Enterprise evolution.

Critics predict a tough year of industry consolidation and fierce competition in enterprise software, and argue that SAP dropped the development ball by going too long between product upgrades. Unfazed, SAP is plotting to maintain its rapid growth trajectory--30 percent annually--with new launches and by setting its sights on small and medium-size businesses. In the discussion that follows, Bill McDermott, CEO of SAP America, shares how SAP plans to become the Microsoft of enterprise software.

How has the business enterprise software world changed--and what is over the horizon?

In the '90s the philosophy was, "Get me the best stuff, and I'll stitch it together." Soon companies had a lot of IT that wasn't integrated, and therefore business outcomes weren't what the customer wanted them to be. Beyond 2000, SAP--as an integrated, industry-specific, out-of-the-box best practices platform--came in vogue. Where it's now going is to an enterprise services architecture, [an open standard, Web services-enabled platform]. That's another way of saying the supply chain, financials, human capital management, supply relationship managers, all that has to be integrated, tailored to specific industries and come out of the box ready to run.

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What has that involved for you in terms of development?

Co-innovation with other market leaders. For example, how do you make business users more likely to change the way they work and therefore more productive? You make it easy for them. So today we have Duet, where you can work on Microsoft Office and seamlessly access SAP processes and data. The other thing is everything is going mobile. That means using RFID intelligently to keep track of your supply chain on your handheld or your cell phone.

Which clients do you view as state of the art in terms of global value chain management?

Colgate-Palmolive is one role model example. CIO Ed Toben had a vision of having all their business processes--from the way they manufacture a product, manage that product in the supply chain, stock it on a shelf and ultimately send it home with the customer--managed and integrated with one instant platform globally. They did that 10 years ago.

Now they're taking that one step further with an enterprise service-oriented architecture. They're service-enabling the platform, which basically means that they can take an SAP innovation or anyone else's innovation and, as long as it's compliant with the Internet, snap it in. For example, Colgate-Palmolive spends millions of dollars on promotions in stores. To make sure a promotion is actually working, they use a piece called trade promotion management that you can snap right on to the platform to fix that specific business issue.

How do you deal with the perception--or reality--that SAP implementation will be a nightmare?

Back in the early days of ERP, it was all virgin territory and systems integrators were learning on the job. Now integrators are more systems literate. And SAP has simplified the platform dramatically. In that era, people were doing big bang enterprise resource planning and going live with the flip of a switch. Now it's modular: a piece today, another in three months, another three months after that. It's a rolling process that is much more tightly governed, and therefore you can manage the risk.

CRM is a vexing issue for a lot of CEOs, many of whom say it annoys, rather than satisfies, customers. What's the problem?

You have to look at integration. If the CRM system isn't integrated into the supply chain, sales representatives can't tell customers when goods will ship. Or maybe it's not integrated into financials so they don't know the customer is on a bad debt creditor list. There are many traps. SAP became number one in CRM because we can solve those issues by integrating CRM with all the other components.

Going forward, what is expected of SAP America?

SAP America is expected to be the growth engine. On a compound annual basis, we've averaged about 30 percent in licensed revenue growth over the last four-plus years. That rate will come down as we get bigger, but the aggregate dollars will actually go up. The metric we look at is market share because growth rates fluctuate based on market conditions, but we have always grown at least three times faster than our competition. We've tripled our market share in the last four years, and we expect to continue to do that by taking care of small, midsize and large companies in 25 industries and adding value everywhere we go.