Hennig Kagermann, chairman and chief executive officer of German business software vendor SAP AG, used the company's Sapphire international customer conference last week in New Orleans to announce a key software development partnership with Microsoft Corp. and plenty more.

Shortly after the event, which attracted about 8,000 SAP customers, Kagermann sat down in an interview with the IDG News Service to talk not only about the implications of the Microsoft deal but also about the general direction of the company as it moves deeper into its new service-oriented architecture.

IDGNS: Some say SAP will benefit the most from the deal with Microsoft to deepen the integration between the companies' two platforms. Would you agree that SAP is the big winner?

Kagermann: No, the customer is -- as you would expect me to say -- but this is really the case. We have many customers who use Microsoft products. The large ones, in particular, want interoperability between our two platforms. They will be happy to see us invest in this interoperability.

IDGNS: Aren't you a bit concerned that by agreeing to a deeper integration of the two platforms, you could be opening the door for Microsoft to move even more aggressively into your space, especially in the mid-market?

Kagermann: No, the move helps both sides. If we didn't make our systems more interoperable, it could be that customers would have to pick a winner (or go with only one vendor). I wouldn't say that we are always the winner, but I would say that a lot of our applications work in our favor. The deal makes it easier for each of us to (remain successfully competitive) where we are.

IDGNS: But isn't the mid-market an area where SAP and Microsoft are directly butting heads -- where cooperation between the two companies ends and competition really begins?

Kagermann: This is true: Microsoft offers business solutions in the mid-market, where we also are. Although we are competing in this area, the competition is about applications, not platforms. I don't think companies in this market would buy both solutions; they can't afford both. Most would go for either the Microsoft or the SAP solution.

IDGNS: So you really want to make it easier for customers to choose among applications, say Microsoft's Office and mySAP CRM (customer relationship management). This sounds a bit like a Lego approach, doesn't it?

Kagermann: Yes, some customers may want to pick Office together with several of our applications. This integration is beneficial for us.

IDGNS: Is it really? While such integration may help your customers link to products from different vendors more easily, aren't you concerned about losing your ability to lock them in with such openness?

Kagermann: We don't want to lock in our customers. This isn't a good strategy. Customers fear being locked in. I see this when SAP reaches a certain level of "share of wallet." This triggers a response at the board level, where members begin to discuss whether their company is becoming too dependent on SAP. They have two choices: either they take

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