Cloud Downer

December 4, 2008

SAP, once desired by Microsoft, finds itself the baby in the super platform enterprise software game. SAP is trying to pump up revenues, deploy new on premises services, and make its investments in cloud computing pay off. Intelligent Enterprise has an interesting story about this juggling act here. (This is one of those wacky urls that could go dead at any moment.) The article “SAP Pays Price for SaaS Maturation” is by Rajan Chandras. For me the key point in the write up was:

SAP’s Business ByDesign, the newly introduced SaaS version for ERP, is “ready and done” and “the coolest app ever written,” according to Apotheker. Yet, he admits, it’s a bad time, financially, for doing a big market push — “hurting our margin, and hurting our stock,” is how he describes it

Blue-chip, white shoes consulting firm Forrester chipped in some insights for Mr. Chandras’ article. The BCWS outfit figured out that SAP was rethinking its commitment to SaaS or Software as a Service. The SAP financials make the plight of the German software company easy to grasp. Click here to see what I mean. The softening is evident in stock price, earnings, and soft inputs in the commentary about the company.

The SAP search system TREX is simply not pinging the radar of the people with whom I speak. In fact, some SAP customers are not up to speed on the system.

In my opinion, the shift from on premises’ software to cloud based services is going to impose some hefty penalties on companies like SAP. Cloud services offer cost savings to corporations that are struggling, often without success, to contain the information technology costs of on premises software. But if an on premises licensee jumps to the cloud, the incumbent vendor may suffer cannibalization of on premises revenue. SAP may sense the danger in a lousy financial climate and find itself unable or unwilling to push forward with its cloud initiative. SAP then becomes more vulnerable because cloud service vendors can try to poach SAP customers. In short, I think SAP is in a world in which the three other super platform enterprise software vendors will squeeze down on SAP. Cloud based vendors will push up on SAP. Unless SAP comes up with some viable options. Otherwise, R/3 may find itself marginalized as TREX.

Stephen Arnold, December 4, 2008

Written by Stephen E. Arnold · Filed Under Enterprise, News, Search

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Stephen E. Arnold monitors search, content processing, text mining and related topics from his high-tech nerve center in rural Kentucky. He tries to winnow the goose feathers from the giblets. He works with colleagues worldwide to make this Web log useful to those who want to go "beyond search". Contact him at sa [at] arnoldit.com. His Web site with additional information about search is arnoldit.com.