Standing before a capacity crowd of 14,000 CEOs and IT executives from customer and partner organizations at SAPPHIRE '07, Henning Kagermann, CEO, SAP, outlined the next steps businesses will need to take to outpace competitors and commoditization in the years ahead. Kagermann underscored the importance of business network transformation -- the optimization of a company's network of employees, suppliers, customers, partners and distributors -- to maximize both competitive advantage through accelerated innovation and the productivity of non-differentiating tasks. Kagermann observed that two trends have begun to dominate the world of business: the accelerated speed of change and the need to differentiate through innovation. Companies are finding that, to successfully address these pressures, they must look outside their organizations and more effectively collaborate with their business network. For business network transformation to occur, Kagermann concluded, IT must provide a flexible, adaptable and ever-evolving infrastructure that allows continuous improvement without disruption to core processes. Key to this infrastructure is enterprise service-oriented architecture (enterprise SOA), which SAP introduced in 2004 and against which SAP has largely delivered the first service-enabled business suite in 2007. The announcement was made at SAPPHIRE® '07, SAP's international customer conference, being held in Atlanta, Georgia, April 22 - 25.

• CEO Predicts Increased Customer Activity Around Business Network Transformation as the Speed of Business Change Accelerates and Companies' Business Networks Become the Primary Source of Competitive Differentiation
• Keynote Underscores Importance of Global Co-Innovation on Industry-Specific Business Process Platforms
• SAP Delivers Against Promise of Service-Enabled Suite in 2007: Enterprise SOA Has Been Established in All SAP Products and Adopted by More than 13,000 Customers Using SAP NetWeaver® and More than 2,000 Customers Running SAP® ERP
• SAP Adopts Stable-Core/Enhancement-Package Delivery Model for the Business Suite Starting in 2008, Enabling Accelerated Innovation for Customers without Disruption Across the Entire Suite

Podcast of Henning Kagermann keynote at SAPPHIRE '07

Enterprise SOA Moves Business Networks Past Connectivity Roadblocks
Kagermann detailed how business network transformation is happening globally, is transcending every industry and requires IT to take a strategic role in the business as collaboration and integration cross boundaries. Although business network transformation has been broached in the past, only now, with the mass adoption of enterprise SOA, can IT support change, collaboration and integration at the speed and cost required. The industry has embraced enterprise SOA because it provides a competitive advantage to the companies who leverage its architecture to work with their business networks across heterogeneous landscapes, to collaborate among people and communities and to connect using events and services. IT is emerging as the enabler of accelerated and competitive differentiation in all types of key activities by providing speed of mergers, ease of outsourcing, effective process co-innovation, new product co-innovation and the ability to effectively tap into new channels and markets. When a business network has a higher flexibility of business processes, it can be more responsive to market conditions and react to customers more quickly.

"In the 1990s, companies combined business process re-engineering with ERP systems to achieve new levels of operational efficiency," said Henning Kagermann, CEO, SAP. "Today, companies are seeking to combine business network transformation with enterprise SOA to achieve new levels of competitive differentiation. As we observe business network transformation happening globally, we predict it will elevate IT to a more strategic role for the business in the future.

"No longer can companies go at it alone," Kagermann added. "Change is happening at an accelerated pace and every company needs to cultivate a network of business partners to cope with the speed of change in business. The combination of business network transformation and the advent of enterprise SOA form a powerful foundation for creating an even greater competitive advantage for companies. SAP has been a first mover in the enterprise SOA space and will continue to innovate without disruption for our customers."

SAP Applies Its Own Model of Business Network Transformation
Kagermann also noted that SAP has applied this model of business network transformation to its own business, leveraging the advantages of collaboration and co-innovation to support its customers and partners. With a history of co-innovation and co-operation, SAP has been a forerunner in fostering communities of partners and influencers that collaborate to solve industry-wide issues for customers. Companies have never relied more on their networks of IT suppliers, partners and distributors. SAP has discovered that when these relationships are properly developed, they yield tremendous benefits, allowing companies to move away from merely innovating to reaching a higher level of success because they are able to markedly differentiate themselves from competitors and escape the threat of commoditization. SAP has transformed its business network by relying on co-innovation with its business partners and customers and thus has set itself apart from its competition.

At SAPPHIRE, SAP announced new industry value networks to provide companies with a systematic way to identify industry-wide trends and work together to develop processes that can solve industry problems and automate non-differentiating processes. SAP also recently announced new business process expert communities to bridge the gap between business groups and IT departments and share ideas and best practices among companies using enterprise SOA to help their organizations became more agile and adaptable. In this context, Kagermann highlighted two examples that have supported SAP: a two-decade relationship with HP and a recently forged partnership with Cisco that grew out of SAP's ecosystem efforts and is providing unique solutions to customers. (See related video clips from Cisco and HP.)

"One of my personal goals has been to team with the best companies in the industry to form relationships that don't just add incremental value to customers, but provide true differentiation to ourselves and our joint customers," said Kagermann. "Two of these partners are Cisco and HP. As you heard from John Chambers and Mark Hurd, when companies have complementary visions and when their goals around satisfying customer requirements coincide, true co-development and co-innovation can happen, and this is unique. The relationship with Cisco around our complementary views of service-oriented architectures has yielded a product that helps companies of all sizes turn managing risk into an asset -- a proposition that every CEO and CFO is looking for today. In addition, our long-standing relationship with HP continues to grow stronger as we service more than 55,000 joint installations with nearly 50 percent of all SAP deployments running on HP technology. No longer is co-innovation a 'nice to have'; it's a 'must have' that SAP has learned to leverage through a strong legacy of productive partnerships."

SAP Fulfills 2007 Promise, Maps Out Next Five Years
Kagermann also declared that SAP has fulfilled its promise to largely deliver the first service-enabled suite of enterprise software to the market. With SAP® ERP as the front-runner, SAP is on track to service-enable all SAP Business Suite applications in 2007. Leveraging the blueprint of enterprise SOA, this flexible business process platform promises to further grow its ecosystem of software partners. By using services from SAP Business Suite applications as well as a new composition environment delivered via SAP NetWeaver, partners can compose new industry-specific solutions. Together, these advances will help organizations transform their business networks into adaptable systems of collaboration.

"Our vision for the next five years is based on the achievements of the last three years," said Kagermann. "With enterprise SOA now established in all of our products, we can deliver innovation to customers without disrupting their IT landscape. In the years ahead, we anticipate that the speed of change in business will continue to accelerate and that companies will need a stable, open platform that has the ability to support innovation. Enterprise SOA and the business suite we have built using this architecture is the only platform that can deliver the level of stability and flexibility organizations will need to empower the business network transformation and collaboration necessary to differentiate themselves and outpace competitors and commoditization."

SAP Adopts Enhancement Package Delivery Model for the Business Suite
The company is building upon the successful release strategy around SAP ERP, in which the core remains stable while customers receive regular innovation on top of the business process platform. These enhancement packages will now be introduced across the entire suite and, since the enhancement packages are optioned, customers will be able to choose new innovations and capabilities according to their needs. At the same time, SAP has announced its plans to extend its standard maintenance for SAP ERP until 2012.

"I speak with hundreds of CEOs, CIOs and CTOs from small, medium and large enterprises each and every year, and one of the common themes I hear from them is the need to address the speed of change as well as the need to achieve competitive differentiation," said Kagermann. "Every 3.5 minutes a new product is introduced and every second 10 containers are shipped. At these rates, companies require innovation at a much faster pace and a level of agility that increases without sacrificing the productivity of current operations. SAP's commitment to its global customer base as well as my personal commitment is to continue to listen closely to our customers and deliver the innovations they need to run their business as efficiently and effectively as possible regardless of the product they have purchased. Just as we've done for the past three-and-a-half decades, we will innovate in the core products around SAP Business Suite as well as in emerging solutions. And, most importantly, we will take what we have learned, share our knowledge and insight throughout our organization and business network, and work together to ignite future innovation."