Commentary: Big changes for NetWeaver

By Forrester Research
Special to CNET News.com
March 5, 2004, 8:27AM PT

Laurie Orlov, Research Director

SAP is wrenching its engineering approach from building visible applications to designing components built on its NetWeaver technology stack. Customers will see little near-term change, as SAP moves into the integration and infrastructure software market.

SAP executives talk excitedly about the impact that their "comprehensive integration and solution platform"--also known as NetWeaver--will have on the total cost of ownership of enterprise software. SAP executives claim that NetWeaver, first announced in January 2003, will enable SAP to switch from:

• Producing applications to creating industry processes built on components. Companies have spent plenty of money implementing SAP offerings like supply chain management (SCM), sales and distribution, and customer resource management (CRM). But when it is time to create a coherent business process for global shipping or make-to-order cars, companies have had to hardwire new processes together. By combining predetermined Industry Solution Portfolios with a service-oriented component architecture, SAP wants to make it easier for customers and partners to develop and deploy these processes.

• Selling the all-encompassing suite to delivering multivendor integration. SAP executives acknowledged that historically, the vendor has not made it easy--or cheap--for its customers to link SAP applications to those of other vendors. With NetWeaver's process integration layer, which includes both integration broker and business process management functionality, SAP hopes to provide integration software instead of handing that market to others, like IBM or SeeBeyond.

• Building applications on proprietary technology to providing an open platform. With NetWeaver, SAP is capitalizing on the infrastructure it established with the now-defunct SAPMarkets, SAP Portals and a yet-to-be-released Composite Application Framework (CAF) for crafting xApplications, which extend a company's existing SAP application environment into new applications that span a company's partners, customers and other non-SAP-centric parts of the enterprise.

The goals? SAP will roll out new applications--such as its Global Trade Services (GTS) application--that link in data about landed costs and trading compliance far faster than its historical multiyear track record. Furthermore, SAP hopes that partners will step forward and create their own xApplications on the NetWeaver platform.

Promise, but limited visible change
SAP's strategy to rearchitect is inevitable and well thought out: Its previous solutions that went beyond R/3, like SCM and CRM, were a long time in the development hopper, pushing users into the laps of best-of-breeds like i2 Technologies and Siebel Systems. SAP needed a platform to build new solutions quickly--and enable linkage to non-SAP data, both of which are promised with the NetWeaver stack. While SAP gradually replaces the foundation elements of its giant applications portfolio, customers will see limited near-term impact as:



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• Various stack components are version 1 or to be delivered. SAP is planning a new release of its XI (Exchange Infrastructure) offering in 2004. But the current version is still immature. CAF--the xApplications key to linking together objects, services, processes and a user interface--will not ship its first version until the second quarter of this year.

• SAP's sales force will still do what it knows: sell preintegrated packaging. Despite its efforts to market NetWeaver as a compelling development infrastructure, SAP is circumspect about pricing. Its sales force will not directly sell NetWeaver but will instead bundle it as an underlying infrastructure to other applications seats it can sell to extend its own applications footprint--such as offering the new GTS application linked into SAP's R/3 or linked to Oracle, if that's what the customer is running.

• Function-feature comparisons may favor best-of-breed. SAP is careful to sidestep direct comparison with stack layers from other vendors--like comparing its Web Application Server to application servers from IBM or Microsoft. Its key value proposition? Preintegration between applications and platform technology. But SAP customers already running software from integration and infrastructure ISVs like BEA Systems or WebMethods will look at each NetWeaver element on its merits--and favor best-of-breed offerings that are more mature, more functional or more open.

Waiting can bring benefits
The target market for NetWeaver strategy is its own 20,000-strong installed base of customers that badly need to derive information from multiple sources--not just SAP. Customers like Dow Corning are a reality check on waiting for SAP to deliver. Despite its single instance of R/3, it is running Haht Commerce as a storefront, Lighthammer's business intelligence solution, Siebel for CRM and Microsoft BizTalk for integration--and evaluating NetWeaver capabilities like the CAF for future solutions. The real benefit NetWeaver represents? Over the next few years:

• SAP's engineering approach will deliver much-needed flexibility. SAP's loyal customer base needs the accelerated pace of software change NetWeaver promises. Once the SAP engineering organization fully transitions to NetWeaver's services-oriented architecture, SAP will accelerate the pace of shipping both individual upgrades to existing app modules or bundling application modules into new processes demanded by its chemicals or automotive customers.

• Customers will see third-party vendors build an ecosystem around SAP. While SAP executive board member claims reluctance to aggressively seek value-added reseller and third-party developer applications for NetWeaver, an extended ecosystem around SAP will form that will be attracted to the SAP customer base and to the greater ease of building new processes and applications around it. This ecosystem will offer SAP's customers new ways to build on their existing SAP investment--including new collaborative applications on both the buy side and sell side.