ERP 2005. But Cox had a problem with the new functionality that required implementation of a support pack — it wasn't available as a single node.

"Well, we didn't want to [implement the support pack] because we would have to go back and repeat a whole lot of testing," said Wyatt. "If we had known up front that we needed that support pack, no problem, we'd put it on up front and it would have no impact whatsoever. But, we didn't know, so we had to go back a bit."

"One thing I would like to see from SAP when going into an upgrade is more guidance around what support packs and support stacks you are going to need before you can start," he said. "You know, it wasn't a huge deal, but it did cost us some time." 

Steven Passer of NASA and Stefan Kneis, vice president and ASUG executive liaison at SAP, also responded. We'll have their take soon as well as something on Enhancement Packages. If you have your own ideas on how SAP can improve the upgrade process, please email me at jfranke@techtarget.com. 

Until then, we have to find a place to watch The Office in the Denver airport.

DENVER — We made it to the ASUG mySAP ERP Upgrade Symposium in Denver with no problems. There are about 200 attendees at various stages of upgrading to mySAP ERP 2005 — from just considering upgrading, to already done (granted, most of these people are presenters).

Since we're at an ASUG event, we asked for a couple specific examples of how ASUG had influenced SAP products or strategy in our interview with Stefan Kneis, vice president and ASUG executive liaison, and Martin Riedel, head of SAP's global upgrade office. Kneis's reply was:

Well, there's a lot, it happens on a regular basis. Influence councils are running on a monthly basis, and there are many real examples. An exciting one to me was the new xApps around sales operations planning which was really a story where ASUG told SAP to build a new product if you will. That's on the level of the influence councils.

Another example of influence from the group is the maintenance strategy. The 5-1-2 strategy [mainstream maintenance for all SAP products will for five years from the general release date. After that, customers can extend maintenance for one year for an additional 2% and for two additional years at a rate 4% above the annual maintenance fee.] was heavily, heavily driven by ASUG a few years ago. We had all kinds of maintenance strategies for different products and it was somewhat confusing for customers. ASUG really influenced our cleaning up of the maintenance strategy.

We're planning a couple more posts this week. We attended and interesting session that shed some light on SAP's enhancement packages strategy, so we're planning to post some information (and, if all goes well, pictures) from that. We'll also get some attendee comments on their upgrades and the conference in general.

Weather permitting (we are flying Jet Blue), SearchSAP.com will be covering the ASUG (Americas' SAP Users' Group) mySAP ERP Upgrade Symposium in Denver Wednesday and Thursday. In advance of the event, we spoke with ASUG president Rod Masney about SAP CEO Henning Kagermann's contract extension and what to expect at the conference.

Masney was very positive about Kagermann's new deal and said he extended Kagermann congratulations that evening. Kagermann personally responded with thanks and good words for ASUG the next day. So, it's probably not surprising that Masney sees the extension as a good thing.

"We [ASUG] see it as a positive because of the relationship we've built with him and his team over the years and the programs we've worked on together. Henning has articulated his commitment to all the user groups, not just ASUG. He has articulated that there's value that groups such as ours bring to his customers. He shows this through SAP resources, time at our events and his personal time meeting with us."

Masney views Kagermann as atypical among CEOs in his willingness and interest in working with user groups. Kagermann generally meets with ASUG leadership face-to-face twice a year, once at Sapphire and once in Germany.

The co-location of the ASUG annual conference and Sapphire is a prime example in Masney's mind. He also mentioned that ASUG developed the "voice of the customer" program (where ASUG surveys members about SAP products, services and relationship with SAP) at Kagermann's request, as well as a book that ASUG and SAP are working on jointly.

"The board extending Henning's contract is a testament to the strategies he's put in place and the leadership he's demonstrated within SAP, the growth they've experienced and the commitment to the strategy around ESA and where they're taking the platform with the customers."

Masney indicated that ASUG really doesn't care who succeeds Kagermann, and mentioned the organization's relationship with Shai Agassi, president of SAP's product and technology group, and Léo Apotheker, president of SAP's customer solutions and operations, have grown in recent years as well.

"It's not a beauty contest. For us it's about having the right relationships and having the opportunity to have influence in SAP, as well as to demonstrate that we're delivering value by educating our members and giving them an opportunity to network and learn from each other."

Masney also talked about the upcoming upgrade symposium. He said the attendees will represent the whole spectrum of the upgrade process from just thinking about it to already in the throes of it. (Earlier this year, Masney said he was starting to see an uptick in users considering upgrades.)

"The whole idea behind a symposium is a very small [200-250], very focused, very intimate event. There is a real good opportunity for education and peer-to-peer networking. This is not for giving them big-picture, esoteric information, if you will. But more to deliver concrete stuff that attendees can take back and use in their business."

We're bringing our digital camera to the event, so we'll aim to have some thoughts and pictures posted on the blog late Wednesday or early Thursday. We'll also have a couple items up on the main site by later in the week. If there's anything specific you're interested in, please shoot me an email (jfranke@techtarget.com).

You've probably read Axel Angeli's guest editorial SAP under fire: Axel Angeli on why 2007 will be tough for SAP. Not surprisingly, there was an avalanche of reader responses. Some agreed and applauded the honesty, while some jeered and argued Dynamics was nowhere near ready for prime time. Axel answered two questions in depth yesterday; today he concludes his stint on the soap box by going to the heart of the matter:
What exactly did SAP do to fumble the ERP ball, and what can/should they do about it?

Axel: The SAP ERP is still the flagship of SAP, despite all efforts to gain market shares in areas where competitors seem to be strong. While FI/CO seems to be stable and has set the European way of accounting as IT standard all over the world, the SD/MM and PP areas are still areas where the customers ask for significant enhancements. Let us pick SD for instance… Currently, we still find a hybrid of functionality, powerful but extremely difficult to make any enhancements. And it is the latter that is more and more required by companies, especially if SAP wants to conquer the markets of the SMB. The classical areas of concern are variant donfiguration, pricing, special shipping & handling scenarios, intercompany invoices … all topics the experienced SAP consultant can be caught with a cheshire grimace on her/his face. 

Don't let me be misunderstood: the functionality is powerful and covers many, many areas. But if you need to do something special, the SAP approach with user-exits (aka customer enhancements, BADIs) has its severe limitations. 

To cope with the challenges of agility, a more object-oriented approach, one that has been rightly drawn and begun with the BAPI concept, is required. And again, one has to regret that SAP lost the completion of the BAPI concept out of sight. The SD-BAPIs are far from complete: e.g. the "order read" and "order create" modules have different interfaces, isolated pricing modules are still missing, variant configuration is still dug far down in the inside belly of the SD core modules. Modern ERP systems would break down an SD component into small, self-contained objects that inter-operate through message pipes. That would even allow to run a SAP SD fully decentralized, maybe the order creation on one instance, the delivery on a second and invoicing on a third one. Revamping the BAPI concept might already bring a high degree of progress and eventually a convincing argument to upgrade a newer SAP release, one based on ROI instead of simply falling out of maintenance. 

SAP did well in the MM sector when succeeding in rewriting procurement in the form of the SRM component. SRM has all that the purchaser needs and it integrates with ease many external offers, like life vendor catalogue access, auctions or goods tracking via slim or sometimes not so slim Web interfaces. Although SRM might well be broken down in smaller atomic units, it is a step into the right direction of an object oriented componentization. However, the drink may be poisoned here as well: while SAP admits the necessity of integration, they are still reluctant in releasing interface specifications to the public and offering demo hubs against which developers can test their development. 

The peril is ante portas, not mainly and only in the shape of Microsoft Dynamics, whose principle power lies in the marketing strength or through Oracle where we observe - I admit: to my surprise - an increasing number of new "Peoplesoft" installation, mainly in countries where SAP traditionally had a bad standing, like France for instance. There is also the open source community that seems to increasingly enjoy the ERP worlds after they worked the CMS fields to exhaustion.  

Momentarily the importance of open source ERP is low due to the fact that although open source (SAP is also "open source&quo they are mostly not "free software" sporting a pretty amusing variety of "licensing models". I have seen licensing constraints where software is free but consulting must be purchased by the owner of the code and others that keep the software free for developers but require substantial licensing fees for productive use. Both models cannot work, as it is too obvious that the makers want cheap labor from the community but are pretty selfish when it comes to give anything back.

But there are also good examples of open source and free ERP approaches, like Adempiere that - after divorcing from Compiere on arguments about licensing philosophy - became number three in the charts of the most attended projects at SourceForge. Until now the ERP has not yet reached the PHP or Python community that would allow to run distributed ERP on cheap Web hosted platforms, giving the notion of EDI (Electronic Data Exchange) a completely new flavor.

Editor's comment:
This is the last (?) part of Axel's take on the "SAP under fire" issue. As always, we'd love to hear your thoughts on the matter. Reply to this post or send your thoughts to mdanielsson@techtarget.com.

Matt Danielsson
Editor 

We received a tremendous amount of reader feedback on veteran site expert Axel Angeli's recent guest editorial SAP under fire: Axel Angeli on why 2007 will be tough for SAP. Here are some of the reader comments and Axel's responses.

"I agree with Axel's assessment that Microsoft Sharepoint will give SAP KM and EP a run for its money. I, with a group of other 'pioneers', have started an ASUG Special Interest Group to investigate and influence the interoperability of Sharepoint and the SAP Enterprise Portal. Many SAP customers will license the Sharepoint MOSS solution over the next few years because it certainly wins the 'beauty contest' and gives SAP a run for its money on robust search functionality.

Where Sharepoint is falling short is tying document management to business process via workflow and transactions. This is where you use Sharepoint for the user interface and document repository, but you run SAP workflow to handle the business processes, like approving documents based on document type and user hierarchies from HR organizational structures. I do not tout myself an expert in this area as we have just begun our journey down the path of interoperability, but I do see this being a relevant space within the SAP-Microsoft ecosystem.

– Name withheld, SAP Business Analyst, Longmont, Colo."

Axel: I am happy to read this comment. I am convinced that something needed to be done in this areas. SAP has all the necessary features including a basic WEBDAV support, allowing one to map any SAP repository data source as a network drive. One should maybe make clear to the Sharepoint newcomers that Sharepoint stands for two completely different elements: the Sharepoint Services and Sharepoint Portal Server. The Sharepoint Services allow reading and writing back documents to a Sharepoint enabled server, while the Sharepoint Portal is a content management system that makes use of Sharepoint Services but otherwise is just another "Portal" and competes with SAP EP in this respect. We integrated Sharepoint Services successfully to open source CMS like Joomla or DRUPAL, hence I don't see a reason why it should not comply with EP as well.

I would love to eventually read more on the progress of your ASUG SIG project and maybe participate on a blog on this.

"First of all, I think SAP didn't drop the ball. I think SAP is doing very good job. SAP has already released its major version ECC 6.0 in 2006. No major releases are due until 2010. So SAP is up to date in all areas of ERP. SAP is ready to complete enterprise SOA technology. More enterprise SOA implementation projects and SAP upgrade projects will be implemented in 2007. As a result, more XI projects will be implemented in 2007 and demand for XI skills increases. Microsoft cannot compete with SAP in the ERP marketplace. They are still far away from SAP's level. Microsoft enters every niche market. That doesn't mean they can compete with SAP in the ERP market.

– Sobhan Annepu, Sr. Programming Analyst at Coca-Cola Bottling Co., Birmingham, Ala."

Axel: Saying that SAP didn't drop the ball may certainly be a matter of how you interpret the situation. I would say that SAP exactly DID drop the ball by putting a moratorium on release upgrades for four years and hence leaving ERP in the current state. It feels like leaving the dish in the kitchen sink after an opulent dinner. A moratorium will exactly be the kind of advantage that the competition is waiting for to dash into the gap.

When it comes to the mid-sized markets, SAP ERP won't win the beauty contest. ECC is strong in features but weak when it comes to agility. For small and diversified production sites, the Microsoft AX "Hub and Spoke" concept appears to be more convincing. If I am asked to give a proper advice in strategy to SAP product life cycle management, I would opt for efforts to break down the SD/MM/PP complex into small objects that can be decorated by the customer at discretion if production is concerned that might be done on the basis of an "APO light".

The weakness of Microsoft is currently the fact that AX (formerly: Axapta) still falls out of the Office licensing scheme and the frightening low number of developers that are familiar with the software. However, the latest release of AX sports a virtual machine and a script-like programming language that speaks for a serious effort to attack the markets of SAP. It might be a correct perception that Microsoft is ready to enter every niche market, but so does SAP.

I acknowledge that there will be an XI boom in 2007 and I already have predicted a shortage in skilled XI technical people. However, I stand firm to my belief that SAP has not yet reached a practical SOA, although I am certain that they are on track and will take over leadership in less than three years from now.

Editor's comment:
As always, we welcome your input. Reply to this post or send your thoughts to mdanielsson@techtarget.com.

Matt Danielsson
Editor