February 15, 2006 5:40 PM PST

SAP: Open-source rivals won't make the cut

SAN FRANCISCO--A wave of consolidation is sweeping the information technology industry, and many open-source business applications will be left behind when customers pare down their suppliers, an SAP executive predicted Wednesday.

SAP sells proprietary enterprise resource planning software used to track corporate finances and manage relationships with customers, but the German company faces competition from OpenMFG, SugarCRM, Compiere and others.

But those rivals are too immature to make it, said Peter Graf, SAP's executive vice president of marketing, during a speech at the Open Source Business Conference here. When major changes occur--as is happening today with customers retooling computer systems to adapt to the Internet--customers want to bet on known quantities, he said.

"We believe that open-source business applications do not have enough time to mature before this huge consolidation wave matures," Graf said.

Graf is not the first from a proprietary software company to dismiss competition from companies that employ the collaborative, sharing methods of open-source programming. But changes of heart are not unknown: IBM bought an open-source Java application server company called Gluecode, despite having a successful proprietary competitor; and database giant Oracle considered buying open-source MySQL.

SugarCRM Chief Executive John Roberts, unsurprisingly, adamantly disagrees and said his company's technology is mature enough today for use by major customers. "We relish the opportunity to compete with them any day," he said in an interview. Avid Technology is one customer that converted from SAP's products to SugarCRM's, he added.

Another voice of dissent came from Compiere's top executive, Jorg Janke, whose software is used by, among others, a French manufacturer and seller of beauty products with 2,000 stores. However, he acknowledged that some criticism of open-source business software is warranted.

"There are lots of people who think open source is a quick way to form, so they put out marginal business applications and try to get venture capital funding," Janke said.

SAP isn't solely a proprietary software company, though its core products are. When it comes to open-source projects, "We're both a consumer and a contributor," he said.

SAP uses several open-source programs, including the Eclipse programming tools and Java application server software components such as Apache's Struts and JBoss' Hibernate. Many open-source projects are widely used enough to maintain their influence, he said.

"When the market consolidates, people (put) their investments into the biggest pile," Graf said. "Which open-source technologies are mature enough to survive the wave that's coming? Linux--absolutely. Eclipse? Yes. Mozilla? Most likely."

See more CNET content tagged:
SAP AG, SugarCRM, open source, rival, Novell Inc.

10 comments

Join the conversation!
Add your comment
If open-source models cant cut it...
then why the hell are open-source projects like Mozilla and Open Office gaining such popularity and especially in the past few years alone taking markets for software away from the major players like Microsoft, and getting backing from other major players like Google, IBM, and Sun (Microsystems)? Answer me that Mr. SAP executive...
Posted by tech_junky (56 comments )
Reply Link Flag
Easy answer. It's not true.
Open Office may be good for the hobbiest, or as a starting point for a small business, but it has not put a dent in the "Office" market. It's bloated, slow and still needs a lot of work.

Don't mistake Firefox's success as a market driven success story. Firefox has about a 10% share of non-enterprise browser usage. Not all of that 10% came at the expense of Microsoft. And most of it occurred, not because Firefox was so good, but because IE fell behind in quality.
(Contrary to the hype, FF has its own problems)

Now that MS has seen the light (thanks to FF), they are about to release IE 7. You can rant and rave it sucks and blah, blah, blah blah, but it will succeed in true MS fashion and FF will probably drop down to 5-7 percent of the market. Right now, it's just the way it is...
Posted by robertcampbell2 (103 comments )
Link Flag
If open-source models cant cut it...
then why the hell are open-source projects like Mozilla and Open Office gaining such popularity and especially in the past few years alone taking markets for software away from the major players like Microsoft, and getting backing from other major players like Google, IBM, and Sun (Microsystems)? Answer me that Mr. SAP executive...
Posted by tech_junky (56 comments )
Reply Link Flag
Easy answer. It's not true.
Open Office may be good for the hobbiest, or as a starting point for a small business, but it has not put a dent in the "Office" market. It's bloated, slow and still needs a lot of work.

Don't mistake Firefox's success as a market driven success story. Firefox has about a 10% share of non-enterprise browser usage. Not all of that 10% came at the expense of Microsoft. And most of it occurred, not because Firefox was so good, but because IE fell behind in quality.
(Contrary to the hype, FF has its own problems)

Now that MS has seen the light (thanks to FF), they are about to release IE 7. You can rant and rave it sucks and blah, blah, blah blah, but it will succeed in true MS fashion and FF will probably drop down to 5-7 percent of the market. Right now, it's just the way it is...
Posted by robertcampbell2 (103 comments )
Link Flag
More nonsense
Opensource has aready taken over. They can have their commercial end but in the back end the consumer can enjoy their product. Any mid-teir company knows this by now to survive unless they are like FTP pro already locked in to a customer base, but not for long. They are probably the only people making any money in the FTP transfer market.
Posted by Blito (436 comments )
Reply Link Flag
More nonsense
Opensource has aready taken over. They can have their commercial end but in the back end the consumer can enjoy their product. Any mid-teir company knows this by now to survive unless they are like FTP pro already locked in to a customer base, but not for long. They are probably the only people making any money in the FTP transfer market.
Posted by Blito (436 comments )
Reply Link Flag
Right and Wrong
He's right that the shake out is occurring. On the other hand, I mow the lawn occasionally and bare spots appear. I notice that it fills back in everytime if the soil is healthy. So even if some open source vendors shake out, the shared risk model is an evolutionarily stable strategy so they are replaced by others.

As to big purchase buys, sure, bet on proven track records, but given that there are big companies with proven track records sharing development risks and costs through open source, open source as a business model will continue to thrive.

This isn't bigGuy vs littleGuy (Have no need to fear! Underdog is Here!): it is bigGuy vs bigGuy where one has found a differentiator based on open source. Price is only one part of a procurement; it isn't the most important part until the differences of cost vs quality and features is too large to ignore. Little guys will have to scramble in the shakeout, but that is no different in any business regardless of the model given players of differing sizes. What is interesting about the web is that for reasons the MBAs don't get because they believe in pop psychology models like the 'tipping point', deep pockets and big companies don't always win.

You can put a lot of nitrates on unhealthy soil or soil where big trees are taking up all of the water and the grass still won't grow unless it thrives in the shade. Small startups aren't lugging big legacies. The differences start to even out. Also, some markets will not commoditize and unless they do, the big companies are at a distinct disadvantage.
Posted by Len Bullard (454 comments )
Reply Link Flag
Right and Wrong
He's right that the shake out is occurring. On the other hand, I mow the lawn occasionally and bare spots appear. I notice that it fills back in everytime if the soil is healthy. So even if some open source vendors shake out, the shared risk model is an evolutionarily stable strategy so they are replaced by others.

As to big purchase buys, sure, bet on proven track records, but given that there are big companies with proven track records sharing development risks and costs through open source, open source as a business model will continue to thrive.

This isn't bigGuy vs littleGuy (Have no need to fear! Underdog is Here!): it is bigGuy vs bigGuy where one has found a differentiator based on open source. Price is only one part of a procurement; it isn't the most important part until the differences of cost vs quality and features is too large to ignore. Little guys will have to scramble in the shakeout, but that is no different in any business regardless of the model given players of differing sizes. What is interesting about the web is that for reasons the MBAs don't get because they believe in pop psychology models like the 'tipping point', deep pockets and big companies don't always win.

You can put a lot of nitrates on unhealthy soil or soil where big trees are taking up all of the water and the grass still won't grow unless it thrives in the shade. Small startups aren't lugging big legacies. The differences start to even out. Also, some markets will not commoditize and unless they do, the big companies are at a distinct disadvantage.
Posted by Len Bullard (454 comments )
Reply Link Flag
Meaningless article
Sounds to me like SAP is scared of something. Open source has been growing and open source companies have been becoming profitable. If they had said this, say 5 years ago, it might have made more sense then (although time has shown it would be largely wrong).

Open source continues to make big inroads worldwide. Look at MySQL, look at PostgreSQL, look at China's adoption of Linux, look at the increasing penetration of OpenOffice and Linux in European governments and schools. It's just a matter of time, perhaps 10 or 20 years, but open source is going to continue to challenge companies like SAP. If they embrace it they'll probably do ok, if they go into denial or fight it they'll go the way of companies like SCO.
Posted by (7 comments )
Reply Link Flag
Meaningless article
Sounds to me like SAP is scared of something. Open source has been growing and open source companies have been becoming profitable. If they had said this, say 5 years ago, it might have made more sense then (although time has shown it would be largely wrong).

Open source continues to make big inroads worldwide. Look at MySQL, look at PostgreSQL, look at China's adoption of Linux, look at the increasing penetration of OpenOffice and Linux in European governments and schools. It's just a matter of time, perhaps 10 or 20 years, but open source is going to continue to challenge companies like SAP. If they embrace it they'll probably do ok, if they go into denial or fight it they'll go the way of companies like SCO.
Posted by (7 comments )
Reply Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.