SAP invests in Kiefer & Veittinger

Business software giant SAP plans to buy a 50 percent share in one of Europe's leading sales force automation firms, Kiefer & Veittinger.

According to industry analysts, the move indicates SAP's drive to shore up its core product, R/3, a back-office business application package, by extending it to the front-office.

SAP said it plans to combine K&V's technical resources and consulting services with its development efforts to provide corporate users with customer management applications. No specific financial terms were disclosed.

"It's a good move," Judy Hodges, a senior analyst with International Data Corporation, said. "They are building an integrated suite. It brings their core product into the customer services area--the front-office, which will also help their presence in the electronic commerce market as well."

SAP joins a number of its competitors that have either invested in, partnered with, or bought out smaller application developers to build integrated enterprise applications suites.

Hodges said today's announcement from SAP is similar in scope to recent moves from the company's competitors. Baan recently purchased Aurum, a customer relations software provider, in a stock-swap deal valued at approximately $250 million.

And in October, SAP competitor PeopleSoft said it would acquire management software maker Salerno Manufacturing Systems for an undisclosed amount.

All three companies compete, along with Oracle, in the global ERP (enterprise resource planning) systems market, providing packages used to automate and integrate corporate functions such as sales forecasting, inventory, control, procurement, manufacturing planning, distribution, finance, and project management.

ERP applications have become fixtures at a large majority of multinational corporations in recent years, but sales have begun to stagnate with market saturation, observers say. SAP and its competitors have devoted large resources to try to extend their core product to the front-office to make it attractive to a more diverse market.

"We're definitely seeing a trend in investments and acquisitions by these companies," Hodges said. "And I expect more to come in the near future."

Under today's investment agreement, K&V will maintain its corporate identity, continue to support its current installed customer base, and continue to offer its products, through SAP's distribution network. The two companies have long been strategic partners, and have similar corporate cultures, product architectures, and many common customers. SAP executives said the investment strengthens this relationship.