SAP’s Challenges writes:

Among the threats to the German company are software interoperability standards called Web services, the entry of Microsoft into SAP’s market and growing interest in alternative software licensing models from upstarts like In addition, some securities analysts say SAP’s core market–major corporate software overhauls–has peaked, causing several of them to question the company’s growth potential.

Microsoft is hitting SAP in one of its weaker spots–the largely untapped market for business applications software geared toward small and midsize companies. A new software rental model also appeals to this segment.

Additionally, Web services enables large companies to stitch together otherwise incompatible applications, lessening the appeal of a monolithic system like SAP. Adding to this trend is the availability of low-wage software programmers in Asia and elsewhere, ready to build programs to specification.

While these challenges are daunting, no one is ready to write off SAP. With more than 21,000 customers–among them the global giants of commerce–SAP is practically guaranteed a steady stream of lucrative maintenance revenue for years to come.

SAP is still at the top of its game after one of the harshest periods in the computer industry’s history. According to AMR Research, SAP rakes in more than a third of the $20 billion or so that companies spend each year on enterprise resource planning applications–software designed to automate corporate tasks such as billing, payroll and customer service.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.