IBM, SAP deal targets smaller businesses

IBM and SAP are tightening an existing joint-marketing deal aimed at boosting sales to smaller companies.

IBM plans to begin offering consulting services tailored to mid-size companies installing SAP's business applications software. SAP has pledged to develop by early next year a version of its software for small companies that will run on a stripped-down edition of IBM's database software, called DB2 Express.

SAP chairman Henning Kagermann was expected to announce the partnership during a keynote speech on Tuesday morning at SAP's customer conference in Orlando.

The deal could help SAP extend its lead over rivals, such as Oracle, PeopleSoft and J.D. Edwards in the market for enterprise resource planning (ERP) software. SAP leads in the ERP software market, with sales of more than $7.4bn (£4.4bn) expected in 2003, according to AMR Research.

The company has gained market share in the past two years at the expense of its competitors, AMR said. Oracle is a distant second, with roughly $2.6bn in sales expected in 2003.

IBM does not sell ERP software, choosing instead to partner with SAP, J.D. Edwards and other companies to promote sales of its database and application server software. IBM competes with Oracle in the market for database software.

Executives from SAP and IBM said the announcement of a tighter partnership was in the works well before PeopleSoft announced earlier this month its proposal to merge with J.D. Edwards and before Oracle began its hostile takeover bid for PeopleSoft.

Analysts said that the confusion resulting from the merger and takeover announcements, along with related lawsuits, could drive companies looking for ERP software to SAP's door.

IBM's consulting business already sells services for helping companies install SAP software, which is used to automate back-end processes such as manufacturing or finances. But the new IBM services will be modified to appeal to smaller companies, by offering hardware and software packages and fixed prices, rather than the per-hour fee usually charged for consulting, IBM executives said.

Under the agreement, IBM and its partners will offer worldwide consulting services for SAP's All-in-One, a simplified version of its applications targeted at mid-size companies. The service, which will include hardware and software licences for about 50 people, will cost about $500,000 and be implemented within eight to 12 weeks, said Elaine Lennox, director of global small and medium business at IBM.

IBM and SAP will also create an edition of SAP's BusinessOne applications, which are aimed at companies with up to 50 employees.

Both SAP and IBM have renewed efforts to boost their standing with small and medium-size companies, which are viewed as one of the few substantial growth areas in the business software market.

Martin LaMonica writes for CNET News.com