Backing puts Team NZ in F1 territory

By ADAM GIFFORD

When Team New Zealand's yacht gets the wind behind it in the America's Cup, the name of a German software company will be emblazoned across its spinnaker.

While SAP may not be a household name like Microsoft or IBM, within the world of business computing it is the brand to beat.

SAP stands for Systeme, Anwendungen und Produkte (in der Datenverarbeitung), in case you were wondering - which translates to systems, applications, products (in data processing).

Its 20,000 customers include many of the world's largest companies, who rely on its software to do their accounts, manage their staff, ensure raw materials get to their factories at the right time and finished goods get to customers, and many of the other interwoven aspects of modern economic life.

For this they are prepared to pay a lot of money. Making a large SAP system work can take years, tens of millions of dollars and a significant reorganisation of the business.

Last year SAP made a profit of €509 million ($994 million) on revenue of €7.41 billion.

All this has made a lot of money for the five former IBM engineers who started the company in Walldorf, Germany, in 1972 and for SAP shareholders and partners.

One of those founders, Hasso Plattner (who shares the roles of chairman and chief executive with Henning Kagermann), was ranked last year at 47 on the Forbes list of the world's wealthiest people, with US$4.4 billion ($8 billion).

That is just over half the wealth of the Alinghi boss, Ernesto Bertarelli, 31 on the Forbes list, and well short of the $23.5 billion Oracle's Larry Ellison (No 5) has to play boats with, but he's not short of a euro.

Several Team New Zealand members have sailed with Plattner on his various boats, all called Morning Glory, which opened the door to the sponsorship.

After tough negotiations, SAP joined the "family of five" sponsors for an undisclosed multimillion-dollar sum, and for an additional sum bought the spinnaker rights.

It did so believing its investment was on a par with the money it puts into the McLaren Formula One racing team, golfers Ernie Els and Gary Player and the SAP Cape Town-to-Rio boat race.

While Plattner's nautical friendships may have played a role in the deal, more important were other values associated with big boat racing - pressure-cooker technology innovation, team drive and winner-take-all competitiveness.

"When I look in the eyes of these sailors, I see the same fire as I see in Michael Schumacher and Ernie Els," said Chris Burton, SAP's New York-based sponsorship manager.

What the team of IBM engineers saw back in 1972 was that the rules for their industry had changed, and a new kind of technology could make them winners.

Until the 1970s most computers were big mainframes, mostly built by IBM, and unique programs were written for each customer. A 1969 anti-trust settlement required IBM to unbundle or charge separately for hardware and software, opening the field for third party companies to write software.

Plattner and his colleagues wanted to create programs which could be used by multiple companies, rather than creating a new accounting system for each customer. They wanted the different functions integrated into the one system, and they wanted the system to be modular, so different functions could be added as required.

And they wanted it real time, so data interacted with the program as soon as it was input, rather than waiting for "batch" processing at a later time.

The result was their R/1 (for realtime) application, which began to win sales throughout Europe by word of mouth. But what propelled SAP into the number one position for business application software globally was its decision in the 1980s to make a new version, by then R/3, which would run on the smaller minicomputers being made by companies such as Digital and Hewlett-Packard, which used the Unix operating system.

When the United States climbed out of recession in the early 1990s, companies took on board the message that they should run their businesses in more streamlined and integrated ways - a concept research firm Gartner Group called enterprise resource planning (ERP) - and that they should do so without having to spend millions of dollars on "big iron" mainframe computers.

SAP was the only software company that could demonstrate an ERP system already running on the Unix operating system.

It also made a shrewd pact with the main consulting firms, teaching them how to do the implementations and thereby win the business consulting work that flowed from it.

Sales boomed. By the time competing vendors got Unix versions of their software to market, SAP had market share and mind share.

Russell Jones, the chief information officer for Carter Holt Harvey, one of SAP's biggest New Zealand customers, believes its reputation is well deserved.

"It stands out for the range and breadth of functionality, the ability to pull disparate parts of a business into a single environment."

Jones said the painful implementation process was a result of the product's strength, not its weakness.

To install the software, consultants went through and turned off the bits that were not needed. "You have to work out what you are trying to do, given the choices in the system.

"It forces you to re-evaluate how your particular business works."

nzherald.co.nz/americascup

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