SAP's announcement of its on demand CRM solution has stimulated competitors and commmentors. Phil Wainewright hits SAP over the head for announcing a "gridless on demand model." Zach Nelson of NetSuite and Marc Benioff of salesforce.com had their responses even before the SAP press conference. RightNow CEO Greg Gianforte was a bit tardy, but sent a lengthy critique on SAP's entry into hosted applications. Gianforte writes (excerpts):
We appreciate that SAP has finally recognized that on demand is the future of the computing industry, even though they are five years late.
Also we are flattered that SAP is attempting to copy the mission critical on demand architecture we introduced in 1997 with 'isolated tenancy.' However, they're missing the boat for enterprise customers. Unlike SAP, our customers can run different versions of our software, and can upgrade on demand.
As recent history has proven, on premise vendors can't successfully make the switch to on demand.
Jeff Kaplan of THINKstrategies puts a positive spin on SAP's initial on demand effort.
In THINKstrategies' view, if SAP puts its vast marketing and sales engine fully behind its new On-Demand CRM business, it can not only position SAP as a market leader but also firmly establish SaaS as a legitimate software alternative.
However, SAP still faces three serious challenges winning a meaningful share of the SaaS market,
1. Re-architecting its other applications to provide well-integrated, easy-to-use, web-enabled SaaS solutions,
2. Re-structuring its overall packaging and pricing models to balance the revenue and profitability requirements of its On-Demand and on-premise solutions,
3. Re-castng its corporate culture--from R&D to sales and support--to become more services-oriented.
SAP's penetration of the SaaS market may be slow, but the impact of today's announcement on the software industry will be swift and significant.
Software industry analyst Curt Monash isn't sure if SAP will be successful with on demand CRM:
Like most cases in which a huge and hugely successful company invades the core market of a rival, this effort will need to be judged several years and releases down the road. And the most important deciding factor will be whether or not there’s ongoing commitment to succeed in this new market, on a level comparable to the commitment with which the company pursues its much large core businesses. SAP has already shown such a commitment once this century, in NetWeaver. It’s too early to tell whether they’ll do so a second time, in SaaS.
By trying to recast SaaS as a small-time offshoot of the traditional on-premise model, SAP is hoping not to build a big on-demand business but rather to protect its traditional business. It's allowing customers to take a ride on the SaaS pony without leaving the SAP ranch. As Wall Street analyst Jason Maynard says in the Business Week report, "They're positioning on-demand as a niche offer. That's smart. If I was SAP, the last thing I'd do is validate on-demand as the biggest trend in the software industry. They'd be crazy to do that."
My take: I'm not betting against SAP succeeding in its installed base, which salesforce.com and others have been chipping away at. Beyond that, which is a large chunk of users, it won't have much of an effect other than further legitimizing the on demand movement.