SAP lands major deal with 3M at Oracle's expense

IDG News Service - SAP has seen its share of executive upheaval and customer discontent in recent months, but a newly inked agreement with global conglomerate 3M is giving it reason to celebrate.

The project, which will see SAP's Business Suite 7 rolled out companywide, is going to be conducted in phases, said Rob Enslin, president of SAP's North American division.

Over the next several years, the project will replace many of 3M's legacy applications, according to a statement. Some of those are almost certainly Oracle, as 3M is a long-time PeopleSoft shop.

A 3M spokeswoman didn't immediately respond to requests for additional comment. In a prepared statement, 3M CIO Ernie Park said the project will help the company unify its core business processes around the world.

SAP would not reveal the price tag on the pact, but it is likely worth up to $35 million in license revenue alone, with that figure assuming a substantial discount off list price, said Altimeter Group analyst Ray Wang, a veteran software contract negotiator. Annual maintenance fees paid as a percentage of license costs will add millions more each year.

To that end, the deal also serves as a litmus test for SAP's newly restored tiered pricing model for support. According to Enslin, 3M is going with SAP's Enterprise Support option, which has more features than Standard Support but also costs more money. SAP went back to a tiered model after outcry from users over its 2008 move to transition customers to Enterprise Support.

Global ERP (enterprise resource planning) roll-outs like this have become rare, said Bob Parker, an analyst with IDC Manufacturing Insights. "It's a pretty saturated market at the enterprise level. Most people have picked an ERP team to play on."

3M has been a key account for Oracle, Parker said. "PeopleSoft didn't have a lot of lighthouse customers in manufacturing. But 3M was the big deal they won," he said.

The SAP-3M deal has interest for reasons apart from vendor rivalry, Parker added.

There has been much talk in recent months about enterprises deploying ERP and other applications via an private cloud computing platform, serving up virtual instances to various business units.

The SAP project at 3M presents an opportunity to test that scenario out, and "could be a peek at the future of a lighthouse implementation," he said.

An Oracle spokeswoman declined to comment Monday on SAP's announcement.

However, Oracle is already poised to patch the holes left by 3M's decision. It announced Monday that food manufacturer Land O'Lakes recently completed a large PeopleSoft project.