So What Is SAP's Enterprise Software as a Service Strategy, Anyway?


In my opinion, SAP has taken proactive steps to correct the record relative to its Software as a Service (SaaS) strategy, which were badly misrepresented in a posting at BusinessWeek ("SAP Hits On-Demand SaaS Button To Avoid Extinction") described in my companion blog post here on IT Business Edge. (I am purposely not linking to the misleading headline so as not to contribute to its click count.)


SAP did not say that the June 16 press release was a direct response, but it really had no choice in my investment-research opinion but to issue this information given its Sarbanes/Oxley, U.S. Securities and Exchange Commission (SEC) and transparency-with-shareholders responsibilities. It looks like a June 16 executive presentation at a trade show provided the venue. The basis of my opinion is two-fold: no press release was issued during the week of June 8 when the same executive gave the same speech at a similar trade show (but maybe the June 16 trade show is just a bigger deal in Europe), and there really is no news in the June 16 SAP SaaS announcement.


One of the key phrases in the headline of the June 16 SAP press release concerning SAP's Large Enterprise On-Demand Strategy" is the phrase "large enterprise." Like all the leading software suppliers, SAP has multiple long-standing SaaS strategies related to various classes of customers. (SAP along with Google, IBM, Microsoft, Oracle and Symantec are the leading software suppliers as measured by worldwide revenue according to IT Investment Research; as a group the five account for over 40 percent of your total software spending worldwide.)


Despite conventional wisdom, SAP has been delivering its popular software in various service forms to large enterprises for almost its whole 30-year-plus history. If SAP customers prefer that method of delivery (which is really all SaaS is - see my post concerning the common fallacy that ERP and SaaS are somehow comparable), SAP obliges. Beginning in 2007, SAP even started breaking out this revenue stream separately for shareholders in a segment (SEC terminology) called "Subscription and Other Software-related service revenue." There is no new news here.


Specifically for large enterprises, SAP has long offered an SAP Customer Relationship Management (SAP CRM) on-demand solution, an E-sourcing on-demand solution (which goes back to SAP's CommerceOne relationship and subsequent investment in 2001 and acquisition), and SAP recently began offering cap-and-trade calculation software through the Clear Standards acquisition. SAP said new SaaS-based expense management software is expected to be launched in mid-2010.


Not to be forgotten, beginning in the late 1990s, SAP also attempted to better serve mid-sized and small businesses (SMBs) that have historically used Infor (and all its constituent parts), Intuit, Microsoft or Sage software. SAP started a joint venture called Pandesic with Intel aimed at ecommerce customers in 1997. It acquired the companies that underlay its BusinessOne product line beginning in 2002 with TopManage. It rolled out (and re-rolled-out and reportedly rolled back in) its BusinessByDesgin (BbD) SaaS offering in 2006. All of these offerings, especially BbD, are available as SaaS via partners. There is no new news here, either, but note that back in history, SaaS might have been called Application Service Provision.


The new news, to the minor extent that there is something new here as opposed to SAP simply taking the chance to refute that post at BusinessWeek, is that SAP is formalizing some of the long available connections between SaaS-delivered and on-premise software. The strategy was unveiled by John Wookey, executive vice president of Large Enterprise On-Demand at SAP and former leading Oracle Applications eBusiness Suite honcho, during a presentation titled "Next Generation OnDemand" at SIIA On-Demand Europe 2009 (see links to the presentation vis the press release hyperlink above).Wookey also announced that all large enterprise on-demand applications will be powered by the Java-based Frictionless platform SAP gained through the Frictionless acquisition in 2006. This is an interesting development vis a vis TopTier, developed by the same Israeli group that provided the TopManage software described above, and which has become the underpinnings of the flagship SAP middleware offering branded NetWeaver. Is Wookey veering away from a "NetWeaver under everything" strategy at SAP? At Oracle, he didn't hesitate to use any middleware he thought would do the job to use under Oracle applications.


Despite that misleading headline, no one of SAP's many SaaS strategies is likely to cause its extinction (or "save it" from such a fate either). The only antidote to a software company's extinction is good products.