SAP Acquires TopTier
On Friday, March 30, 2001, SAP announced its intention to acquire
TopTier, a California- and Israel-based portal software company,
for $400 million. Industry insiders know that SAP already has a
3-year unlimited-use license for TopTier technology that has 1 ½
years to run, a license that cost just $5 million.
So what are they buying for $397.5 million?
- The ability to extend the license. SAP sees a need for their
technology that will extend beyond 2002.
- The ability, theoretically, to dominate the corporate portal
market by selling Top Tier technology to the SAP installed base.
This ability to dominate the EIP market is the announced
reason for the deal.
- The ability to prevent SAPs competitors, like Baan, from
using TopTiers slick drag and relate technology. (See below
- The ability to provide desktop integration (what TopTier calls
drag and relate) to those customers who for some reason
insist on using other enterprise applications besides SAPs,
applications like Siebel or i2.
- The ability to redirect TopTier so that its development parallels
SAPs portal development.
When SAP paid the original $5 million, they got technology that
became the foundation for SAPs mySAP.com portal, which SAP
calls the Workplace. The Workplace is a web interface to SAP that
a) makes up for many of the sins of the regular interface and b)
provides a simple way for business partners to access the core SAP
This desire to allow access to business partners has been a driver
for many SAP customers. Their problem is this. A planner at Company
A wants access to Company Bs current planned ship date for
As order. (Company B is the SAP customer.) Without an interface
to SAP, the planner has to call, which is expensive. Companies want
to save money on customer service, by allowing the planner to access
this information using his or her browser. But direct access is
bad, partly because many planners would be defeated by the SAP interface
and partly because those who werent defeated would have access
to Company B internal information. What they need is a buffer areathe
Workplacethat is easy to use and provides only the information
SAP has made money from these Workplaces alreadya lot of
money. They license the Workplace for a non-negligible (est. average
$100/seat) amount of money, and the number of seats can be large.
(Flagship customer Nestle was announced at 230,000.) So protecting
this income is a pretty good underlying justification for the acquisition.
It should be noted, however, that SAP also has a product called
the Internet Transaction Server, which some SAP customers use to
give external access in preference to the Workplace. So not all
SAP customers will buy the Workplace.
As noted above, though, SAP has stated that its ambitions now extend
farther than its installed base. SAP believes those analyst reports
that say the EIP market will be $X billion, and they are willing
to pay 20 times last years earnings (est.) to get what they
hope is a big piece of it. (TopTier is a private company, but their
revenues last year were a widely-reported $20 million, and this
year, they say, is significantly better.)
Hence the organization that SAP has created. TopTier will become
SAP Portals. Its CEO will be Shai Agassi, now CEO of TopTier. Product
development will be headed by Klaus Kreplin, formerly Senior VP
of Business Intelligence and Workplace at SAP.
SAP Portals will continue to license TopTier to its competitors,
which should help TopTier gain dominance. Baan, as noted above,
is a TopTier licensee, and so is Microsoft. Both have given their
nominal blessings to the merger, while (I am sure) looking around
for someone else. (Laurens van der Tang, president of Baan, even
appeared at the aforementioned press conference.) SAP has shown
that it can be ruthless in the past, and it would take a lot for
its competitors to believe really that the leopard has changed its
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