On-Demand in Demand as SAP Goes SaaS

If ever there needed to be a “big bang” validation of the software-as-a-service (SaaS) concept, then SAP’s September 19 unveiling of its Business ByDesign on-demand software for midsize companies surely suffices. Not only is SAP the first major enterprise software player to get serious about SaaS, it is the absolute largest enterprise software player and its move is thus freighted with significance.

But there really doesn’t have to be a big-bang validation of SaaS. Many thousands of customers are endorsing the concept every day as they leverage SaaS offerings, and will continue to do so in increasing numbers, with or without the help of traditional enterprise software companies. It is not SAP nor any other huge software company that will drive SaaS. It is the customers who are in the driver’s seat, and SAP is wisely reacting to this fact. And now SAP will have to meet these customers’ expectations—expectations built up by trail-blazing, 100 percent SaaS companies like salesforce.com, NetSuite and Xactly.

There’s no doubt that SAP’s on-demand offerings have the potential to provide immense value to the targeted customers—SaaS delivery coupled with SAP functionality packs a powerful punch. But SAP is not about to abandon its on-premise model anytime soon, and its management will be wrestling for some time with such issues as how to keep from cannibalizing its bread-and-butter software licensing revenues and how to successfully support two entirely different delivery models. And along the way, they will learn what 100 percent SaaS companies have known from the start: If you don’t meet the expectations of SaaS customers, they can cut you off in an instant, no questions asked. That’s not something that enterprise software vendors, with their long-term licenses and claws sunk deeply into their customers’ costly IT infrastructures, have traditionally needed to deal with.

Still, SAP is doing the smart thing by getting started in SaaS now, when it can be lifted by the rising SaaS tide. In doing so, SAP will add to the tide by increasing the portfolio of software functionality available to customers on demand. SAP’s move doesn’t prove that SaaS is viable. That’s already established. What it really demonstrates is that the traditional enterprise software model is not all that viable for most companies. And for that we welcome SAP to the SaaS world.

Buyer Beware: “Hosted On-Demand” Is No More Than a Wolf in Sheep’s Clothing

Reeling from tight IT budgets and the consequent popularity of new software-as-a-service (SaaS) offerings, many enterprise software vendors are casting around for ways to dress up their own offerings and perhaps cash in on the cachet of SaaS and on-demand delivery. What several have come up with is the “hosted on-demand” label, which in reality is nothing more than draping the tired old enterprise software wolf in ill-fitting sheep’s clothing. As I’ve said before, enterprise software by any name, hosted or otherwise, is not a substitute for true on-demand. Software vendors taking this re-labeling route are doing a colossal disservice to customers, whether those customers buy into the name game or not.

So, what does “hosted on-demand” have to offer? Disappointments, mostly. What these vendors are doing is simply providing the same old premise-based software in a hosted environment, coupled with a seemingly substantial—but not nearly substantial enough—price break. And under the fleece is the same old ravening wolf. Hosted or not, these are still expensive solutions to implement, and shaving 30 percent or even 40 percent off the typically enormous up-front implementation cost doesn’t change that fact—and there’s still the monthly fees for accessing the hosted software to contend with. These are also typically complicated and inflexible solutions and just because they are now off-premise doesn’t necessarily change that fact.

What may well change, however, is a customer’s support priority. With two models to support—on-premise and hosted—there’s an almost invariable dilution of resources. Which customers do you think a traditional enterprise software company is most likely to make its top priority? And for that matter, what about new functionality, version control, reliability and scalability? On-premise and “hosted on-demand” implementations are identical in that each customer is a discrete box, or technology platform—it’s just that in a hosted implementation, that box has been moved off-site. But with a true on-demand solution, all customers share the exact-same platform. Just as they all share the same low cost-base, they all benefit equally from more rapid introduction of new functionality as well as from identically robust version control, data security, disaster recovery and scalability. In numbers, there is strength.

So buyer beware. Don’t be misled by labels. If you want on-demand, go with pure on-demand solutions, 100 percent purpose built to deliver the full benefits of SaaS. Avoid the nasty shock of being fleeced, and let the wolves go howl.