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of a customer's business processes once it is installed and running, there are high switching costs
involved in moving to another ERP product—costs that customers want to avoid.
Although the United States had become SAP's biggest market, the explosive growth in
demand for SAP's software had begun to slacken by 1995. Competitors such as Oracle,
Baan, PeopleSoft, and Marcum were catching up technically, often because they were
focusing their resources on the needs of one or a few industries or on a particular kind
of ERP module (e.g., PeopleSoft's focus on the human resources management module).
Indeed, SAP had to play catch-up in the HRM area and develop its own to offer a full suite of
integrated business solutions. Oracle, the second largest software maker after Microsoft, was
becoming a particular threat as it expanded its ERP offerings outward from its leading data-
base systems and began to offer more and more of an Internet-based ERP platform.
With the advent of the Internet, newer companies like SAP Systems, Commerce One, Ariba,
and Marcum, which began as niche players in some software applications such as SCM, CRM,
intranet, or website development and hosting, also began to build and expand their product offer-
ings so that they now possessed ERP modules that competed with some of SAP's most lucrative
R/3 modules. Commerce One and Ariba, for example, emerged as the main players in the rapidly
expanding B2B industry SCM market. B2B is an industry-level ERP solution that creates an orga-
nized market and thus brings together industry buyers and suppliers together electronically and
provides the software to write and enforce contracts between them. Although these niche players
could not provide the full range of services that SAP could provide, they became increasingly able
to offer attractive alternatives to customers seeking specific aspects of an ERP system. Also, com-
panies like SAP, Marcum, and i2 claimed that they had the ability to customize their low-price
systems, and, consequently, prices for ERP systems began to fall rapidly.
In the new software environment, SAP's large customers started to purchase software on a
best-of-breed
basis, meaning that customers purchased the best software applications for their spe-
cific needs from different, leading-edge companies rather than purchasing all of their software
products from one company with a monolithic package—such as SAP offered. Sun began to
promote a free Java computer language as the industry
open architecture
standard, which meant
that as long as each company used Java to craft their specific web-based software programs, they
would all work seamlessly together and there would no longer be a need or an advantage to using
a single dominant platform like Microsoft Windows or SAP's R/3. Sun was and is trying to break
Microsoft's hold over the operating system industry standard, Windows.
5.1.4 mySAP.com
In 1997, SAP sought a quick fix to its problems by releasing new R/3 solutions for ERP
Internet-enabled SCM and CRM solutions, which converted its internal ERP system into an
externally based network platform. SCM, identified as the
back end
of the business, integrates
the business processes necessary to manage the flow of goods, from the raw material stage to
the finished product. SCM programs forecast future needs and plan and manage a company's
operations, especially its manufacturing operations. CRM, identified as the
front end
of the
business, provides companies with solutions and support for business processes directed at
improving sales, marketing, customer service, and field service operations. CRM programs are
