Apr 27, 2007 (08:04 PM EDT)
Amid Challenges, SAP CEO Kagermann Sticks To His Plan

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SAP's faith in itself is unshakable. It remains committed to organic growth, despite archrival Oracle's considerable market share gains through big acquisitions. It's sticking to its wait-your-turn CEO succession strategy, despite losing its highly regarded heir apparent. It's taking a tentative approach to subscription-based software, even as the midsize companies it covets warm to the idea of pay-as-you-go services.

SAP's approach: Stay the course, keep cool, even amid Oracle's bare-knuckle tactics, such as dispensing people to downtown Atlanta last week to hand Oracle bags to attendees of SAP's big customer conference. "We are never defensive. We just have our style," explains SAP CEO Henning Kagermann in his soft-but-to-the-point delivery. "I don't like their style. Why should I adopt it?"

Oracle filed a lawsuit in March accusing SAP's TomorrowNow support subsidiary of corporate theft, claiming the unit used customer passwords to download massive amounts of app-support documentation. SAP will reply within the next week or two, Kagermann says.

He calmly adds that nothing about Oracle scares SAP, including the billions of dollars Oracle has spent to close the gap in enterprise applications. "You should not compare us," Kagermann says. "Oracle is still mainly a database company." Ah, right. And Honda's mostly a motorcycle company.

It's hard not to admire SAP's conviction, even if it sometimes sounds like the grown-up at a college kegger. At last week's conference, company executives spoke of how SAP, once synonymous with unwieldy application megaprojects, can help customers become more agile and flexible, particularly by using its NetWeaver middleware, the core of its service-oriented architecture. They peppered their speeches with references to blogs, wikis, and YouTube, assuring attendees they get Web 2.0, though they'll never be accused of throwing money at the latest trend.

Still, a number of forces are sure to test SAP's faith.

SAP established its SOA technology ahead of Oracle. But even though it has some notable trailblazers in its camp--Coca-Cola, Dow Chemical, Home Depot--other SAP customers aren't sure what SOA will mean to their businesses, so they're moving slowly.

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Then there are doubts about SAP's commitment to subscription-based software, also referred to as software as a service, and the company's ability to draw midsize customers. The Oracle lawsuit could be a major distraction. And the resignation last month of Shai Agassi, president of products and technology, raised fresh questions about its top executive succession plan.