META Trend: During 2004/05, Tier 1 ERP vendors (e.g., Oracle, PeopleSoft, SAP) will focus on building comprehensive application infrastructure for commercial sale, albeit with limited appeal to non-ERP shops. On the other hand, standalone/emerging vendors (e.g., CRM, SCM) will leverage commercial infrastructure (e.g., BEA, IBM, Microsoft) to facilitate application integration. Through 2007, vendors will evolve to service-oriented architectures. Concurrently, proprietary development environments will merge with ubiquitous tools (e.g., Eclipse, Visual Studio .Net) to support new application development.
As the conflict between functionality and verticality has begun to slow for major ERP vendors, a new competitive battleground has opened up: underlying technologies outside the usual core competencies of application providers. To date, Oracle - the first ERP vendor to have all the pieces available - has difficulty communicating a comprehensive end-to-end data warehouse story embracing both technology and business applications. In contrast, SAP has been increasingly aggressive in the technology area with a strong marketing message. Components that formerly were grouped as mySAP Technologies are now sold under the brand SAP NetWeaver and represent a collection of underlying technology components for an application backbone. In the current fiercely competitive economic climate, SAP addresses a new business and IT challenge: mastering data and process integration to support innovative business strategies. But customers new to the NetWeaver strategy may not fully understand the potential for the new NetWeaver architecture. More and continued articulation of how NetWeaver will serve the SAP installed base is required.
Although NetWeaver represents a major step for SAP in terms of addressing the needs of its installed base - while fighting increasing competition from IBM and Microsoft, not to mention its traditional ERP competitors - the implications for client enterprises will be more evolutionary and have significant consequences for the IT landscape. Enterprise architects and planners need to understand the full potential of the offering and be aware of possible conflicts with existing products from other vendors.
During the next few years, we foresee an intensifying competition in the infrastructure field as business process integration gains ground. By 2007, we expect ERP vendors to be split into two groups: a very small group that will own its infrastructure (SAP, Oracle, Microsoft, and potentially IBM) and a much larger group that will be dependent on others’ technology infrastructure and will, therefore, be dependent on their proliferation. This is also being driven by several developments:
Although SAP seeks to brand NetWeaver as one product with one release cycle and one integrated set of infrastructure applications - a clear differentiator - SAP must continue to merge the initially independent set of technology components that compose NetWeaver, including the following:
One additional component of NetWeaver is Mobile Infrastructure, which we will review subsequently. SAP offers the entire technology stack described above under the name NetWeaver ’04 (assuming that there will be annual upgrades) and represents a new level of competition with IBM and Microsoft (and a couple of other technology vendors for EAI, DW, portals, etc.).
Bottom Line: SAP customers can safely adopt mature components of NetWeaver (e.g., Portal, BW) now and begin working with newer components (e.g., XI, MDM). As NetWeaver components mature and are fully integrated, SAP customers will have the opportunity to achieve lower total cost of ownership relative to deploying numerous, competing technology components (e.g., WebSphere, Vitria).
Business Impact: As providers offer unified (and well-integrated) infrastructure facilities, enterprises will have an increasing opportunity to reduce technology management costs over time.
META Group originally published this article on 20 May 2004.