SAP's Silent DatabaseBy Edward Cone | Posted 2003-05-01 Print
The software giant's open source database lacks buzz, but technology executives may want to pay attention.
Even though SAP is soft-pedaling the database, it could save companies hundreds of thousands of dollars on implementation and license fees.
While Henning Kagermann, co-chairman and CEO, talked up SAP's NetWeaver architecture for letting companies blend together data and applications from many sources to create new services on the Web, he didn't play up this aspect of SAP's plan to increase its dominance in the enterprise software market.
Omitted from the slide featuring SAP's hefty product portfolio and emerging "cross applications" was any mention or note of SAP DB 7.4. You'd think a database that's integrated with all of SAP's applications would get a little more attention. But it may take some time for the dominant provider of planning and management software to large corporations to explain this part of the puzzle: Why is DB 7.4 based on "open source" software, that anyone can contribute to, not just SAP's own code?
"SAP DB should be very interesting for users of mySAP," says Charlie Garry, a senior program director at Meta Group. "If you are going to buy SAP with an Oracle database, that's going to be a huge expense. If an open source database is certified to work with an application, it becomes a no-brainer."
In effect, an open source database that does what IBM and Oracle databases do would help SAP take business away from those rivals. And it could help fend off Microsoft, which is pitching services for large enterprises.
Yet, not only did Kagermann not bring attention to DB 7.4 at the road show; SAP didn't want to talk about its open source strategy with Baseline.
Perhaps it was timing. On April 24, SAP touted Microsoft's 64-bit SQL Server 2000 as having "unprecedented scalability and performance" for SAP on the Windows platform. Maybe the company didn't want to elaborate too much on its strategy for small and medium-sized businesses, a market where SAP's database could play well. Or maybe the database doesn't warrant a mention since it has few customers in the U.S.
Whatever the reasons for the silence, SAP keeps developing its open source database, an effort first announced in 2000. In the last two months, SAP has released new documentation, bug fixes and performance benchmarks. It's progress that's been studiously ignored by U.S. companies for almost three years. At best, the SAP database is relegated to fifth fiddle behind another open source competitor MySQL, and Microsoft, IBM and Oracle upgrades.
Despite the lack of buzz, interest is growing in SAP's open database.
The number of inquiries about SAP DB posted at the site of open-source project GNU Enterprise has more than doubled since last fall, to almost 1,000 a month. And the content of those inquiries is changing, says Derek Neighbors, a GNU project manager. "Most early posts were people looking for 'direct' assistance of a highly technical nature. The more recent posts have a lot more 'decision maker' type questions," says Neighbors.
SAP says it has about 1,300 installations of SAP DB running at customer sites, mostly in Germany, and mostly at small to mid-sized companies. In the U.S., SAP customers have cast their lot with traditional database vendors such as Oracle, IBM and Microsoft.
Garry says open source products won't have much of an impact on the large-enterprise market through 2005, due to lack of vendor support, immature technology that is incapable of supporting heavy transaction processing, and corporate investment in proprietary databases.
Yet it is not too soon for companies to consider an open source database, says Garry.
For SAP, giving away software has important long-term implications. SAP made money the hard way in the first quarter of 2003, by squeezing costs in the face of declining sales. Net income of $203 million came on revenue of $1.64 billion, down from $1.85 billion in the previous quarter, with software license revenue down 12% to $384 million.
If SAP can get new customers to use its open-source database instead of a proprietary software from Oracle, IBM, or Microsoft, it can siphon hundreds of thousands of dollars from the cost of owning and operating its applications without cutting its own revenue.
For SAP customers, the math gets interesting. About 70% of SAP applications are run on Oracle databases. The list price for the Oracle software needed to support SAP's R/3 enterprise resource planning software on an eight-way server is $320,000, says Garry. A good database administrator, experienced with both Oracle and SAP software might cost another $150,000 per year. And Oracle maintenance charges add another 22% of the software price per year to the tab.
SAP DB, on the other hand, carries no up-front purchase price and requires limited special expertise to operate.
Europe has been SAP DB's proving ground and marketing focus to date. SAP DB has virtually no presence in the U.S., where SAP applications sell mostly to Fortune 1000 companies. "In the U.S., I don't think our typical customer wants it, needs it, or is ready for it," says SAP spokesman Andrew Kisslo. Roughly three-quarters of users who have downloaded the free software and signed up for service are in Germany, says Kisslo, adding Deutsche Post is among the largest implementations.
Despite pronouncements by SAP executives, the open source database, a descendent of software originally developed by Siemens in the late 1980s, has yet to make a mark beyond existing SAP customers. Last fall, SAP senior vice-president Rudolf Munz, told the European SAP Technical Education Conference that "Open Sourcing SAP DB is our 'sales channel' to the non-SAP world." Yet no such sales have been reported.
Oracle doubts SAP DB will ever be a player. "I don't see it having potential down the road," sniffs Ken Jacobs, vice-president of product strategy, server technologies administration. "We're seeing between 2% and 3% of SAP customers using it."
Frank Hood, chief information officer at Krispy Kreme, is currently evaluating SAP for an enterprise resource planning implementation. He says he finds SAP's open source database interesting, but notes it doesn't play a role in his decision. He said he would be reluctant to replace his SQL-based infrastructure.
"Is open source markedly going to save Krispy Kreme money? Or is it a technical differentiator that's going to be hard to manage?" says Hood.
Jacobs notes that any success for SAP DB could make SAP less dependent on Oracle, a rival in the application software market. But the real payoff of SAP DB would be sales of SAP application software, both to the small-to-medium business market and to large companies.
SAP has to position its applications for a shift in software pricing, says Meta's Garry. Open source software will encroach on ERP and other high-end products within the decade. "They need to lower the total cost of ownership to stay viable," says Garry.
Larry Dignan contributed to this article
IT Solutions Builder TOP IT RESOURCES TO MOVE YOUR BUSINESS FORWARD
Which topic are you interested in?
What is your company size?
What is your job title?
What is your job function?
Searching our resource database to find your matches...