The German company faces what some pundits argue is the commoditisation of software, in which companies like salesforce.com offer cheaper software through monthly subscriptions. The other threat comes from companies like Google that are expected to take advantage of the fact that the next phase of software technology for companies is being generated via the web.
But SAP has got itself into a good shape for the battle ahead. CEO Henning Kagerman has developed some interesting policies to reach his goal of increasing the company's market from $30bn to $70bn by 2010.
He has built in some special compensation schemes to encourage employee performance: any employee from top to bottom is entitled to a special one-off perk such as the doubling of his or her annual salary if they have made a significant contribution to reach targets.
The company has increased its global reach by, for instance, expanding into the US and by setting up offices wherever its clients go, such as India, China and Bulgaria. SAP also has entered into an important partnership with Microsoft in a venture called Duet; this will enable it to give Microsoft Office users powerful back-office applications.
With the upcoming competition with the likes of Google and Microsoft, one thing to look at is whether SAP can go beyond its first original idea (bringing the power of the mainframe to the desktop), a tough call for any great company.
Source: Computer Genius,
Newsweek, 31 July 2006
Review by Morice Mendoza