I don’t think anybody’s really speculated that SAP will do anything but stick to selling software. It seems unlikely that they’d target this “one stop-shopping” approach Oracle is pushing (Sun acquisition) when the partnership approach SAP’s taken to infrastructure has worked so well over the last few years.

However, SAP’s also been very open in the past year that in terms of selling software, it knows it can no longer develop everything organically that it needs to stay competitive.

In that light, it leaked a couple of weeks ago that SAP was looking at a big purchase – even somewhere in the neighborhood of $2.1 billion.

There’s lots of speculation on who it may be, or whether there’s really any truth to the rumor at all. But there have been rumors swirling around SAP possibly acquiring Tibco or Software AG.

Are these rumors given more credence with Oracle’s announcement of the new version of its Fusion middleware today? My colleague Ed Scannell, who covers Oracle, wrote that the new middleware will, “take better advantage of cloud computing, SOA, service-oriented security and collaboration.” The suite allows each module to share a wider set of common services and functions with all the others.

“Customers … told us they need broader but integrated solutions instead of piecing together a lot of individual moving parts themselves,” said Hasan Rizvi, senior vice president, Oracle Fusion Middleware Products.

To give you some sense of how impressed analysts are with the product, Forrester’s middleware guru John Rymer told InfoWorld that Oracle was “stepping out of IBM’s shadow” in terms of middleware.

In our recent reader’s survey, more than 200 SAP professionals who participated cited integration as a major challenge.

Apotheker told the Wall Street Journal there was one difference between him and his predecessor, Henning Kagermann.

“Henning has an infinite amount of patience,” he said. “I do not.”

Perhaps it’s this disposition that will drive SAP to make its next big acquisition a middleware booster?

Figures from Gartner Research’s most recent North American ERP market share report — which ranks the vendors through 2008 — show that doesn’t seem to be the case.

SAP’s share of the North American ERP market decreased from 28.3% in 2007 to 26.8% in 2008. In turn, Oracle’s decreased from 12.9% in 2007 to 12.7% in 2008.

SAP and Oracle are still one and two, respectively, in the North American enterprise software market by a wide margin. But in looking at these numbers, the more interesting question is, who’s taking market share from them?

According to Gartner, Sage’s ERP market share increased from 7.2% in 2007 to 7.9% in 2008. Infor stayed level year-over-year at 6.1%. And “other” vendors grew from 41.7% to 42.7%.

It’s interesting to look at the Tier 2 vendors. Panorama Consulting conducted an ERP software comparison back in March that indicated Tier 2 vendors were holding their own with Tier 1’s in terms of customer satisfaction. Customers were most satisfied with SAP, followed by Tier 2 vendors, then Microsoft and Oracle.

And as evidenced by the SaaS strategy announcements of SAP and now Oracle over the past couple of weeks, it seems on-demand vendors are now a threat as well.

Most recently, Oracle CEO Larry Ellison did a complete 180 on the SaaS-front, now boasting that in less than a decade’s time, Oracle will be the number one on-demand software vendor. It’ll sell its Fusion Applications — its new generation business suite– on-demand and on-premise.

SAP hasn’t expressed desire in such a coup. In keeping with its enterprise strategy of increasing its footprint within its installed-base, SAP will only sell on-demand software to them. For the smaller guys, it’ll sell Business ByDesign — when it’s ready.

Up until now, SAP and Oracle have been plenty profitable without a full-line of SaaS applications. But are the Tier 2 vendors’ successes in economically-troubled 2008 an indication that customers are looking for some less-expensive options?

The long and short of it is this - a more than a year long, costly SAP implementation with less than ideal go-live and upset staff members.

In fact, employees are so unnerved, they’re being offered workshops in managing excessive pressure within teams, coping strategies for abnormally high workloads and dealing with difficult situations/conversations, according to the ComputerWeekly reports.

We’ve been down this route before on SAP Watch — are go-live problems the software’s fault or the businesses’ and systems integrators’ fault?

Not having the right skills on the ERP implementation team, and lack of buy-in from employees once it’s launched are the two biggest causes of ERP implementation failures, according to a Panorama Consulting Group report.

Now this isn’t a failed SAP project, but I’d think the same holds true here.

Recently, Forrester Research’s Liz Herbert did some interesting research on the challenges SAP customers are having with their systems integrators.

It’s worth pointing out that overall, companies were quite happy with systems integrators. That said, there were a few areas in which they’d like to see improvement that seem to speak to the Somerset County Council’s experience.

For one, companies want more help with change management. Companies want systems integrators to share best practices on helping people transition to these new systems. Judging from the workshop sessions Somerset County’s offering their employees, that seems particularly like an area in which they could have used some help.

But systems integrators can’t take the whole blame. Take this anecdote from “Bev,” a response to an SAP Watch blog on whether SAP certification was the right way to ensure successful SAP implementation.

“Two years ago I was approached by Managing Director (automotive parts manufacturer) to look at their SAP system that is productive for 8 years. The MD was very upset due to the endless Euros spent by IT to upgrade and build custom solutions, sick and tired of consulting partners coming and going. The bottom line was that the company continued to have high inventory and poor on time customer delivery performance (50%); therefore making too much of the wrong thing.

The usual approach by consulting partners was to come in and do some fancy add-ons, custom reports, etc.

 In order to re-design, we started from scratch, two teams: a SAP expert in production (and SCM) and good manufacturing expert (not SAP). We eventually found that 50% was a SAP problem and 50% was related to good old manufacturing methods. This created the ideal synergy to optimize SAP and change manufacturing methods, then only did we make a difference.”

Changes in the business process were needed to prove the outcomes they were looking for. And that’s one way companies can ensure better work with systems integrators.

Putting business-focused outcomes rather than deadlines in the contract is one way to ensure focused, and henceforth successful, projects. For instance, Herbert recently worked with a phone manufacturer that put KPIs concerning inventory turns in its contracts during an SAP implementation.

What tips do you have for ensuring successful SAP implementations?

Larry Ellison, he recalled, once told him that what really helped Oracle take off was IBM announcing it was working on a relational database.

At the time, Oracle had the best database technology, and IBM acknowledging that relational databases were a big deal simply elevated Oracle’s profile, Nelson said.

And, as his story goes, Ellison said, “Someday, SAP or Microsoft will do the same thing. They’ll start talking about the importance of what you do, but won’t be able to deliver on it yet.”

SAP’s announcement of its on-demand strategy is “another IBM moment for us,” Nelson said. “The opportunity in front of us is huge. With SAP’s announcement today, everyone realizes [SaaS] is the future of software.”

And, he said, customers aren’t going to wait around for SAP to get it right.

So is SAP too late to the game? It’s no secret that SAP has struggled to get an on-demand strategy off-the-ground. Business ByDesign still isn’t fully to market yet.

But there’s one important difference with its new strategy for enterprises — it doesn’t seem to want to re-invent the wheel anymore. While SAP sells CRM on-demand, and promises Business ByDesign is still coming, there’s no indication, at least now, that’ll it’ll develop on-demand, back-office applications for large companies. Customers, it envisions, instead will use its on-demand applications to augment line of business functionality in their on-premise systems.

Maybe developing back-office, on-demand apps is a game SAP no longer sees as winnable, or perhaps, profitable.

It’s something that seems to be guiding the on-demand strategies of the mega vendors now.

SAP’s push to extend line of business functionality in an on-demand manner is very similar to Microsoft’s “Software plus Services” strategy, a hybrid of on-premise and on-demand software.

Oracle seems to be following suit. In May, the Wall Street Journal reported that Oracle was working on seven new on-demand offerings — applications that would help businesses run sales campaigns, keep track of employees and job applicants and manage marketing.

It’s an approach that is validated by the deal Siemens signed with SuccessFactors this week — which, at 420,000 seats, is one of the biggest SaaS deals to date. Siemens didn’t rip out its SAP HCM deployment. It’s simply augmenting it with talent and performance management software.

SuccessFactor’s Paul Albright told me that its strategy is to act as a partner with the big vendors, rather than rip and replace deep-rooted back office software. They’re eight years old and this year are on pace to bring in $140 million in revenue, so it seems to be working.

“We see ourselves as complementing the investment companies have made in an SAP or Oracle,” he said, adding that they have more than 1,000 SAP and Oracle customers running their software

I think SAP will still pick up customers once Business ByDesign, its SaaS ERP, goes to market, which analysts expect sometime next year.

And I don’t think Oracle making things more interesting by buying NetSuite (Ellison owns a majority stake in the company) is far-fetched at all. Nelson wouldn’t bite Wednesday when I asked whether there was truth to those rumors.

But are the mega vendors signaling that their major on-demand strategies will leave the back-office, on-demand deployments to the NetSuites of the world?

The middleware leader is getting ready to deliver a tool — Tibco Silver — for building enterprise grade applications of top of a public cloud infrastructure, according to SearchSOA.com. The applications will run on Amazon and EC2 for now, but they’re planning on supporting other cloud providers in the future.

Back when Oracle bought BEA Systems, there was lots of talk about SAP perhaps buying Tibco. Bloggers and analysts engaged in loads of commentary on what SAP needed to boost its own middleware – NetWeaver — and why Tibco would make an excellent acquisition. Much of this is summed up well in this 2007 blog by ZDNet’s Dennis Howlett.

In turn, a recent Forrester Research report ranked Oracle’s Fusion middleware ahead of SAP NetWeaver, touting its broader set of tools, and better support for openness and standards.

Tibco’s still available — could it bolster SAP’s middleware?

Add to that scenario the benefit to SAP’s cloud computing strategy, and Tibco’s looking good. SAP has said repeatedly that it’s trying to find a way to accommodate enterprise customers in the cloud. That’s a governance challenge that Tibco is going to tackle with Silver, Tibco’s Rourke McNamara, head of product marketing, told SearchSOA.com:

“We have been looking for a way to make the cloud useful to enterprise customers, and have talked to them about stumbling blocks such as the lack of governance, lack of portability of skill sets and code, and security.”

According to the article, Silver also features integration as a service, built on Tibco’s core service bus technology, which simplifies the process of sending and receiving data with other enterprise applications like SAP, Oracle Financials, and Siebel.

Plus, the product sounds as though it’ll be platform agnostic — the direction SAP is indicating they want to go with the cloud.

Might Tibco make a nice 2009 acquisition for SAP?

But the financial crisis in September slashed spending by SMBs, sank SAP’s earnings and sparked hundreds of millions in cost cutting measures across the organization.

So I wondered how SAP would spur sales in this segment again. Selling software to small and medium-sized business remains one of the main legs of SAP’s strategy, Enslin said. He said, in general, the industries SAP is selling well into now include the public sector, financial services, retail and utilities. Plus, Business ByDesign, its on-demand ERP, is still coming — though he couldn’t say when.

Moreover, SAP will be “flexible” in terms of how it sells software to these customers.

“We’ve got a big financing [program] on right now. We would do different commercial models today how we sold to these customers,” he said. “It’s not one commercial model, up-front. It’s whatever suits the customer.”

But Oracle, which has been pretty absent in this segment, may have signaled its entrance by purchasing Virtual Iron, which makes server virtualization management software.

Virtual Iron was nipping at the heels of Citrix, VMware, Xen and Hyper-V, mostly in the SMB market, according to Chris Carter, CTO and CEO of CCI, a Milwaukee-based consulting firm which specializes in SAP virtualization.

What remains to be seen, Carter said, is whether Oracle will take Virtual Iron and make it part of its virtualization software, Oracle VM, to bring to the enterprise market, or whether whether Oracle will take its applications to Virtual Iron, and therefore, the SMB market, Carter said.

In that case, they’d be able to offer SMBs a complete package of hardware [i.e. the Sun acquisition], virtualization software and business software.

SAP’s approach to virtualization – agnostic to what platform its customers use and leaving its execution to partners — has so far served it well, according to analysts. Plus, it has far more to offer in terms of business software — including SAP Business One and SAP Business All-in-One, its flagship ERP software packaged for SMBs.

But does SAP need to do more now that Oracle could be entering one of its major markets?

The idea of “going green” is nothing new for the company; late last year, SAP said it wanted to help its customers drive corporate sustainability with its ERP software. But it was SAP’s approach, which leans more towards the business benefits of sustainability rather than the environmental, that grabbed my interest during a roundtable session Wednesday.

 “It’s not about green philanthropy per se,” Peter Graf, SAP’s chief sustainability officer, said in the session. “It’s about business, so I think creating a business case for sustainability is an important job.”

Graf stopped short of saying the environmental aspects weren’t as important. He did emphasize their benefits, though he mentioned how SAP had a moral obligation as a market leader to indulge in sustainability, but the ultimate goal was more to focus on the business side.

As such, Graf discussed the company’s recently-unveiled 2008 Sustainability Report, as well as the SAP Sustainability Map, a tool meant to take its ongoing stakeholder conversation about the sustainability needs of customers to the next level. Moreover, SAP also put up a Sustainability Stakeholder survey to further discussion and feedback.

The report itself incorporates an interface based on Xcelsius software, which stakeholders can use to analyze and view SAP’s reporting data in accordance with their needs (i.e., readers can analyze green house gas (GHG) emissions reporting data from SAP by entity or employee, worldwide or regional, by scope and by source of scope emission).

But the report, Graf said, is only the first step. “The goal needs to be that we get more visibility around these things in more real-time scenarios,” Graf said. “People will want to see this in a much more frequent way.”

Hence the Sustainability Map. “The Sustainability Map allows for a more structured approach to understanding and communicating customer requirements,” Graf said in a statement at the time of the report’s unveiling.

Of course, SAP raised the curtain on the report to coordinate with its announcement that it has acquired Clear Standards, Inc., an innovator of enterprise carbon management solutions. With the move, SAP said it hopes to speed up its ability to meet carbon management requirements of organizations for better transparency by the public. The company plans to allow Clear Standards to tap into its financial and other data stored in such applications as Business Suite 7 and its Environment, Health and Safety Management app.

So, naturally, I was left to ask myself, What’s the goal here? Well, the company already has plans in place to reduce its total carbon footprint back to its year-2000 level by 2020, or a 49% reduction of its 2007 baseline GHG emissions. (The company was able to reduce its footprint by 6.7% last year compared to 2007.)

The idea of visibility with the Sustainability report and map certainly fit in well with Sapphire’s slogan of “It’s time for a clear new world,” which in turn points towards the reduction of carbon emissions and hiking up the visibility. Needless to say, I’m interested to see how things will pan out on both ends.

The big problem seems to be delivering on-demand software in a “profitable” way. This InformationWeek article offers a great behind the scenes look at what’s going on with Business ByDesign, including what types of “major reconstructive surgery,” it may need before it can be profitable enough to make generally available.

Cloud computing is the “OctoMom” of the technology news industry. And it’s tempting to think that because SAP doesn’t have an on-demand ERP in the market, it’s, as this Reuters article states, “being left behind” as other vendors sell the software.

But just because Business ByDesign isn’t on the market yet, does it mean SAP’s behind in cloud computing?

I spoke with many customers at Sapphire about what types of projects they’re working on this year, and what their strategies are for the future. Few mentioned any cloud-based projects.

Some still weren’t exactly sure what is indeed meant by the term “the cloud.”

In turn, SAP certainly wasn’t trying to hide Business ByDesign, or the company’s on-demand efforts — which include delivering on-demand expense management and human capital management “soon.” Apotheker pointed out that SAP sells CRM, procurement and sourcing and SAP BusinessObjects software on demand.

CEO Leo Apotheker included, albeit briefly, Business ByDesign in his keynote and invited attendees to demo it themselves to “kill a rumor” at one of the booths on the show floor. It’s something analyst Joshua Greenbaum did and said in his blog it “looked and acted pretty robust.”

And Apotheker certainly didn’t discount “the cloud” as a very important delivery model. In fact, most of his keynote focused on how SAP would make its software easier to deploy, lowering the total cost of ownership for its customers.

“I firmly believe that cloud computing is coming down to earth,” Apotheker said in his keynote. “Private clouds are becoming a totally feasible possibility.”

 What do you think?

To that end, the executives named pieces of software or products a company could buy now to have an almost immediate impact on business.

1. Try SAP BusinessObjects Explorer for free. Check it out here.

2. Invest in a Best Run Now package — special software packages geared to helping enterprise-size companies weather the economy, complete with implementation services and financing as low as 0% for 12 months. The packages, some of which can be deployed in a matter of weeks, include software for managing cash, liquidity and financial risk, managing the workforce through rapid change, and business planning and consolidation.

3. Take advantage of SAP services — including Solution Manager, SAP Enterprise Support and landscape optimization

4. Look into some of the third-party products offered through EcoHub, its partner product review site

That’s how SAP’s Bill Wohl, who wanted to chat about SAP’s new Enterprise Support agreement, opened up a conversation with me Wednesday. He was referring to Oracle’s decision to give its users on older releases a couple more years at the rates on their current contracts – 22% of net licensing fees

My ears perked up. Nothing like a little SAP vs. Oracle baiting– the Red Sox vs.Yankees of the enterprise software world — to brighten a dreary Wednesday afternoon.  

SAP, of course, is riding a wave of good will churned up by its recent decision to delay implementing an SAP maintenance fee increase until it proved it was worth the money. It’ll do this by tracking certain KPIs on a group of 100 customers.

“We have really worked exceptionally hard through some very painful moments in collaboration with our user groups to figure out a formula and I think we’ve found one now,” Wohl said. “That’s pretty much game changing.”

“The best [Oracle president] Chuck Phillips can do for his customers is say ‘I’m going to delay raising your price for a year or two’ on a bunch of legacy applications that we’ve not innovated in three to four years?,” Wohl said. “And so I’m left asking the question, do they really get it over there?”

OK Oracle you’re up. And SAP’s just thrown strike one.

But before we play any further, let’s remember that SAP sort of threw a ball on this issue to begin with. SAP introduced Enterprise Support back in July, and launched it in January. It didn’t have this formula attached to it then — that was something negotiated by user groups.

“I admit it, we went to the woodshed and back and for some user groups this was really a serious issue,” Wohl said.  ”But I still maintain through it all the issue was really a function of, how do we describe the value proposition for our members? Price became a lightning road, but it wasn’t the biggest issue. The biggest issue was —show us the value.”

Fair enough, but what about those like Salesforce.com’s Mark Benioff — who say these software maintenance fees aren’t even worth it in the first place — you know, his recent calls for “the end of maintenance?”

“Mark would like the world to believe that because it’s a good sound bite that there is no cost of maintenance in on-demand software and that’s just not true and he knows that,” Wohl said, adding that it’s “baked in” to the per seat cost.

Moreover, Benioff is also “trying to play in a big-boy’s game without a solution that gives him legitimacy to play. He’s not offering a solution comparable to SAP, or to Oracle for that matter, by any stretch of the imagination. He just wants to play in the game.”

So who’s really ahead in the count on when it comes to maintenance fees?  Does SAP now have the upper hand on Oracle? Or do vendors like Salesforce.com, who, like the Tampa Bay Rays in the American League East, still threaten to be a contender?