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Late last week, SAP introduced a feature pack for its SAP Business ByDesign on-demand ERP software. The so-called Feature Pack 2.0 provides some useful features, including integration with SAP’s BusinessObjects business intelligence software as well as functionality to support business processes such as customer relationship management, order-to-cash with automated billing, project profitability, resource management and time and expense reimbursement.

While the availability of these functions is good news for existing and would-be Business ByDesign customers, it’s still a reflection of how slow SAP has been to develop its midmarket/SaaS-based ERP model since the company announced the service in Sept. 2007.

When SAP first announced the service, then-CEO Henning Kagermann said the company’s goal was to have 10,000 clients using the service by 2010. But to date, SAP still has only 90 customers who are using Business ByDesign in a charter client program, according to a story posted by ChannelWeb. By the Spring of 2008, SAP had put the brakes on those lofty plans, stating that it needed more time to develop how it goes about selling, delivering and running the applications offered through the Business ByDesign service.

In the ChannelWeb story, SAP executive Jeff Stiles is quoted as saying “We have to get the go-to-market right.”

It’s certainly taking a deliberate and methodical approach towards doing just that.

As I’ve written about before, all of the enterprise software heavyweights, namely SAP, Oracle, Microsoft and IBM, are approaching SaaS very carefully as they each want to ensure that they’re able to offer the types of on-demand applications that customers are looking for at a reasonable price point without cannibalizing their extremely lucrative and highly profitable on-premise installed base. But rather than attacking the opportunities for generating alternative revenue channels in the SaaS space and jumping out ahead of their competitors, enterprise software providers like SAP and Oracle appear to be approaching the market like two kids daring one another to be the first to jump into a chilly lake. ‘You go first! No, you go first!’

Comments (4)

	1. 08-05-2009 15:11
	It will prove extremely difficult for these companies to wean themselves from the traditional licensing model, but while they wait to get it right, vendors like Salesforce.com will continue to chip away at their customer bases. Registered

Mel Duvall

	2. 08-05-2009 15:29
	Mel, what makes you think it will be extremely difficult for such companies to shed traditional licensing models? Most of these companies like SAP are seeing a big change in their go-to-market strategies? I think the larger players have actually done more in some instances than smaller players in the market toward SaaS. IBM for example has an entire section of their site dedicated to SaaS... http://www-304.ibm.com/jct01005c/isv/marketing/saas/index.html  Even posting a brochure on how to expand your reach through SaaS applications...  http://www-304.ibm.com/jct01005c/isv/marketing/saas/saas_brochure.pdf Registered

Ron Kost

	3. 08-05-2009 17:20
	To further my observation above, Microsoft is actively looking to provide SaaS solutions, perhaps along the lines of \"If you can\'t beat them, join them\" mind sets. Even asking their development community for insights...  http://social.msdn.microsoft.com/Forums/en/architecturegeneral/thread/c02160db-cf34-40de-8038-9458cb64073b    Also, similar to IBM, Oracle is dedicating substantial time to SaaS solutions on their web site...  http://www.oracle.com/technologies/saas/index.html    I think the rate of change for these larger companies in this \"New Economy\" is going to surprise many in the IT industry. I believe they are not waiting to \"get it right,\" but they are looking to understand it well enough to service their existing and future customers. I believe they, similar to many smaller and agile companies, are making headway the best they can. Registered

Ron Kost

	4. 08-06-2009 14:26
	Ron, in response to your question about why SAP and company will find it difficult to shed their traditional licensing models, I have posted a blog which goes into more detail. You can read it here:  http://www.ciozone.com/index.php/Default-Category/SAP-Treads-Cautiously-on-SaaS-ByDesign.html#akocomment1578    But in summary, the answer comes down to profits. SAP and Oracle could jump into on-demand software in a big way, but they risk cannibalizing a very lucrative model based on licensing and maintaining software on-premises. In time they will have to respond more aggressively to the threat posed by Salesforce.com and others, but for now, they are betting they can make more money by sitting on the sidelines. Registered

Mel Duvall

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