How Serious is SAP About the On-Demand SaaS Model?

Nick Carr stirred up the Enterprise Irregulars with his post on SAP (SAP) and SaaS over the weekend. It spurred a lot of discussion about just how serious SAP is about the on demand, software-as-a-service model and how the new SAP A1S solution, which is due around year end, fits into the existing set of products aimed and the SMB market. David Terrar sorts out some of the issues brought in various reports in his post yesterday. David wrote:

Apparently these briefings suggested SAP aims to squeeze the new hosted offering between two of its existing products targeting small and medium-size enterprises (SMEs): All-in-One and Business One (B1). As part of the company’s assault on the global SME market, A1S will target businesses with between 100 and 1,000 employees, while All-in-One will focus on companies with between 1,000 and 2,500 employees and Business One between 10 and 100.

Could users of All-in-One, which is a slimmed down version of mySAP ERP, be attracted to the new hosted application to save money? “Let me make a comparison to the car industry,” Kagermann said. “You can buy a basic car that transports you from point A to point B. But if you want to have other special features, you pay for them. That’s the difference between All-in-One and A1S.”

So, SAP's hosted, on demand solution will be more of a basic car with limited customization and complexity–easier and less costly to maintain and deploy. You could say the same about many on demand products in terms of cost and ease of deployment, and limits on the customization.

Salesforce.com seems to be trying to have it both ways, enabling simple or complex customizations in a single on demand product platform.

An issue for SAP is having multiple overlapping products, targeted by company size. What happens if a company outgrows Business One, which SAP expects to account for 50,000 of the 100,000 customers projected by 2010. Is upgrading just adding a few more features to the same car? Probably not.

SAP has clearly done lots of research on market segmentation, but customers will gravitate to the product that SAP or competitors offer that is forward looking and offers the best ROI, based on a need for ease of deployment and use, and a 360-degree view of customers, not the one that is for x-company size and is not flexible or agile enough in the sense of a software platform that continues to grow and inherit powerful features. It's like having to choose from among three cars and you want some parts of all two or three.

Maybe we will get the answers at SAP's annual Sapphire conference in Altanta next month.