Anheuser-Busch has agreed to a $52 billion takeover offer from Belgian beer company InBev. The deal will create the world’s largest beer company and generate plenty of possibilities in the SAP domain, as both companies are SAP customers. Anheuser-Busch runs SAP online procurement and supply/demand chain applications (the BudNet portal tracks distributor sales in order to give Anheuser-Busch an almost real-time picture of demand) as part of its larger use of SAP for Consumer Products; Anheuser-Busch is also a Business Objects customer. InBev runs SAP CRM and HCM.
Since InBev and Anheuser-Busch don’t significantly overlap in terms of their use of SAP, there’s a clear opportunity here for InBev to take over (and, indeed, globalize) the SAP software that Anheuser-Busch has successfully implemented in the U.S. Meanwhile, InBev could export its SAP CRM and HCM instances to Anheuser-Busch’s operations.
It’s rare for two large companies in the same space to have such different SAP footprints, but in this case there’s a lot of upside for InBev. The combined entity will have a comprehensive, non-overlapping portfolio of SAP resources that could be very valuable in improving global sales and execution processes.
Demir Barlas, Site Editor
Menasha, a packaging company in Wisconsin, installed SAP R/3 in 1995. Some media reports estimate that the project cost roughly $23 million, including $5 million for a license, and over $16 million in expenses incurred as a result of paying SAP, Deloitte, and other consultants to modify the R/3 system; documents filed with the Wisconsin Court of Appeals indicate that the total cost was over $46 million. Whatever the case, Menasha reportedly made 3,000 changes to the SAP software after purchase.
Menasha paid Wisconsin over $342,000 in sales tax for the SAP transaction but argued that, because the system was so heavily modified, sales tax was not in fact owed on it (state tax codes typically levy tax on out-of-the-box software purchased by businesses, which is counted as tangible property under the law, but not on customized software). After thirteen years of litigation, the Wisconsin Supreme Court agreed with Menasha and ruled that the state could not collect sales tax on customized software. This has profound implications for Wisconsin, which will now have to pay back $265 million to businesses who have paid such sales tax over the years. SAP and other enterprise applications customers in Wisconsin who have modified their systems should anticipate receiving these sales tax refunds soon. The ruling brings Wisconsin into line with other states whose tax codes forbid taxation of modified software.
One pertinent question raised by the ruling is why sales tax is collected on enterprise software at all. True enterprise software is always modified, and not in any trivial way; as in Menasha’s case, it is the rule rather than the exception for consultants, integrators, and other providers of value-added services to modify enterprise software for business use. Logically, then, enterprise software should only be taxed as tangible property when such value-added services providers are not present and the software is truly out-of-the-box.
The ruling in Menasha’s case should encourage all U.S.-based SAP, Oracle, and other enterprise applications users to aggressively challenge their state department of revenue’s procedures. Under the letter of the law, there is no such thing as non-modified enterprise software, so why not attempt to recoup all sales taxes paid on such software?
Demir Barlas, Site Editor
It all started with a quote from Ray Wang of Forrester Research, as he mentions that SAP might be “getting rid of terms like ERP, SCM, etc, and transforming it all into about seven sections.” A comment that suggests a loss of individual labels for software modules and a focus on suites.
This was too interesting to let go, so I dug a bit deeper and contacted SAP for a comment. The SAP spokesperson I contacted mentioned Jim Hagemann Snabe and his appointment to the executive board. This was beginning to make sense; Snabe is responsible for product development of SAP’s Business Suite family of applications. Now the question seems to be: Is there a direct relation between Ray Wang’s comment and Snabe’s executive board status?
I spoke with Saswato Das, Director of Global Communications for SAP, regarding Snabe’s interaction, and all he could tell me was: “typically when one person takes over there is some change.” He went on to say that he could neither confirm nor deny the comment… but I wonder what he meant by “some change.” Am I the only one that is confused by all this?
Eric Samuels, Assistant Editor
Remember SAP’s Safe Passage initiative? Well, apparently a few Oracle customers never made it through safely.
Something interesting emerged in a recent judge’s order in Oracle’s TomorrowNow lawsuit, in which Oracle is suing the SAP subsidiary for copyright theft.
As part of its damages claim, Oracle says it lost “many hundreds” of customers, due to TomorrowNow illegally downloading Oracle’s intellectual property.
Yet, in the recent judge’s order filed in U.S. District Court in San Francisco, SAP says that 70, not “many hundreds of customers,” converted from Oracle to TomorrowNow and then to SAP.
That doesn’t seem to jive with claims SAP made two years ago. In 2006, SAP announced that it had lured more than 200 companies away from Oracle to SAP with its Safe Passage program. The program offered PeopleSoft and JD Edwards customers deep discounts to move to SAP, as well as the promise of maintenance for their current software via TomorrowNow, which SAP had recently purchased.
So, was it 70 or 200? SAP’s explanation:
“This is a routine disclosure matter and we won’t engage in media questions pertaining to such small specifics,” said SAP spokeswoman Lindsey Held.
Courtney Bjorlin, News Editor
SAP may be on the verge of reorganization, according to Ray Wang, principal analyst at Boston-based Forrester Research. The company hinted at the new plan on July 1, 2008 in Walldorf, Germany — but it is currently only a rumor.
However, if this turns out to be true, SAP may be, “getting rid of terms like ERP, SCM, etc, and transforming it all into about seven sections,” said Wang.
Check back often, and we’ll find out what SAP has to say about this alleged plan to reorganize.
Eric Samuels, Assistant Site Editor
I asked Steve Strout, CEO of ASUG for his take on the recent surge of customers upgrading to SAP ERP 6.0 since the latest enhancement package release. He was able to shed some light on the issue:
Well, I believe the 10,000 is a global number of ERP 6.0 customers who have or are in the process of upgrading. And I think the reason it was so “easy” for SAP to hit this number is the value that this particular release provides. First, it’s an extremely stable release. People are able to do a technical upgrade without much hassle. I know of people who have eliminated upwards of 70% of their custom code just by moving to this release. I also think SAP has done a tremendous job of making the migration a relatively easy one. I know that when I went from 4.6c to 6.0, it was a pretty straight forward process and we didn’t find any real surprises. We upgraded our single instance when I was CIO at Morris Communications by taking only 5 months for the project and the cutover weekend was literally a “non-event”.
There are many cases where having the most up-to-date software, which can often take steps out of a business process and reduce the transaction cost, can certainly be a competitive advantage. If a company doesn’t do upgrades on a regular basis and their competitors do, they could very well be at a pricing disadvantage.
And finally, I think people are realizing that they get access to a whole list of new functionality and ease of access to their technology that they hadn’t had before. In addition, I think if they are a reasonably sophisticated shop, they will start taking advantage of Service Oriented Architecture and expose access to their SAP environment and create new ways of taking out steps of a business process – thus reducing their overall costs. We are starting to see people use SOA technologies to innovate and create new ways for their business to do all new things. And this innovation can’t occur at the same price point with the older technology.
Words I think we all can agree with.
Eric Samuels, Assistant Site Editor
Recently SAP released its third enhancement package for SAP ERP. SAP began releasing these enhancement packages about two years ago. Since then, by offering free upgrade packages that offer industry-specific business processes, Waldorf has been fine-tuning SAP ERP 6.0 in an attempt to cater to the needs of all businesses.
Analyst Ray Wang of Forrester Research explains why so many customers have upgraded to ERP 6.0: “New functionality, progression to service-oriented architecture and enhancement packages provide significant incentives to upgrade to SAP ERP 6.0.”
That being said, will SAP acquire 100,000 customers by 2010? AMR estimates that SAP has nearly 45,000 customers to date, so the odds are not looking very good at the moment. The SMB space is critical and could be SAP’s savior in this regard, but all the chips seem to be placed on Business ByDesign. “It would be quite a challenge,” Wang says, “without a Business ByDesign or SMB offering that SAP can scale quickly. But will they be able to scale Business ByDesign in time?”
For SAP, that’s the billion-dollar question.
Eric Samuels, Assitant Site Editor
AMR Research has just released its CRM market analysis of 2007. There are plenty of interesting facts in the report, starting with the growth of the market. CRM revenue grew by a gaudy 12 percent in 2007, which AMR points out is “the strongest year-over-year growth for the segment since 2000.”
Here are the leading CRM vendors, with their 2007 total revenue and revenue growth rate:
1. SAP $2.7 billion (20%)
2. Oracle $1.9 billion (39%)
3. Salesforce.com $749 million (51%)
4. Cegidim Dendrite $602 million (82%)
5. Amdocs $522 million (14%)
6. Aspect $480 million (-2%)
7. Verint Witness Actionable Solutions $395 million (78%)
8. Microsoft $360 million (39%)
9. SAS $323 million (34%)
10. Avaya $267 million (2%)
The most impressive organic growth rate was posted by perennial SAP heckler Salesforce.com, but SAP’s much larger revenue numbers give it the last laugh. Given how late SAP entered the CRM market, it is no mean achievement. Siebel (later acquired by Oracle) had a head start of several years whereas Salesforce.com cornered the market on buzz, but SAP has demonstrated that it can dominate any segment of enterprise applications seemingly at will.
Something else to consider is that, of the top three CRM vendors, SAP has a possible edge in terms of global reach. Given SAP’s recent growth numbers in India and strong sales and development and footholds across Asia, for example, it seems likely that SAP CRM can crack the huge Indian and Chinese markets in advance of the other majors. If so, this would give SAP a continuing lead in CRM.
It bears repeating that, although these numbers might draw a ho-hum from people who are accustomed to thinking of SAP as a leader in various enterprise applications segments, they are all the more remarkable given the state of the marketplace in the early part of this decade. I still remember watching Tom Siebel in Los Angeles about five years ago arguing that Siebel’s CRM revenue would eclipse SAP’s total revenue by the 2010s, and a lot of audience members bought it. How much has changed since then!
Demir Barlas, Site Editor
We blogged earlier about the city of Burnaby, B.C.’s SAP project, which has sucked up millions of the Canadian town’s unbudgeted dollars due to project creep. That’s tragic for the citizens of Burnaby, who are paying for an expensive accounting system that may be more robust than their city needs, but there’s an undeniably comic element in the proceedings.
Apparently, according to journalist Brooke Larsen of BurnabyNow, Burnaby paid $100,000 for a report defending its decision to go with SAP. The report, which was provided by APT International Business Sciences (an outfit that, as of press time, had a placeholder Web site dominated by an ill-advised image of a burning tower), failed to discuss ROI and seemed instead to be a fig leaf for the city’s increasingly unjustifiable decision. The fact that the report was based exclusively on interviews of Burnaby city officials and workers was another embarrassing factor; surely there should have been input from outside authorities–including Telus, the systems integrator who pulled out of the project?
Burnaby must be rolling in wealth to pay $100,000 for fluff reports that would have been overpriced at $100. Thankfully for city government, the age of civic responsibility, or indeed basic awareness, is long dead; apathetic tax-payers would probably shrug their shoulders even if Burnaby decided to hold a public bonfire of tax revenues.
Demir Barlas, Site Editor
SAP is celebrating July with an executive shakeup. As of today, the SAP Executive Board has appointed the following new members:
Erwin Gunst: Gunst, formerly president of SAP’s EMEA division, is now COO as well as an Executive Board Member.
Bill McDermott: McDermott, formerly the president of SAP Americas, is now in charge of Global Field Operations.
John Schwarz: Schwarz, the CEO of Business Objects, is now on the Executive Board as well.
Jim Hagemann Snabe: Snabe heads up SAP’s new Business Solutions and Technology organization, which is in charge of the SAP Business Suite and SAP NetWeaver.
In addition to these Executive Board appointments, SAP has imported new managerial blood by appointing Jose Duarte as head of EMEA, replacing Gunst, and making Rodolpho Cardenuto president of SAP Latin America, replacing McDermott (who used to head up the Americas and APAC for SAP).
Demir Barlas, Site Editor