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2/6/2007
02:52 PM
David Linthicum
David Linthicum
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Can SAP Embrace On-Demand?

SAP, in the light of weakening demand for its software, has announced plans to expand faster into the on-demand market. "SAP AG used its fourth-quarter conference call to trickle out more details about its forthcoming mid-market product, promising a 'game-changing' offering that combines SOA technology with a new business model...

SAP, in the light of weakening demand for its software, has announced plans to expand faster into the on-demand market, focusing on mass selling versus the slow-to-go enterprise sales that made the company so large in the last 20 years."SAP AG used its fourth-quarter conference call to trickle out more details about its forthcoming mid-market product, promising a 'game-changing' offering that combines SOA technology with a new business model," proclaimed a recent article in Computer Business Review Online. "However, its decision to accelerate its development suggests that the company may have been forced into action as a result of increased market competition."

SAP is looking to get into the SOA space by using its software as sets of services for use within enterprises, combined with its own flavor of integration technology.

I think this well-anticipated move could be too little too late. However, SAP is sure swinging a large hammer with thousands of enterprise customers using its products today. The trick will be to keep those customers and move into a space that is very different from its current core business.

The market dynamics are clear: Enterprises small and large are growing tired of paying through the nose for large, cumbersome enterprise applications that are both complex and difficult to implement. Thus, they have turned outward to SaaS-delivered applications and open source solutions that are kinder to the bottom line and can be more effective, given the number of complementary resources that exist on the Web.

Thus, it's only logical that SAP should see slower sales, even with the market once again expanding. The company is looking to play catch-up football with only two minutes left in the game. SAP's answer is its sheer power of resources, looking to accelerate development and marketing of its next-generation/on-demand/SOA product.

"SAP's intention is to swoop in with a simple but complete business application suite covering all critical business functions and a choice of deployment models, of which on-demand is likely to be key, before existing players can take market share," reports Computer Business Review. "However, [SAP CEO] Kagermann also indicated that he thought the real competitive threat would come from start-ups."

SAP is a valuable enterprise asset (notice I did not say was). At its essence it's a business process provider, and many in the SaaS space are finding that they can either replicate or improve upon these processes. Moreover, the challenge that SAP will face as it moves quickly into this market is that most customers don't consider it to be an on-demand player (even though it has had such an offering for a while). Changing that mindset will be a challenge as Salesforce.com and other SaaS players continue to grow, in many cases stealing share from SAP.

The question is, can SAP pull off a metamorphosis? Application integration and service oriented architecture expert David Linthicum heads the product development, implementation and strategy consulting firm The Linthicum Group.SAP, in the light of weakening demand for its software, has announced plans to expand faster into the on-demand market. "SAP AG used its fourth-quarter conference call to trickle out more details about its forthcoming mid-market product, promising a 'game-changing' offering that combines SOA technology with a new business model...

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