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When SAP vice president John Wookey announced the company’s plans to sell additional functionality to customers of its Business Suite ERP software under a Software-as-a-Service (SaaS) model at the Software & Information Industry Association’s OnDemand Europe conference in Amsterdam last week, the news shouldn’t have come as a complete shock.
After all, the software giant recently announced plans to expand its Business ByDesign offerings to midsized companies. Plus, with increasing demand for on-demand software services from enterprise companies, it was only a matter of time before SAP made a bigger splash in this space.
To be sure, enterprise CIOs haven’t suddenly put aside longstanding security and contractual concerns associated with SaaS systems. One of the biggest stumbling blocks towards SaaS adoption for many Fortune 2000 CIOs are uncertainties in how proprietary data, including customer information, is to be managed in the cloud or returned to them after a contract has been terminated.
Still, many CIOs say they’re becoming more comfortable with having non-mission critical systems hosted by third party providers, such as payroll systems. Siemens’ SaaS agreement with SuccessFactors for 420,000 employees and managers to manage employee performance and recruiting across 80 countries was a huge shot in the arm for the enterprise SaaS market.
Meanwhile, SAP’s enterprise SaaS strategy could be viewed as a stepping stone approach. Customers are able to integrate add-on applications such as CRM on-demand and e-sourcing with their existing on-premise or hosted ERP suites. It’s one way for SAP to gauge customer interested in the types of applications they’d like to have hosted while determining how they can do this profitably without cannibilizing their extremely lucrative on-premise business.
Oracle, which offers a suite of on-demand CRM and other products, will almost certainly try to differentiate its own SaaS strategy following its acquisition of Sun Microsystems. No matter how you look at it, the expansion of the enterprise SaaS market offers CIOs additional options to consider.
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