SAP in the Fast Lane

The software maker aims to prove its worth to smaller businesses by helping a Formula One racing team create a winning car

Auto makers have long used racing as a technological proving ground, so there's a certain logic to software maker SAP (SAP) doing the same thing. Team McLaren Mercedes (DCX), currently ranked third in Formula One racing, is demonstrating how SAP's enterprise software -- mostly associated with big corporations -- can make sense for a smaller operation.

Plenty of CEOs of smaller companies have their doubts. In fact, McLaren Racing managing director Jonathan Neal worried that SAP would be more software than his 1,000-person organization needed. "We were fearful of doing anything that would slow the business down," Neale told BusinessWeek, speaking in Paris at SAP's SAPPHIRE customer conference.

It's no wonder he was worried. The difference in performance among Formula One teams is painfully small. The spread among the top 10 cars at Germany's 3.1 mile Nürburgring is just 0.6 seconds per lap. The SAP software went online in October. Neale's conclusion: "It works."


  That's exactly the type of testimonial SAP needs. The Walldorf, Germany-based company is the dominant supplier of software that big multinationals use to automate functions such as supply-chain management, personnel, and finance. But SAP has for years been trying to push further down into what it calls the Fortune One Million -- companies with as few as 100 employees. SAP's goal is to have 100,000 customers in that segment by 2010, a more than fivefold increase from the current level. "That's ambitious, but we can get there," SAP CEO Henning Kagermann told reporters at SAPPHIRE.

There is far more competition in the bottom end of the market, especially from Microsoft (MSFT). So SAP is working with partners to create software that addresses the needs of specific industries or small businesses -- everything from wineries to eBay (EBAY) power sellers. This year, SAP plans to introduce some 80 products, which it calls "micro-verticals," aimed at various market niches.

It's also opening six regional centers to serve the market. "We don't do this top down," Leo Apotheker, SAP's president of customer solutions and operations, told reporters. "It's our partners and customers who drive which micro-verticals can be developed."


  That's the way it worked at McLaren, based in Brixworth, Britain. As is typical for smaller businesses, McLaren wanted an off-the-shelf product that wouldn't require a lot of customization or tax the company's limited IT staff, says managing director Neale. So McLaren installed the mySAP All-in-One software developed for the auto industry by the Bielefeld, Germany-based company, itelligence. "I wanted to support the project with a lean infrastructure," Neale says.

Building a race car is auto manufacturing at Formula One speeds. Teams field a new car every year, with design and construction taking as little as six months. A car has some 11,500 components, only about 10% of which are carried over from the previous year, according to Neale, a slim, intense man who used to run a jet fighter program for Britain's BAE Systems (BAESF).


  Keeping such a project on track is a monumental task. That's where the SAP/itelligence software comes in. It's designed to help engineers plan engine development and construction, manage the flow of parts, and more quickly incorporate design changes. Engines last just two races, and teams continually strive for better acceleration and handling, so even a miniscule improvement can make a big difference on the track.

Has SAP made McLaren faster? Neale says that's hard to quantify. The software's biggest contribution has been to help management know what's going on and get easy access to information, he says. "I can't say it's worth half a second," Neale says. "But we spend less time missing deadlines because we know where things are." For lots of small businesses, that's half the battle.

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