Never mind the software, measure the results

Who does SAP fear the most? According to long-term SAP watcher Bruce Richardson, interviewed by BusinessWeek in May, it's not Oracle, Microsoft, or even salesforce.com.

"When you talk to the SAP execs and you ask, 'Who are you worried about?' their answer is the only possible threat in the next 5 to 10 years may be some large Indian IT services firm that learns to build composite applications and can mimic or replicate the functionality that SAP has and do it all in new code, and not worry about being backward-compatible with the 27,000 customers SAP already has."

I wonder, then, how closely SAP is following the fortunes of Indian startup Aegis InterWorld, which recently acquired software and services technology that "will help give customers of the offshore outsourcer the ability to design and carry out business process improvements in real time, bringing cost savings of 15 to 30 percent over existing processes."

Aegis is combining three separate forms of outsourcing and on-demand, so bear with me for a moment while I just run through this.

• First and foremost, it's an offshore business process outsourcer. That's straightforward enough.
• Secondly, it provides business process modeling as a hosted application, which customers use to refine the outsourced business processes to produce the business results they want. This is the cunning bit, because whereas most outsourcers are mired in discussing software specs with their customers, Aegis has skipped ahead to focus on business results -- a smart move, because that's what customers are really interested in.
• Finally, Aegis presumably has some mechanism for tailoring its software to deliver the business process automation that its customers request through the modeling tool. This is a form of on-demand software development, except that, again, customers aren't specifying the actual software — they don't care how it's implemented, so long as it works. This gives Aegis one of the most important hidden benefits of the on-demand model — total freedom to choose how it implements its software. If it's sensible, it will be lowering its offshore cost base even further by using as much open-source code as it can.

This on-demand variant of business process outsourcing is a left-field threat that should be keeping executives awake at any enterprise software company, not just SAP. Why bother having anything to do with software at all (even the on-demand variety) when you can outsource all of those operational headaches to someone else, and yet still have complete control over the business processes? If companies like Aegis can get this to work, it's going to make a very compelling proposition.