SAP America eyes fed market

SAP AG the fifth-largest independent software developer in the world has been virtually unknown in the U.S. federal sector. But this situation could be changing soon as the German software developer takes its first steps in the government market.

The company's American arm SAP America Inc. earlier this month formed a development group targeting aerospace and defense companies. SAP America is already working with such companies as Northrop Grumman Corp. and Lockheed Martin Corp. and plans to develop a version of its R/3 suite of business applications for aerospace and defense contractors. R/3 is a client/server-based product that includes manufacturing financial and human resources applications.

The company's defense sector thrust is a potential stepping stone to federal government business said Paul Melchiorre vice president of global accounts at SAP America. "When [aerospace/defense customers]...implement R/3 for internal use they can potentially resell or be a solutions pro-vider for R/3 " he said. He added however that the transition from customer to reseller will not be immediate.

In the meantime SAP is working on a solution designed for the government market. R/3 Release 4.0 scheduled for early availability in the third quarter of 1997 will include a Public Sector component. According to the company the Public Sector module will automate the administrative and budgeting processes of national and state governments. The company has appointed an executive to direct the company's U.S. public-sector operations.

In aerospace and defense SAP America has been working with its initial group of customers for about 12 months. Melchiorre said defense contractors typically are "starting to look at how to reduce costs and improve cycle time." Many contractors he said are using decade-old home-grown business applications. He added that merger and acquisition activity has led contractors to consolidate their information systems."That's a key driver for almost every one of these major companies " Melchiorre said. He noted that some contractors are using more than 20 general ledger systems and are seeking to standardize on an off-the-shelf solution.

Melchiorre said SAP America is investing $15 million to develop enhancements to R/3 specific to the U.S. aerospace and defense market. He said the enhancements will reflect such U.S. requirements as progress billing government cost collection and cost-reimbursable contract billing.

Gisela Wilson an analyst with International Data Corp. said SAP's effort to create industry-oriented solutions is part of a software industry pattern. "The trend now is to focus on the specific needs of certain verticals " she said.

SAP has a strong track record in the markets it has chosen to penetrate. The company is the market-share leader in financial systems and process manufacturing and trails only Computer Associates International Inc. in discrete manufacturing applications according to Wilson.

AT A GLANCESAP AGFounded: 1972Revenue: $1.8 billion (worldwide)Customers: More than 6 000 in 50 countries. Markets include process and discrete manufacturing retail and financial services.Headquarters: Walldorf GermanyU.S. Headquarters: Wayne Pa.