SAP unfazed by rise of SAAS model, says CEO
- 07 November, 2007 10:08
SAP will not plunge into competing in the Software as a Service (SAAS) market for large companies, despite its launch of a hosted enterprise resource planning suite earlier this year, its chief executive has said.
Henning Kagermann told delegates at the Gartner ITxpo in Cannes, France, that SAP would hold its own against the rise of SAAS because of its experience in core enterprise systems to "keep the lights on."
It was "impractical" to bring the approach behind SAP's new hosted Business ByDesign suite to large enterprises "because it's so new" and had been built on entirely new technology. Testing with SAP user groups had confirmed that they agreed, he said.
The hosted suite was "designed to the needs" of mid-market companies, but large enterprises would see "proof of concept," Kagermann said. The "first step" for enterprises might be for their smaller subsidiaries to adopt it.
But the technology would be used as a springboard for innovations in SAP's big business products, Kagermann said. "We will bring to large enterprises accelerated and radical innovations in future. Some of these innovations will follow concepts we've developed and proved with Business ByDesign."
SAP was not looking at an immediate move into the multitenancy SAAS market to compete with providers such as Salesforce.com, Kagermann said. "We will think about it. It's not our first priority because it's not where we come from."
The ERP giant was "not so interested in 'drop-in' services for three or four users, he said. "We want to run the company, we want to run the business, we don't want to just support some services for some users in the company."
Business ByDesign offered some of the benefits of the multitenancy SAAS model -- "we manage it, but we have isolation, we keep the data of the user protected," Kagermann said.
Asked by Gartner analysts if large companies were attracted to the SAAS model, Kagermann said: "I think they want it." In particular, firms would look at it as a first step towards implementing major on-premises customer relationship management projects, he suggested.
"They would prefer a quick win, that could be some CRM functions on demand," he said. They might later want to bring in on-premises software, he said. "That would take the risk and cost down."
Gartner research shows that decisions to implement SAAS were increasingly being made by business unit leaders, bypassing corporate IT departments. But Kagermann denied this made SAAS providers more of a threat to SAP. "Frankly no," he said.
"We see them as competition because without them we could sell even more, no doubt. We see them as competition in a way that keeps us moving and thinking about alternatives -- that's good. I don't see them as competition in switching and running the show and keeping the lights on instead of us."
SAAS providers had "no track record" of running core business processes, he said. "We are 35 years in this business and we know how to run a big organization round the clock. We know what to do if the CIO calls and says production is down."
He added: "I view it as more of a challenge for us to move even faster in what's outside the core." Not everything was about "keeping the lights on," Kagermann said. "We want to optimize the [user's] business, we want to innovate."