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ORLANDO, Fla.—SAP AG made some sweeping announcements at its annual Sapphire user conference here May 16-18, led by the introduction of the long-awaited MySAP ERP 2005 suite that sports new vertical industry processes and analytic capabilities baked into the applications.

SAP also made the conference the forum to announce a the acquisition of Frictionless Commerce for its on-demand supplier relationship management products and the launch of a new governance, risk and compliance management business unit to expand the company’s flagship suite of enterprise applications even further.

But the most significant and anticipated announcement is the release of mySAP ERP 2005, the initial product implementation of SAP’s ESA (Enterprise Services Architecture).

ESA is SAP’s services-based architecture around which it has redesigned its applications, starting with its NetWeaver integration platform and mySAP ERP 2005. ESA is also the direction SAP is pushing its customers to move in.

The suite, as characterized by executive board member Shai Agassi, is really the starting point—the 1.0 version— for implementing its ESA strategy.

It’s the first step for any company that wants to leverage the newer capabilities being developed over the past three years at SAP.

“This is going to be the foundation, the core, that will take us forward for a very, very long time,” said Agassi, during his May 17 keynote address.

“This is the first incarnation of SOA. For the first time, we’ve integrated all the industry capabilities into a single framework. We’ve also documented the enterprise services that came out of ERP 2005—documented them and productized them.”

(The productization of 500 mySAP ERP services, available in SAP’s Web services registry in June, is another announcement coming out of the Sapphire show).

The mySAP ERP 2005 suite brings a plethora of upgrades from its predecessor, mySAP ERP 2004.

Included are elements like a newly architected general ledger module, which brings the ability to balance ledgers by multiple dimensions, and upgraded HCM capabilities that provide new talent management tools.

More prominently, what mySAP 2005 brings is the ability for users to take a process-centric approach to development, and to integration, along with a single instance for processes that span industries.

For example, for an oil company with retail outlets, “in the past you had to have an instance for retail, and an instance for oil and gas,” said Agassi.

“Now there is one instance for ERP, and you activate the processes that you want. It’s one system for all processes.”

Part of the success around mySAP ERP 2005—and, ultimately, SAP’s ESA strategy—will be in the creation of a successful ecosystem around NetWeaver, with the idea that partner will build more products around NetWeaver.

Read more here about building products around NetWeaver.

To this end, SAP announced May 17 that it has established a $125 million venture capital fund geared toward helping ISVs build software around SAP’s architecture.

To date, SAP has about 400 products available from NetWeaver-based ISVs, and about 600 in the pipeline, officials said.

SAP is also expanding its own stable of software offerings.

With the acquisition of Frictionless Commerce, expected to be completed in July, SAP will combine its mySAP SRM applications with Frictionless’ e-sourcing capabilities in an on demand offering.

The idea is to have an on demand counterpart to its on demand CRM (customer relationship management) offering.

While CRM does what it says—helps users manage customer and sales initiatives—SRM takes a similar approach to managing supplier relationships.

SAP also announced that it would move its entire on premises CRM product line to its current “hybrid” on demand model by 2007.

SAP announced in February its first on demand product, CRM On-Demand, available in the hybrid model—customers receive quarterly updates and pay a subscription fee for a service hosted by SAP, but operate on their own instance of the software.

In the same vein, SAP launched on May 17 CRM 2006s, a combined on-demand and on-premises suite that brings new industry-specific functionality and a standard user interface across both types of software.

The idea for SAP’s on demand solutions is to start small (with on demand) and move up to on premises software.

Separately, SAP’s new Governance, Risk and Compliance Management suite will be based on the April acquisition of Virsa Systems.

SAP plans to take a lot of point solutions and bring them into the Virsa framework, building a unified experience, by industry, around compliance.

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