Attending SAPPHIRE '06 in Orlando this week, I was more than once gripped with a sensation of deja-vu. Like the SAPPHIRE event held in Philadelphia one decade ago, SAP was talking about how applications would be dynamically combined and flexible (now with services, then with components via Business APIs - BAPIs). Systems integrators and hardware vendors grabbed the lion's share of third-party floor space and lots of tchotchkes were being thrown at attendees, who were all looking forward to Thursday night's concert with Sheryl Crow.

However, the environment of enterprise applications in 2006 is very different than that of 1996 when there was still a race in ERP as well as a menagerie of TLA markets that could easily absorb and grow due to yearly end-user spending increases of 15 percent and more. Today's down-to-earth GDP-metered IT spending growth has created a vastly different dynamic that casts SAP as the silverback software gorilla and most other vendors playing the roles of the lesser primates. And if SAP has its way, the differences will become even more extreme in the years to come.

The large themes at this SAPPHIRE were 1) Too much IT complexity is bad; 2) Corporations want to buy integrated suites; and 3) Upgrade to the latest version of SAP (ASAP) to speed your way to innovation with SAP and its partners. There was no subtlety in these messages.

At the same time, SAP attempted to show how its gorilla-like arms embraced a growing and vibrant ecosystem of software partners via its xApps and NetWeaver programs. SAP told its customers that over time it would "guarantee" the performance and quality of some of its software partners. It also announced a $125 million NetWeaver venture fund to seed small innovative companies (no doubt most awards will go to those who commit to build software using the xApps and NetWeaver platforms).

This creates a difficult dynamic for any software vendor that seeks to penetrate and work with the 30,000-plus customer SAP base because there are concentric circles of partnerships and favorites. If you are in the outer circle of being NetWeaver compliant, you are acknowledged as existing; if you are on the inner circle of being put on the price list, you will get near-exclusive salesforce access and attention to the detriment of your competitive peers.

But as we all know this access and position changes. SAP just announced the acquisition of Frictionless Commerce; it had been working quite well and strong with Ariba, which has competitive offerings via its FreeMarkets acquisition. A decade ago SAPPHIRE had an array of supply chain and CRM vendors in attendance. This year there were none.

Many years ago at a Sand Hill Group Enterprise event, SAP's Hasso Plattner gave a famous speech where he said that if you are not with SAP, it would crush you. Most people laughed. It was the middle of the dot-com boom and money was flowing like flood water. Most of those people and companies no longer exist as independent entities. But Hasso was wrong. SAP didn't crush companies, it just neutered them as Bill McDermott pointed out during his keynote: "Best-of-breed may have been the best but it didn't breed."

This fact is not lost on companies such as Salesforce.com, which is taking a variety of measures to create an ecosystem of complementary software partners as well as to have an application and non-intrusive focus that does not always need tight integration via an IT staff.

This is probably one of the best strategies for companies looking to crack the SAP user base. But it is still in the context of traditional software and traditional offerings. There is a growing and interesting base of software and approaches around open source, Web 2.0 and technologies outside the immediate envelope of traditional enterprise software processes and optimization. These components need to become at the core of new offerings that can be installed quickly and in a non-intrusive way.

To reduce IT complexity buyers will: 1) Purchase a suite (what SAP would like); 2) Build their own SOA-based integration platform with purchased and custom-built solutions; or 3) Purchase services or outsource portions of business processes in lieu of software.

So software vendors need to ask themselves: How does my solution reduce IT complexity and which of these three avenues represents my best strategy for profitability and growth?

Erik Keller is principal of technology consultancy, Wapiti LLC. This post is related to sapphire06.