An announcement by SAP AG (NYSE: SAP) in May 2009 that it is acquiring Sterling-based Clear Standards Inc, a company that develops on-demand carbon emissions-tracking software for companies, may be a sign that large software companies are ready to jump en masse into the carbon-tracking market.

Yet some industry insiders are skeptical of SAP’s ability to switch gears fast enough to keep up with the ever-changing world of carbon tracking and reporting.  "Carbon is changing literally every week," says Michael Meehan, CEO of San Francisco-based Carbonetworks, a software company that helps businesses track carbon emissions and connects them to others looking to buy and sell emissions credits. "In six months, we don't know what carbon management is going to be. You need to make sure you're nimble enough to act," Meehan adds.

SAP's sustainability efforts are driven by its sustainability map which also influenced the decision to acquire Clear Standards, says Scott Bolick, SAP's vice president of sustainability solutions. That map is also making sure SAP’s sales and tech forces are able to provide answers to customer questions about sustainability. "If we want to have a large impact, we have to have the whole organization focused on sustainability," he says.

Whether SAP can effectively help its customers monitor and track their carbon emissions in ways that assure they meet future regulations is questionable, says Meehan. He cited Carbonetwork's ability to develop "a new arm" for one of its products in a week and a half as an example of the requirement to be nimble in order to be successful in the space.

SAP is going to be able to respond to client needs in a similar fashion, says Anirban Chakrabarti, president of Clear Standards. SAP will keep Chakrabati's smaller, focused team in tact so it can respond aggressively to shifting carbon market requirements, which is a unique approach, he says.

SAP, which purchased Clear Standards for an undisclosed amount, reported first quarter 2009 revenues of $2.4 billion, a 3 percent decrease from 2008 first quarter revenues. 

The purchase of Clear Standards is not likely to have much of an effect on the overall carbon-tracking software market, which is relatively small, says Meehan. If anything, it will help smaller players such as his company, which works with more than 300 organizations but as a private company did not make its first quarter 2009 earnings available. "Large players are carving off a slice that is pertinent to them, and that's good," he says. Otherwise, large companies would be buying up all the smaller ones in the space in order to be able to do it all, which leads to “a fairly flat market.This market is far too early and far too large for that type of leveling. I want to see innovation take root."