Q+A: SAP chief executive Henning Kagermann

Henning Kagermann is chief executive of SAP, Europe's biggest software company and the dominant global supplier of enterprise applications. He spoke to Computing in advance of SAP's Sapphire worldwide user group meeting in Orlando this week.

What's the priority for SAP this year?

We are going for market share and for efficiency as we prepare for growth. It's about focusing on the next growth engines, which are our integration platform NetWeaver, customer relationship management (CRM), enterprise resource planning (ERP) and the mid-market.

How will you persuade people to spend more money with you?

Companies spend too much time running existing IT infrastructures and not enough investing in new technology. We have to help them to decrease their running costs, and that will free up opportunities for new investments.

How are customers changing their spending?

There is still the same demand, but people are taking fewer risks and buying in smaller pieces. Our average deal size is now half what it was two years ago. In the first quarter of this year, 15 per cent of our software licence contracts were worth Eur5m or more each, which is not really huge. That figure used to be 20m euros.

How do you compare with your chief competitors?

We're not the best in class in all categories. I would say we're good in providing services - better than the big services companies. In our sales and marketing, though, I would say that Oracle is better. Databases are easier to sell.

What's your advantage against Oracle?

We understand the applications business and are focused on applications. We definitely have better and deeper products than Oracle. We deliver more reliably on our promises. Also, our products are more evolutionary than Oracle's. They made a big bet in 1999-2000 that their new products would be completely different, and people would have to rip out the old stuff. But no-one wants to do this. That's not the future of our industry.

How about PeopleSoft?

Some of what I said about Oracle applies to PeopleSoft. Also, our offering is much larger than PeopleSoft's. They have never been good in manufacturing and the supply chain. Their strength is administrative solutions in the service industries. They are very narrow in scope.

Microsoft now competes with you in small and medium sized businesses. Doesn't it have a better brand and reseller channel for that market?

From the brand point of view, we're okay. Microsoft's advantage is their channel. They're used to selling through the channel. For us, the challenge is to be as good as they are in building a channel. But we know a lot about different industries - and the mid-market is about industries, not generics. The market is pretty large, and there's room for more than two players.

Are you considering any acquisitions?

Not to buy market share. Only to complete the product portfolio, for example if we are not fast enough to come to market - as we did with portals - or in some areas of vertical solutions. It could be that we'd look to make an acquisition when it comes to the small and medium sized business market. Also, we have an open mind for acquisitions in some large future markets, such as China, where we could ramp up our channels better with a local arm.

How do you want to change SAP?

We have to accelerate the way that we bring products to market. It still takes too long to get many customers onto newer products. We also have to industrialise the process of making software, so that we know very early in the process exactly what we will be bringing to market, and so that we can commit earlier than we can today.

We also want to improve the design of software so that customers can take smaller pieces and fit them into their infrastructure and upgrade them individually, but without having too complex an environment later on.

What's the strategy for your xApps business process integration tools?

They are a different way for us to develop software and bring innovation faster to the market. Some will be bundled over time into the mySAP suite or into our industry-specific offerings. But don't expect them to be just another product that we sell on top of the suite -- they are agnostic to what's below them. They allow us to create new applications that will work as well in SAP environments as they do in other environments.

Doesn't SAP have a reputation for sending mixed messages?

Too often we use terminology that's not understandable to the outside world. If you listen to SAP people in different countries, it's not a consistent message, so it's no surprise that the media and analysts have different interpretations. We have many clients who've been with us for ten or 15 years, and it's difficult for them to keep up. We need to focus less on new announcements, and more on making the message simple and consistent.

Why did you drop the '.com' from the mySAP brand?

It was put there to emphasise collaboration, but collaboration is now an integral part of any business, and it makes no sense to highlight this now. We also dropped the 'e' from ebusiness in our advertising, again because it's now part of everyday life.

Why pick a fight with IBM, Microsoft and BEA by having your own middleware?

Our customers expect the same robustness and reliability in Java as they get with our ABAP language. That's why we had to do middleware ourselves. Customers understand this and have no issue with it. It's a core competency for us. We integrate with the others' middleware.

Surely you don't get the economies of scale they do?

We've got 20,000 customers. Let's talk about this again if it's 10,000 customers.

How important is wireless technology?

It's still just taking off. There are problems with too many devices, standards not being there, and networks charging too much for airtime.

What about radio frequency identification (RFID) chips?

Some clients are using this technology, but there aren't yet products that we can deploy to 20,000 customers. Maybe in two years' time.