SAP and Business by Design
May 16, 2009
SAP, Europe’s largest software company, continues to intrigue me. The company’s roots are deep in the on premises hydroponic tanks of its customers. The writing is on the wall, however. SAP customers are pushing back on costs, long deployment times, and complexity with each passing month. I read Michael Krigsman’s “Understanding SAP’s Business by Design SaaS Strategy” with interest. You can find that article here.
When I copied the url for this link I notice that the subdirectory was “project failures”, which is by itself an interesting bit of information. The article is based on conversations Mr. Krigsman had with a panoply of SAP luminaries. For me the most important passage in the article was:
The Business byDesign initiative presents two broad strategic challenges to SAP. First, from a Board-level perspective, the company must decide, on an ongoing basis, how much to invest in this product, which has long-term potential but is expensive in the present. The relatively slow rollout reflects the Board’s measured and carefully paced level of investment. Second, Business byDesign reflects a new way of managing and delivering software for SAP, a company with deep on-premise roots. As SAP has learned, on-premise vendors face formidable challenges and a steep learning curve during the transition to SaaS deployment. SAP obviously underestimated these obstacles.
In my opinion, on premises business models will be cannibalized a nibble at a time by software as a service and other ways of delivering enterprise software. In short, SAP may be a lab experiment that provides useful data on the fate of other on premises giants. You can’t make up the consulting revenue, long deployment times, and high license fees on volume in my opinion. Again, nary a word about search. SAP seems to be drifting.
Stephen Arnold, May 16, 2009
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