SAP: Dinosaurs Resist Extinction
July 2, 2009
Kelly Fishash’s “SAP Hits On Demand SaaS Button to Avoid Extinction” here reminded me that I had in my write up pile a comment about the German software giant’s latest reflex action. Mr. Fishash wrote:
SAP, in a spectacular U-turn, has leapt on board the software-as-a-service bandwagon – the company confirmed its new selling strategy yesterday [June 10, 2009]. The German software giant, which was speaking at an On-Demand conference in Amsterdam on Wednesday, said it will launch SaaS functionality add-ons for its existing Business Suite ERP customers soon. It will wedge open the door to its Large Enterprise on-Demand product, to allow companies to bolt on SAP’s web offerings with their core, on-site or hosted ERP platforms.
I think SAP is one of those companies that merits close observation. The company is a variant of the IBM approach to software and services; that is, big, complex, expensive, and an exemplar of the “take your medicine” method. The SAP TREX search system is interesting, but I don’t see much about it. I track TREX in my Overflight service (sorry, this part of the service is not available for free at this time). I did a write up about TREX in one of the three editions of Enterprise Search Report I wrote. I did not include the system in my 2008 Beyond Search because I just wasn’t hearing much about the company. I continue to follow SAP outfit because it pumped cash into Endeca via its venture unit a year or so ago. I wondered if SAP execs recognized that Endeca required similar upfront consulting for its search and content processing system. The SAP system is front loaded in the same way, and both SAP and Endeca avoid offering bargain basement pricing on enterprise systems.
Now I learn that after a run at raising some fees, SAP is embracing SaaS or Software as a Service which is a more trendy name than timesharing.
Dennis Howlett’s “European SaaS Vendors: Not Quite Comfortabole in Their Skins” here made this point in his June 10, 2009 article:
you have John Wookey’s announcement of SAP’s saas plans. Confused or not, it speaks volumes that SAP chose to make the public announcement to the industry itself. It was greeted with muted acceptance with some muttering that it was defensive while others immediately thought ‘cost.’
I have a slightly different view; specifically:
- SAP is struggling with two financial challenges. The first is the money sucked into the SAP’ black hole of engineering. The company has to spend to keep the quite interesting collection of systems and subsystems working for today’s customers. Second, the company has to find a way to fund research that gets the SAP systems out of the dinosaur trap and into the Googzilla type of low cost engineering mode that Messrs. Brin and Page use. Even Amazon has figured out that open source and commodity hardware are a way to control costs. (Amazon reliability is another issue, however.)
- SAP’s customers are either happy because the system is up and running, business procedures are understood by licensees’ employees, and senior management just pays for engineering support and upgrades. The big invoices are behind the company. Happy days!
- Competitors like Salesforce.com and the Google are not deaf, blind, and mute to the opportunities the IBMs, Microsofts, Oracles, and SAPs create. So, SAP with its juicy client base and “intersting financial challenges” chugs along with a system creaking under complexity, almost immune to substantive change.
I think sudden shifts like the SaaS “love” are little more than signals that an era is ending. I keep watching for similar indicators from IBM, Microsoft, and Oracle. I wonder which of these three will follow in the footsteps of the SAP dinosaur?
Stephen Arnold, July 2, 2009
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