Disrupting the business SAP style

Summary:Larry Dignan has the latest update in the never-ending A1S saga but leaves some lingering questions:In the mid-market there will likely be “rental models” that resemble traditional leasing arrangements with customers. These models aren’t new, but are rare today.

Larry Dignan has the latest update in the never-ending A1S saga but leaves some lingering questions:

In the mid-market there will likely be “rental models” that resemble traditional leasing arrangements with customers. These models aren’t new, but are rare today. Kagermann indicated that these software leasing models may gain traction again for some customers.

Is SAP going into the leasing business? If so then it's an interesting way to generate additional revenue though it's hard to see how they could offer competitive rates.

Kagermann added that he sees A1S as a high-volume business. The SAP CEO also didn’t back down on his A1S projections calling for 10,000 new customers and $1 billion in revenue over a short period. When asked why he was so confident about A1S Kagermann noted that the suite “runs the entire business.”

This is likely to be at the nub of further probing at the forthcoming launch. In revealing these figures, we have more confirmation that SAP is looking to get $100,000 per customer per annum. Projections I've seen put the year one A1S sales target at $405 million. So what 'short period' means will require fleshing out.

The deeper question will be the extent to which SAP believes A1S will encroach on the remainder of the business. The top end will not necessarily take notice but might ask about SaaS offerings for add-ons. Kagermann has gone to considerable lengths in segmenting and positioning for the market. That will count for nothing if customers are able to make like for like functional and price comparisons and are willing to make compromises around customizations.

A point of clarification. Larry says:

The financial services crisis hasn’t hurt enterprise demand yet. Kagermann like a lot of other technology CEOs is being asked repeatedly about enterprise IT spending as the big spenders–financial services firms struggle. Here’s what he had to say:

“The crisis in the sector is not a secret. It’s surprising since the global economy is strong, but we don’t see an impact. A few months from now it could have an impact,” said Kagermann.

That should not be a surprise. Financial services has not been a traditionally strong market for ERP vendors, though recent traction suggests it could prove a rich seam in future years. In light of changing regulation, there seems to be plenty of demand for governance, risk and compliance style products. SAP has said this is a stand out sales segment but it is hard pressed to put production users into the public domain. It is early days.

Topics: SAP

About

Dennis Howlett has been providing comment and analysis on enterprise software since 1991 in a variety of European trade and professional journals including CFO Magazine, The Economist and Information Week. Today, apart from being a full time blogger on innovation for professional services organisations, he is a founding member of Enterpri... Full Bio

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