SAP in SaaS strategy shift

The business software maker, which has struggled to adapt to software-as-a-service, says it will allow customers to mix traditional applications with its online services
Written by Matthew Broersma, Contributor

SAP has announced a major shift in its approach to software-as-a-service (SaaS), in a move intended to help it catch up to SaaS leaders such as Salesforce.com.

Under the new strategy, announced on Wednesday at the OnDemand Europe conference in Amsterdam, SAP will adapt its Large Enterprise on Demand product to allow end-user organisations to mix traditional software in with the online services. Online services will be much more tightly integrated with SAP's core Business Suite product, a spokesman for the company told ZDNet UK.

The move is intended to allow customers to benefit from both the strengths of traditional software and the flexibility of online services, SAP said.

The new approach also aims to help businesses to avoid the integration problems that can arise when they use both in-house software and SaaS, according to SAP. These integration glitches can come when a company shares data between different platforms or can arise from the differences between the business processes used in various types of software.

Large Enterprise On Demand, which is SAP's SaaS product for enterprises, offers CRM (customer relationship management) and e-sourcing. Expense management capability is set for release in 2010.

Paul Daugherty, the chief technology architect at Accenture, said the news reflects the growing importance of SaaS.

"This news from SAP will add to the growing legitimacy of the SaaS model, which encourages the development of company-wide processes, making it easier for a company to focus on what differentiates it from the competition," Daugherty said in a statement.

SAP has faced problems getting into the SaaS market, notably with delays to its Business ByDesign product, which is targeted at small and medium-sized businesses.

In November, Salesforce.com's chief executive, Marc Benioff, accused SAP of failing to understand SaaS. He said the German company was doing a "terrible job" with Business ByDesign, and described the project as "a huge implosion", adding: "The way they're developing it is insane."

In May, SAP said it had signed up only about 80 customers to ByDesign.

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