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Why SAP struggles with innovation

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25th Nov 2009
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SAP may spend more than most developers on R&D, but it is failing to bring innovations to the market quickly enough, according to a respected IT industry analyst. Stuart Lauchlan reports.

Altimeter’s Ray Wang is one of the leading commentators on the German ERP giant and at the SAP UK and Ireland User Group conference in Manchester last week he summarised the company’s history for the past 10 years as “waiting for SAP to innovate”.

While there’s a widespread perception that SAP is bringing little that is new to the market, the problem is partly due to poor communication. In contrast to leading Cloud developer Salesforce.com, which spends around 10% of its revenue on R&D, SAP spends almost twice as much. In 2008, SAP spent $1.6 billion on R&D.

“There’s a ton of innovation going on inside SAP, but it's just not being communicated to customers. It gets mired down in the bureaucracy of SAP,” Wang said.

The result is that SAP is consistently late in product delivery and is currently lumbered with a Cloud strategy that is “all over the map”. The company’s big initiative in web-based ERP software, Business ByDesign, is being worked on, but is a year and half late and does not deliver what it's supposed to do, he noted.
 
To illustrate how SAP is being wrong-footed by smaller rivals, Wang pointed out how Salesforce.com CEO Marc Benioff, a consummate marketer, was making hay around the developer’s Chatter social media environment.

“How many people know that this already existed within SAP?” asked Wang. “It's called ESME and it was a social media experiment that SAP didn’t market. It’s a Chatter-like community that's already happening internally and externally. But the people who were volunteered for the ESME project were mired down in IP issues trying to get it out the door. It's a good example of something that just failed to be delivered.”

Wang focused on innovation as the key to economic survival and urged the audience to do all they could to get their hands on innovative technology.  “How do you take what you have invested in and make the best of it?” he asked.

“If you look at the macro-economic situation, we are going through the most difficult economic times. We have 10% unemployment. But the workforce is changing… Business models are being blown up and there's a general re-assessing of whole areas of the business. We're all talking about the pace of technology adoption. We're not thinking in terms of three-year cycles anymore.

“Things that we used to talk about just don't exist anymore. The traditional models of how we do business have gone away. CIOs are not longer determining technology adoption; the business does… It's during periods like this that we find out what the next set of ideas are.”

This article is an edited version of a longer piece that appeared on our sister site BusinessCloud9.com.

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