A Bright Future for SAP – and SAP Consulting Projects

By Sam Sliman
President, Optimal Solutions Integration, Inc.

In its fourth quarter 2005 earnings report SAP announced results that exceeded most analysts’ expectations. As one might expect, the market responded quite favorably – SAP’s stock rose 8% overnight buoyed by a 14% rise in fourth-quarter net profit and predictions for strong sales in 2006.

SAP’s stellar performance comes as no surprise to those who have followed the company over the last decade. A methodical, long-term strategy – although not always clear – has positioned the company at the forefront of enterprise technology. This ability to execute over the long term has helped SAP achieve a dominant global market share and a large and growing footprint among Fortune 1000 companies. Quarter-after-quarter positive earnings have silenced the naysayers and underscored the fact that

SAP’s present success is no flash in the pan.
Consider this: although SAP is 20% smaller than Oracle – its closest competitor – in terms of revenue, the two companies have approximately the same market cap. And while SAP’s stock has risen steadily over the past year, Oracle’s stock has been on a rollercoaster and is presently lower than a year ago.

Without a doubt, Oracle’s core database business is a force to be reckoned with, and the company’s aggressive consolidation strategy poses a formidable challenge to SAP’s dominance. But today’s enterprise technology buyers are more knowledgeable, skeptical and savvy than in the past. They understand that post-merger integration of companies and their products is a major undertaking that can translate into considerable pain when it comes time for implementation.

By contrast, SAP has been touting end-to-end integration for years, and has steadily and organically followed this path through its strategic product roadmap. With Enterprise Services Architecture (ESA) and NetWeaver, SAP has again seized the high ground. Given the confusion and uncertainty surrounding Oracle’s product strategy, it is no wonder that SAP has emerged as a core, stable infrastructure component for a growing number of organizations.

SAP Consulting Work on the Rise

SAP’s success is a boon for SAP consultants and system integrators, which, according to IDC, is the largest worldwide and U.S. consulting and systems integration ecosystem among all enterprise platform vendors.

Practically every SAP site is doing more with SAP, not less. According to Gartner, SAP's installed base is facing its first big wave of application upgrades as the majority of SAP customers must craft an upgrade strategy now, before older versions of SAP products move into extended support windows, where companies must pay for user-specific support. And although SAP reports that two-thirds of its installed base has negotiated a mySAP ERP or Business Suite contract, Gartner estimates that less that 20 percent have performed the upgrade, availing much work to proven SAP consulting firms.

As many SAP customers move forward with upgrade plans, others are piloting NetWeaver or XApps. Many other SAP customers are dusting off shelfware and beginning implementations. The use of BW, HCM, CRM, and SRM are all on the rise. Still others are dipping their toes into SAP’s ESA to understand how they can make it their standard framework for future development work.

The sizable installed base and continued strong demand for SAP software translates into a robust environment for SAP consultants to design, configure, build and support SAP applications. Across the board, functional and technical roles are opening up for those with demonstrable SAP expertise, creating an optimistic picture for SAP consulting in 2006.