The Game of Leapfrog, SAP Style

SAP's fourth analyst conference has come and gone, and my fellow bloggers (Farber, Nolan, Howlett, among others) have already weighed in extensively on the medium and the message that will guide SAP into the new year. I'll try another tack -- the venerable second-day lead, aka the round-up article written by a blogger who was too encumbered by two massive days of firehose-level input to try to manage some output until he had made it back safely to his office the following day.

SAP's fourth analyst conference has come and gone, and my fellow bloggers (Farber, Nolan, Howlett, among others) have already weighed in extensively on the medium and the message that will guide SAP into the new year. I'll try another tack -- the venerable second-day lead, aka the round-up article written by a blogger who was too encumbered by two massive days of firehose-level input to try to manage some output until he had made it back safely to his office the following day. 

So, here's the lead: SAP leapfrogs the competition. Bearing in mind that the game of leapfrog is never an endgame, but part of a continous, bouncing, advance in a somewhat forward direction, SAP took a big leap this week and jumped out in front of pretty much all three of its main rivals -- Oracle, IBM, and Microsoft. Also bearing in mind that leapfrog is best played out by having what was definitively the latest analyst conference among the Big Four, SAP has taken the strategic high-ground for the remainder of 2006. And, depending on its fellow leapers, SAP could have jumped itself into front-runner position for quite a while. 

This is happening in several ways. In the category of overall market leadership, SAP took the biggest leap of all, and landed squarely in the process. On the morning of the second day of the conference, SAP's Peter Zencke unveiled what the company calls a "SOA by Design" platform that effectively will let a mid-market company switch on or off a select set of processes that in turn will yield a pre-configured MySAP system. To answer one of Dennis Howlett's questions, this will in turn be potentially available in SaaS mode, which of course is exactly what the mid-market would love to see. The Zencke demo was definitely a live demo, running on a system back in Waldorf, and complete with a "server not found" error message. But it had the right effect: highlighting not only SAP's ability (thanks to its partnership with IDS Scheer) to model complex business processes in a SOA environment, but also showing that, underlying the theory of SOA and the theory of model-based deveopment are some very serious and extensive business processes that SAP owns and can deliver to its customers' advantage.

What the mid-market will be getting when this comes out, possibly as early as mid-2007, will not even begin to approach the industry-specific business processes that SAP will bring to bear for its enterprise customers. Fine -- the mid-market customer that wants deep vertical chops will move upstream to a more comprehensive SOA-based process platform that will deliver best of class processes for their specific vertical market. But the frog definitely leaped when a Zencke could show a real business process configuration environment that used SAP's processes to create a living model of a business.

The frog also leaped in terms of some of the data that SAP shared on the upgrades for MySAP. The company has some 500 live implementations, and another 5000 that have at a minimum turned on their registration keys and started working. These are very decent, albeit early numbers, for the much awaited ramp-up to the next generation of SAP technology and the promised land that the company hopes to lead its customers to. Also important was the rate of registration -- 700 per month, which is where Shai Agassi gets the "10,000 customers by the end of 2007" number that Jeff Nolan eludes to in his blog. Agassi meant registrations, not live implementations, and the distinction is not insignificant. But the momentum is important -- you can't cross the Jordan until you get to the river's edge. And, I would contend, these registration numbers are indicative of a critical mass of customers ready to take the plunge. 

My final contention that SAP has leapfrogged the competition comes from its ecosystem push. This ecosystem is becoming a major differentiator, SAP's Henning Kagermann contended in his keynote speech. And it will be up to him to put some real numbers behind that contention, instead of faking them like some competitors are wont to do. But SAP's ecosystem efforts are so big and so extensive that things could actually get out of hand if they're not well-managed. In addition to the more well-known Powered by NetWeaver and other formal certification programs, SAP is out creating Industry Value Networks, Community Definition Groups, and drawing in partners around sub-ecosystems like Governance, Risk and Compliance, Analytics, and, potentially, Duet as well. No one has a network like this around its technology and applications -- in fact, only IBM can come close, but that's really driven by the opportunity that Global Services provides as a channel for vendor offerings. This is a real ecosystem, not an egosystem, and it's going to grow to be an even bigger differentiator than it is today. 

So how long will the leapfrog effect last? SAP would like to think it's permanent, and in some cases, like the ecosystem, it may well be an advantage for a long time (even against Microsoft, which has some serious ecosystem chops). The upgrade factor may be sustainable, depending on how SOA-ready you think Fusion Middleware and .NET really make a customer. But I think the Zencke demo, if it can be followed up in 2007 by some real product, will be the truly lasting effect. SOA by Design was beyond cool: it was a glimpse into the future of enterrprise software, by a company that could make that future a reality sooner than anyone else.