Dell and SAP strengthen partnership


29 Apr 2004

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NEW YORK: Dell and SAP have formally announced a worldwide partnership agreement that they hope will lower the cost of running enterprise computer systems by using industry standard hardware.

The news marks another stage in Dell’s efforts to crack the important and lucrative enterprise business sector. Agreements with the storage maker EMC and more recently with database supplier Oracle have been elements in the same strategy.

Dell and SAP have been working together to ensure that the latter’s software runs on the former’s hardware. Already the companies have 5,000 customers running SAP applications this way, including Texaco, Nestle, Seiko, Cadbury, Ericsson and ABB.

“Over the next few years we believe we can more than triple our share of the market for SAP installations, making it into a $1bn market for Dell,” said CEO Michael Dell at a news conference yesterday.

“There has been a remarkable shift in the enterprise market to standards-based hardware, including that running mission-critical, complex applications,” said Dell. “We believe the enterprise is at an inflection point and we would like to accelerate that, moving to enterprise architectures based around standards-based building blocks of the kind we provide in the server market.”

Dell said that customers were increasingly moving away from proprietary systems that typically run Unix, to servers based on Intel processors running either Windows or Linux. The latter options offer organisations a lower cost of ownership, he emphasised.

As part of the substance of yesterday’s agreement, Dell has also committed to expanding its professional services capability around SAP skills. Although some of the implementation of these systems may be handled by a third party, Dell will be responsible for designing the solution. Other details of the deal have yet to be established, such as whether SAP will urge its own customers to run Dell hardware instead of rivals’ machines.

However Dell senior executives played up the presence of SAP CEO Henning Kagermann at the announcement, calling it an endorsement of Dell’s view of the enterprise market. “Dell provides help for ease of configuration and time to deployment,” said Kagermann.

Analysts cautiously welcomed the announcement, saying that while there were advantages for both companies, much remained to be clarified. Thomas Meyer of IDC’s European Enterprise Server Solutions said that the deal would offer SAP the chance to crack the lucrative US market while boosting Dell’s kudos in the enterprise sector. “It’s a good fit from that point of view.” However he noted that Dell’s agreement with Oracle from last year had not translated into a massive increase in sales.

Meyer also suggested that Dell’s belief in big business’ willingness to embrace standards-based systems may be optimistic. “In the enterprise market, for customers to change, there has to be an incredible advantage to do so and the system has to have reliability and availability.”

Eamonn Kennedy of Ovum questioned how exclusive the agreement would prove to be. “Everyone has a partnership with SAP and everyone, if you ask them, is SAP’s most important partner.” Whereas Dell’s message of adding standard hardware was a straightforward one, he noted that implementing SAP was a complex process. “All the services needed for that Dell has not been providing up to now,” he told siliconrepublic.com.

By Gordon Smith