Was SAP Too Slow on SaaS? Maybe, Maybe Not

Ann All

Several publications are reporting the results of a small survey of British and Irish SAP users, in which nearly three-quarters of the respondents knocked SAP for being too slow to bring its software-as-a-service offerings to market. But what is too slow?


Yes, the SaaS market has grown tremendously in the three years since SAP announced its intent to offer software via a SaaS model. But a recent Gartner study found SaaS accounts for a relatively tiny percentage of total IT deployments, representing 3.4 percent of global enterprise spending in 2009, up slightly from 2.8 percent in 2008. That obviously leaves lots of room for future growth. Some experts, including Saugatuck Technology's Bill NcNee, don't expect SaaS adoption to really begin picking up until next year.


While 16 percent of respondents polled by the UK & Ireland SAP User Group said they ended up using another vendor's technology in another area of their business because SAP did not have an appropriate SaaS product, just 17 percent of them said they were using SaaS or cloud computing to deliver business-critical applications to their organization. Forty-nine percent, however, said they planned to use such services in the next 12 to 18 months. Maybe SAP is "early enough" to the marketplace with its Business ByDesign software, as Jim Noble, managing director of SAP UK & Ireland, said in a ComputerWeekly.com story.


SAP has been developing and testing Business ByDesign for three years, not a horribly long time by traditional software-development standards but an eternity in the world of Web-based applications. SAP in 2008 slowed its efforts to bring the software to market, saying it needed more time to get the product just right, prompting critics to say SAP lacked a fundamental understanding of the differences between SaaS and on-premise software. SAP resisted adopting a multi-tenant architecture, the approach used by most SaaS vendors as a cost-effective way to provision computing resources.


But considering current adoption levels and the growing buzz for SaaS among government agencies and other organizations, maybe SAP is in the right place, at the right time after all with the starter pack and three Business ByDesign packages it released yesterday.


SAP, which like most other technology vendors has always been coy about pricing, released costs and approximate implementation times for the CRM, ERP and Professional Service Provider (PSP) starter packages. In doing so, SAP is obviously trying to appeal to companies' desire for faster deployments and lower costs (the biggest SaaS benefits cited by respondents in the European sample). But it also risks making its on-premise offerings look like the proverbial lumbering dinosaur in comparison. (Thanks, Marc Benioff!)


That's a risk SAP obviously feels it has to take. Like other on-premise giants introducing SaaS products (Microsoft comes to mind), SAP is positioning its SaaS offerings as more sophisticated than typical SaaS point solutions and a more natural fit for hybrid strategies in which companies will keep some applications on-premise while moving others to the cloud. As companies' use of SaaS continues to evolve, their requirements may indeed become more sophisticated. This spring when I spoke to Jeff Stiles, SAP's global marketing lead for ByDesign, he predicted integrated suites (like those offered by SAP) will be "the next wave in on-demand."


Challenges definitely remain. As Dennis Howlett writes on ZDNet, pricing still seems a bit high for the ERP and PSP packages and SAP has yet to come up with the right sales channel strategy. Stiles addressed the channel question in our conversation, telling me SAP would rely mostly on "a co-selling model with partners," beginning with existing resellers of its products. SAP's approach is "overly cautious," wrote Howlett.


Howlett believes much is at stake with ByDesign, not just for SAP but for cloud computing. He wrote:


Progress over the coming year will be keenly watched. If SAP fails then it will be a massive backwards step for all who aspire to the notion of cloud computing. If it succeeds, then it is a massive endorsement. There is no in-between.

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Add Comment      Leave a comment on this blog post
Aug 10, 2010 10:11 AM Sujoy Sujoy  says:

While Sap might not be slow in releasing Business ByDesign or their SaaS offerings, Platform-as-a-Service providers such as WOLF are enabling & delivering a lot of enterprise grade business applications and entering the marketplace with great solutions.

Checkout: WOLF Cloud Application Platform for Businesses

Aug 10, 2010 4:20 PM Barry Boese Barry Boese  says:

I tend to believe if SAP Business By Design fails again with this re-launch, that it only endorses that NetSuite is the SaaS ERP leader.   NetSuite may be impossible to catch, since SAP with all it's resources can't keep up on the Saas front.   Realize also that NetSuite already is installed at the subsidiaries level in many companies running SAP at the corporate office.  If NS continues to gain at the subsidiary level, SAP continues to suffer, and will have less market for it's BusinessbyDesign. 

Aug 10, 2010 7:38 PM Helmuth Guembel Helmuth Guembel  says: in response to Barry Boese

SAP undoubtedly has the lead when it comes to branding. Netsuite has a big edge over SAP when it comes to experience in the ERP Cloud/SaaS market. Both have still a lot of homework to do whenit comes to partnering although ebven here NetSuite has a small edge. NetSuite has not yet found a way on how to enter the German market (a must) and does not have hosting facilities in Europe (a legal requirement when it comes to financial data). Product qualities aside, the biggest issue for SAP is the business model - making money and not run into the cash flow trap. It is hard to see how SAP will recover the 1.5 Billion USD it has spent. I agree with Dennis Howlett that there is either success or failure - and, to my mind, if it is a failure then SAP has to think very hard - there is no third chance, I guess.


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