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Will Oracle And SAP Offer Big-Business SaaS? Sort Of

The question has been out there for some time: Will SAP and Oracle ever deliver software as a service to their large enterprise customers? The answer is, sort of.

Both companies would say that they already offer SaaS, yet that leads to a debate about the definition of SaaS. Companies such as Salesforce.com and Workday would argue that SaaS is comprised of a new class of applications that were built to run on the Web and are delivered in a multitenant environment (e.g., an application is shared by potentially dozens of the vendor's customers). As a result, they say, customers can expect better performance than they would from a traditional application hosted via the Web and pay less to the vendor than they would in a single-tenant deal.

SAP, Oracle, Microsoft, and other traditional software vendors would argue that SaaS doesn't need to be multitenant and applications don't need to be rewritten for SaaS. But then why call it SaaS; why not just call it hosted software (or, as it was known in the '90s, the ASP model)?

So lets consider SaaS more in the vision of Salesforce.com and Workday, and see where both Oracle and SAP stand on their offerings for larger businesses.

The model emerging at SAP is similar to Microsoft's "software + services" approach. It's planning a line of SaaS modules or smaller applications that integrate with a customer's big on-site SAP applications. That approach, if it works, could let SAP protect its profitable licensed software business, get more services revenue from those customers, and address concerns large companies have with putting some of their most sensitive business data in the cloud. Former Oracle executive John Wookey will head this new strategy.

Oracle does see itself playing a noticeable role in SaaS for both large and small companies ... large and small software companies, that is. It wants to be the go-to infrastructure vendor for software companies providing SaaS to their customers. With its "Oracle SaaS Platform," it offers database, middleware, application management, and virtual server software to build the data centers for serving up SaaS. Oracle notes that many SaaS vendors already are using its platform, including Intacct (human resources) and Xactly (CRM). Those vendors, of course, have to pay Oracle traditional licensing and maintenance fees.

Both strategies show that Oracle and SAP want to play in the SaaS world, but have no plans to mess with the cash cow: traditional software licenses and maintenance revenue that come from large companies. And it will likely stay that way unless Workday, Salesforce.com, or another vendor poses a real threat to their installed customers bases.