SAP offers first peek at Mendocino in action

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of Office by marrying documents created in its software with business data, such as sales transactions.

"This changes the perception of Office. Now it's really critical," said Lewis Levin, vice president of Office business applications at Microsoft.

Industry analysts and SAP customers who watched Agassi's demonstration seemed impressed by the fruits of the two software giants' labor. Bruce Richardson, senior vice president with market watcher AMR Research called the Mendocino tools a significant step forward for both companies.

He noted that at an average SAP customer, only 20 to 25 percent of employees have a SAP license, "so if you can extend that so people who would never use (SAP's software) before are allowed to use it in the way they already prefer to work, using Office, that's a big deal," Richardson said.

The analyst pointed out that by attracting more workers to use SAP via Office applications, both companies should be able to sell many more licenses for their respective products. SAP will add new users by giving workers additional ways to access its software, and Microsoft will encourage customers to upgrade to the latest version of Office, he said.

"When you look at a typical company, almost every person in that organization works with Microsoft Office and Outlook already," Richardson said. "There's huge resistance to SAP outside of financial and some other business areas because people don't want to learn a new system, but if you know how to use Office you can do this, and that will encourage more people to use SAP."

SAP customers said they've been waiting to see the sort of integration offered by Mendocino for almost as long as they've worked with the company's enterprise software. John Cirone, chief information officer at marketing and advertising conglomerate Interpublic Group, said Mendocino should indeed encourage more workers to use SAP.

"This is a great example of a technology deployment to the masses, which is always the greatest challenge with (enterprise) systems," Cirone said. "The entire employee base becomes a casual user of SAP, and there are some huge benefits you can imagine with that."