1. Is SAP's corporate structure hindering its competitive advantage?
2. What corporate strategies has SAP used to remain competitive?
3. How has SAP's business-level strategies sustained them competitively?
As Part 1 discusses, by 1997 SAP realized the need to release new Internet-enabled ERP R/3 solutions, solutions, which converted its internal ERP system into an externally based network platform, to satisfy customers needs for SCM and CRM. Recall that SAP's Supply Chain Management (SCM) integrates the business processes necessary to manage the flow of goods from the raw material stage to the finished product-it is a set of supply value chain solutions designed to control costs and increase differentiation over the product life cycle. Customer Relationship Management (CRM), at the front-end of the value chain, provides companies with solutions and support for business processes directed at improving sales, marketing, customer service, and field service operations. By 2000 CRM programs were rapidly growing in popularity because they lead to better customer retention and satisfaction and higher revenues and profits for the companies that make them part of their IT system. Despite the versatility of its platform, SAP was slow to recognize the impact of the Internet for building a global competitive advantage. As a result, the mySAP.com initiative was launched to meet customer needs in an electronic environment, provide the evolving IT platform that would allow product expansion in software applications, provide affordability by breaking up modules into smaller products, and to enable SAP to compete in all market segments-large, medium, and small companies. Along with this strategy, SAP improved in-house training and consulting capabilities, cost effectiveness, and sought strategic alliances and acquisitions for quicker market presence and to seal its competitive advantage. Still the industry leader with a worldwide market share of over 30%, SAP's strategic initiatives had increased its costs and confused its organizational structure and prolonged responses to changing customer needs. For product customization and to meet the actions of its rivals, SAP now moved to decentralize control to teams of software engineers (by product and cross-functional) who were experts in a business process or in a particular industry and who now worked with its local sales force to manage customer problems where and when they arose. Additionally, SAP grouped its national subsidiaries into three main world regions and eventually, began a loose matrix structure. By 2002, SAP had placed several resources into developing new business computing solutions to drive companies to run all their business software using a single SAP platform. As a part of its major push to reduce costs, SAP began to outsource the enormous amount of routine programming involved in improving and creating advanced applications to low-cost countries overseas, such as India.
In an attempt to meeting growing markets and consumer licensing needs, in 2003, SAP changed the name of its software from mySAP.com to my SAP Business and began a major push to increase its share of the SME market segment of the ERP industry. Consequently, the competitive environment became heated on all sides forcing SAP, between 2006 and 2008, to initiate measures to increase market share in the SME segment, increase profitability, better serve SAP users with new products and new industries, and help customers transition to and gain benefits from the software on-demand or software as a service (SaaS) segment of the web-based applications segment. Rising cost structures, the global recession, and customer pessimism prompted changes in leadership who were charged with providing the best-customized suite of business solutions to companies, a suite of software applications, especially CRM solutions that could be obtained on-demand, an SAP solution's "on device," meaning that SAP's customers could access its solution from their laptops, smart phones, and other mobile devices.