SAP Betting Business Portals Aren't the Next Big Hype - TheStreet

SAP

(SAP) - Get Report

opened the door this week on what could be the next biggest bit of hype in the software business: corporate portals.

By announcing a major initiative to include its portal software on

IBM

's

(IBM) - Get Report

WebSphere application servers, SAP has shown a deep commitment to pushing portal technology, an area that many think will become the de facto "desktop" for business computer users in coming years. The announcement came Wednesday at SAP's Sapphire users conference, being held in Orlando, Fla.

But the buzz developing around business portals is starting to sound a lot like the bold projections you heard for B2B software last year: that corporations would buy it in good times and bad because it saves them money, and that revenues would grow to the moon. Now, some observers wonder if business portals won't suffer the same fate as that software, which has diminished in importance and scope within the world of business software.

"The bigger question may be, is this a market in and of itself over the long haul?" says Bob Parker, an analyst with industry research firm

AMR Research

. "We've identified seven key pieces of infrastructure that companies are going to invest in over the next six months, and portals is one of them. But I don't know if it stays a stand-alone category. I think you might see portals and exchange software merge." (SAP is an AMR client.)

Even if you've never used one, you're probably familiar with what a business portal is. Similar to popular Web portals like

Yahoo!

(YHOO)

, which let you set up and customize a homepage where you can access tailored information, business portals put pertinent company information and tools in one place at a worker's fingertips. Perhaps more importantly, they also let workers access all of a company's different computer systems from a single launching pad.

The concept has gotten the attention of all the software bigwigs.

Microsoft

(MSFT) - Get Report

,

Oracle

(ORCL) - Get Report

,

PeopleSoft

(PSFT)

,

Siebel

(SEBL)

and

i2 Technologies

(ITWO)

, along with SAP and IBM, all have portal offerings.

But while the idea sounds pretty neat, and has the potential to make workers more efficient, observers such as Parker think portals are simple enough to be reduced to an add-on feature of broader software applications, as has happened with some B2B software.

At this point, SAP doesn't seem to think that will happen. After buying portal maker

TopTier Software

this spring, it partnered with Yahoo! to aggressively go after the portals market and launched

SAP Portals

as a stand-alone, separate company to sell the product. That unit runs parallel to

SAPMarkets

, the B2B software unit SAP launched to sell its exchange and B2B buying software in May 2000.

SAP says, with IBM's help, it can be the dominant player in the portal market, which AMR's Parker put at $45 billion by 2004. But even in Parker's estimate, there was an implied sense of doubt: He noted in an interview that the number was for the combined portal/ B2B exchange software market, which he thinks will merge.

At SAP Portals, CEO Shai Agassi instead sees a wide-open opportunity, one he says SAP is only more than willing to back.

"This is not a small bet. We've got 800 people dedicated to the portal side alone," Agassi says. "It's a key strategic initiative, and a key strategy within the company that will stand on its own, and sell for the rest of the company as well."

Agassi says that portals will not suffer the same fate as B2B software, partly because of the way they're sold. While many B2B exchanges tried to get a percentage of what a company saved using B2B software -- a tactic that wasn't palatable for many customers -- portals are being sold within the much simpler, more traditional framework of a software license.

"Take the largest 3,000 companies in the world," Agassi says. "Eighty percent of them will need to put a portal in place in the next three years. The average price right now for an enterprise portal ranges around $5 million for the license, and $5 million for the services, so an average of $10 million total. Do the math."

We did: $24 billion. And, Agassi says, companies will quickly see a return on their investment, another reason why the market should last.

"Most Fortune 100 companies, before you even look at the people, have a technology stack that's worth half a billion dollars to start, with an average number of 300

software applications," Agassi says. "If I can improve the efficiency of those applications by 1% or 2%, I've just paid for the portal."

Citing the number of software vendors who are offering portals, and SAP and IBM's push behind the application this week, consultant Joshua Greenbaum says the portal wars have already begun. But he also cautions not to get caught up in the hype of the phenomenon.

"This is not the ERP, or even the next procurement," says Greenbaum, principal of

Enterprise Applications Consulting

in Daly City, Calif. "But it is enabling technology. It's not going to be the kind of product that is in and of itself the basic differentiator. What's going to differentiate it is how easy it is to set up."

That means how many different applications a customer is able to plug into any one company's portal. Agassi says SAP's offering will be superior, given IBM's help on the service side and the portal's ability to plug in a broad array of technology capabilities.

Whether that will be anything to boast about a year from now, though, is anyone's guess.