SAP Backtracks on SAAS (Again)

Not long after the New York City media rich SaaS product announcements and follow-on happy hour parties were over, SAP has disclosed significant setbacks in its yet to be released software as a service CRM and ERP solution titled Business ByDesign.

In fact, more than just an indefinite delay, SAP has pushed the release date back by 12 to 18 months and also reduced the customer acquisition projections, revenue forecast, R&D budget and the staffing of the Hosted ERP software system. Analyst firm Gartner found itself in an 'I told you so' moment as the research firm was extremely cautious when it first called SAP's entry to the hosted software market "a big bet" about a year ago.

Early mixed SAP Business ByDesign software reviews and technical problems have plagued the Business ByDesign on demand ERP system. InfoWorld blogger Bill Snyder suggests that Business ByDesign is too closely tied to Netweaver 7.1. “SAP’s latest iteration is the big honking platform that nobody likes.” SaaS is designed to reduce complexity, but SAP spent nearly four years developing Business ByDesign — and precious little of that time apparently went to coming up with a workable model."

Other skeptics concluded Business ByDesign dead on arrival, assuming it would ever actually arrive, due to SAP's mandate that the software not be customized. Prohibiting software customization and thereby requiring mid-market enterprises to adjust their business processes to accommodate the software application is akin to putting the cart before the horse.

InfoWorld's Snyder also astutely points out that SAP's hosted platform may be more of a monster than middle market companies want to absorb and that SAP doesn't understand that companies smaller than the global 1000 don't necessarily want an entire software stack from the same vendor. Snyder writes, "The wave of consolidation that has swept the enterprise software world since Oracle bought PeopleSoft has been accompanied by a drive on the part of the largest survivors to build and sell complete software stacks. Although there are reasons that the stack strategy offers benefits to the enterprise customer, it clearly doesn’t serve the interests of the little guy."

Snyder and a host of other industry insiders correctly suggest that if SAP wants to legitimately play in the software as a service industry, the company should consider acquiring Salesforce.com or another credible on-demand software company. However, that would require the German giant to admit it missed the boat to the SaaS industry and was unable to retrench without outside help - two things not within the culture of SAP.

SAP's fallback to a failed on-demand ERP system is now to spin a new "services by design" approach. However, the market is not buying the spin nor the buzzword marketing campaign and SAP looks more like a dinosaur reverting to a part-hosted, part on-premise hybrid approach which will fail to match the value propositions of true SaaS systems such as Salesforce.com, NetSuite and Aplicor. In SAP's defense, the approach is not radically different than that of Microsoft and may ultimately secure the acquisition of some hosted customers which are then transcended to the company's flagship on premise ERP system. Expect SAP to ultimately release (late) a watered down, rigid and non-customizable middle market ERP system and aim the majority of their marketing to existing SAP customers looking to extend their on premise systems to decentralized, virtual or remote operations.

Posted by: Jeffrey on 05.15.2008
Posted in: SAP
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