Wookey: SAP's future is on-demand

Citing the spectre of long-forgotten titans of previous generations of business application software, SAP executive VP John Wookey set out the software giant's commitment to embracing on-demand applications in a keynote presentation at the OnDemand Europe conference in Amsterdam today:

"On demand is the next stage in the evolution of application development ... It is absolutely essential from SAP's perspective that we embrace this change," he said. "On-demand is what our customers are looking to invest in. If we do our job well and listen to our customers, these are the applications we have to be delivering. We have to drive to leadership in on-demand applications."

As previewed by articles in the WSJ and FT today, Wookey (pictured) outlined the company's strategy for bringing on-demand applications to SAP's existing customer base of large enterprises. This is separate from the more widely publicised Business ByDesign offering being developed for midmarket companies and the BusinessObjects on-demand portfolio, although lessons have also been learned from those initiatives, he said. As EVP of large enterprise on-demand, Wookey heads up a team with a portfolio of on-demand products targeted at large enterprises, including CRM, strategic sourcing and expense management.

The core of the strategy, targeted for availability mid next year, is an architecture where new on-demand applications can be deployed instantly because they'll inherit the existing policy settings from the installed Business Suite infrastructure. "The on-demand applications we deliver can behave as an extension of the Business Suite," Wookey explained. "[Customers] just turn it on. They don't have to redefine anything to the on-demand service." The principle has already been tested with the e-Sourcing on-demand application. Once it has been stabilized, it will be offered to partners to plug in third-party on-demand applications (although Wookey didn't elaborate on the exact shape of that ecosystem, for example whether it might include SaaS players with rival applications such as Salesforce.com and SuccessFactors).

The strategy will make it easier for customers to add new applications, overcoming what Wookey described as the "fatigue" that often sets in a few years after a SAP implementation, when organizations lose the appetite to continue upgrading their installed software to introduce new features and functionality. "One of the exciting things about on-demand is that it enables a level of closeness with customers that we've never had before," he said. "It's just a much faster cycle time." His unit is using agile methodologies to enable much faster development lifecycles, in tune with the on-demand ethos. He also praised the changed economics of the on-demand model which means that "we only get paid when [customers] get value."

He spoke, too, of the need to cater to new ways of working being adopted by the younger generation, noting that in five years' time, Gen-Y will represent 45% of workers: "They're not coming in, they're going to run the place." They'll introduce a more collaborative, socially networked style of working and Wookey's team is working on applications that will support that new approach, using the on-demand model to ensure they keep up with the rapid pace of innovation. For example, he said, "We need to find a way to get Facebook better integrated with our business systems." The acquisition of Sky Data, which closed last week and has become part of Wookey's team, underpins that strategy. The earlier acquisition of Frictionless Commerce provides other key members and foundation technology for SAP's on-demand product set.

Wookey's task, of course, is huge. His acknowledgement of the importance of on-demand for SAP's future success and survival is a welcome boost not only for on-demand advocates within SAP but for everyone in the wider industry, and it appears that Wookey's team has a great deal of autonomy to pursue its goals: "Effectively we're like a start-up organisation within SAP," he said. But at the same time, the strategy is focused on using on-demand as a means of helping customers add extra functionality around their core Business Suite infrastructure, which remains on-premise. On-demand becomes a kind of innovation layer that sits on top of the existing on-premise investment. That's clearly what SAP's customers are looking for at present — very few of them are looking to rip out their core business systems to replace them with cloud-based ERP alternatives. But where a customer is looking at an on-demand offering as replacement for or alternative to an on-premise equivalent from SAP — for example supply chain management, HCM or CRM — will the vendor encourage a move to on-demand or will it seek to protect its on-premise license revenues? It'll be interesting to watch how SAP evolves this new strategy.