Sapping the on-demand party dry?

Does SAP have what it takes to succeed in the on-demand space?
Written by Fran Foo, Contributor
commentary After months of speculation, German business software maker SAP finally lifted the veil on its hosted sales automation application.

The hosted, or on-demand, software arena was initially pooh-poohed by certain SAP executives but the missed opportunities eventually became too numerous to ignore. Figures quoted by IDC say the market is expected to grow to US$4.8 billion by 2009 in the US alone.

Fran Foo, ZDNet Australia

In Australia, the software giant is gearing up to tap into its existing ERP (enterprise resource planning) and CRM (customer relationship management) clientele to spread the word on SAP Sales On-Demand.

John Goldrick, its CRM business development manager for Australia and New Zealand, told your writer that there has been interest from customers about the company on-demand "capability" but he couldn't provide more details.

SAP Sales On-Demand will be aimed at large enterprises and upper mid-market organisations. Pricing starts at US$75 (AU$101) per user, per month. Rival RightNow Technologies' hosted sales tool costs AU$70 (US$52) per month for a two-year licence.

SAP plans to launch a marketing module in the next quarter, followed by SAP Service on-demand for call centre management and similar functions. Hosting services will be provided by IBM.

Although SAP has taken its time to join the on-demand bandwagon, the company feels it has all the right ingredients to differentiate itself from the likes of RightNow, Salesforce.com and Siebel. "They needed continuous deployment options and a more strategic CRM.... They wanted more than just a sliver of customer information. They wanted a full picture of the customer," Shai Agassi, president of SAP's product and technology group, told ZDNet Australia's sister publication CNET News.com. The thing is, not everyone buys it.

A few hours after SAP's announcement, the following note landed in my inbox (and no doubt that of many other journalists and analysts) from RightNow CEO and founder Greg Gianforte. I've been chasing SAP for a response since Friday.

Here's an excerpt from that note:

Today SAP announced an extension to their CRM offering to include an on-demand option, a move which they say is driven by customer demand. We at RightNow agree. We built our business on customer driven policies which is why we've been offering an on demand solution for nearly ten years. We appreciate that SAP has finally recognised 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 ....

Gianforte goes on to justify his claims in four parts: architecture [SAP Sales On-Demand is not mission critical and not up to scratch], revenue recognition [no money upfront which could possibly test SAP's patience], customer success [vendor lock-in doesn't exist in the on-demand world], and complexity of software [self explanatory].

He wrapped up by saying: "As recent history has proven, on-premise vendors can't successfully make the switch to on-demand. On-demand is becoming the predominant model of delivering enterprise software. Siebel tried to make the switch to on-demand, but couldn't.

"SAP is going to face similar challenges. It is more than a new delivery model, it is a way of thinking, of caring for customers, and a cultural shift that those vendors will have a very difficult time embracing."

It's now Wednesday and still no word from SAP. Hopefully, this feet-dragging nonsense isn't common practice with customers. If the company wants to play in the on-demand space then it has to get with the program and start walking the walk. Remember, a 200kg gorilla with lipstick and rouge is still a 200kg gorilla.

Fran Foo is ZDNet Australia managing editor.

Editor's note: SAP responded with a "no comment" one and a half weeks later on February 17.

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