SAP: build to flip?

Executives from SAP added more color on the decision to decelerate the rollout of Business ByDesign, it increasingly looks like the management is moving more firmly into sales mode with a view to enhancing profitability.Several times during the day, board members Leo Apotheker and Henning Kagermann, the joint CEOs referred to sticking with development of the core suite and not racing off into innovations like Web 2.

Executives from SAP added more color on the decision to decelerate the rollout of Business ByDesign, it increasingly looks like the management is moving more firmly into sales mode with a view to enhancing profitability.

Several times during the day, board members Leo Apotheker and Henning Kagermann, the joint CEOs referred to sticking with development of the core suite and not racing off into innovations like Web 2.0/Enterprise 2.0. During a discussion with James Governor, Kagermann said: "It's not that we want to be fixed in the backbone, but that's where we have no competition. You can damage your brand with chaotic approach."

Earlier in the day, I asked Pascal Brosset senior vice president, SAP portfolio strategy about SAP's vertical market strategy. He reiterated SAP's desire to stick with developing the core: "Our customers consistently tell me that's what they want," he said. Implicit in that approach is that customers want better value for money and a long term reduction in TCO.

I see this as SAP putting itself in a position where it cannot be easily beaten for core ERP functionality at scale while leaving the hard pieces to others. This allows the company to maximize its R&D investments (which are falling in percentage terms against sales) and so make it much more profitable. A couple of points on the top line  is a large number that drops straight to the bottom line. The question then becomes whether SAP is trying to build itself into a cash cow which might be attractive to an IBM or Microsoft. The opinion among the bloggers I met was exactly that.

Watch this space.