Recruiting troops
In a sure sign that the company's moves are aimed squarely at Microsoft, SAP has stealthily sought to recruit Microsoft Business Solutions software dealers to sell its new competing product line. One major advantage Microsoft has in the small-business segment is its network of 4,500 software distributors. SAP typically sells directly to customers, and the lack of such a network has proved to be a stumbling block in previous attempts to reach smaller businesses.
SAP denies it's trying to appropriate the Microsoft dealer channel in its drive to build a distribution network for Business One. But among Microsoft distributors, SAP's overtures are "certainly the talk of the town," says Steen Frentz Laursen, a spokesman for Microsoft dealer Aston Business Solutions.
Laursen and a handful of other Microsoft Business Solutions resellers confirmed that SAP began to court them earlier this year, but they report mixed responses to SAP's offers. At least two of them, Tectura in Phoenix and ePartners in Dallas, have turned SAP down. Dan Duffy, CEO of ePartners, says he's wary of SAP's spotty track record in the small-business market. "As capital spending picks up, we're not convinced that SAP isn't going to retreat," back to larger companies, he says.
Yet others, such as Third Wave Business Systems in Elmwood Park, N.J., are taking the SAP bait. Korey Lind, president of Third Wave, said SAP offered her a chance to expand into new markets Microsoft doesn't serve. But since she signed up with SAP, Microsoft has been a lot less friendly. "I feel like I've been ostracised," says Lind, who relies on Microsoft for sales leads and technical support.
Analysts say SAP may appeal to a certain group of Microsoft resellers who feel neglected by Microsoft, whose restructuring over the summer has caused some confusion. "They're certainly cherry-picking some of these Microsoft resellers," IDC analyst Albert Pang says. "It's an obvious target."
However this escalating conflict plays out, analysts suggest it's yet another example of how the information technology industry is rife with "co-opetition," a phenomenon involving companies that both compete and cooperate as partners. Byron Miller, a technology analyst at Forrester, predicts that SAP's relationship with Microsoft will end up closely resembling the one it has with Oracle, which competes with SAP in the ERP software market.
"I would not call SAP and Oracle friends, yet most of SAP's customers run on an Oracle database," Miller says. "Microsoft will continue to support SAP running on top of its operating systems and databases. There's that one level on which they have to get along."
SAP has managed to stay several steps ahead of Oracle as a competitor. Will Microsoft prove a tougher opponent? Among the things SAP has going for it are an exclusive focus on business applications, three decades of experience, platform independence and the most comprehensive product on the market.
Microsoft has none of these, but it hopes to take advantage of SAP's weak points: the complexity and high cost of its traditional products. Esselte's Spund, for one, was convinced. The high price of installing and maintaining SAP's application helped swing his company's decision in Microsoft's favour. "It was equally viable to spread SAP all over the world," Spund says. "It's just more costly."
