Enterprise software is an industry of laggards
This might seem like a drastic statement to make but the reason in simple - Once a customer has invested in package or system it is expensive and quite a challenge to replace the system. Quite a few organizations are still running their main system on Mainframes and then have gone on to invest in specific packages that are built / deployed around these "Legacy" systems and having deep tightly coupled integrations with them.
Now this is on the software side, but now on the services side most consulting & IT Services companies have grown fat supporting & enhancing these applications, where the incremental value delivered for the customer organization has been limited if non existent. So not only in software product and maintenance the customers end up spending a lot in terms of support and maintenance.
The reasons for this situation to persist are many but will not focus on that here.
Why SAP Business By Design?
There have been on demand solution available but why do I think SAP Business by Design is the future. Well the reasoning is rather simple. First SAP BBD (Apologies mike cant continue typing the full name) is the most complete package I might be drinking of little of the SAP kool aid here but a quick view of the functionality clearly indicates that they seem to have better fleshed out the SaaS functionality. They are moving away for the concept of the siloed applications ERP, CRM, SCM etc its one integrated suite. of course not all the in depth functionality is likely to be included but they have started and may be the rest of the functionality can be developed by ISV's other vendors etc.Like one of the SAP executives very rightly pointed out typical enterprise software are stalagmites where some of them are tall some short. But the idea behind AIS/BBD is that the complete suite of functionality is fleshed out equally well.
During the announcement of SAP BBD/A1S, Henning Kaggermann started by saying this is one of the biggest announcements of his tenure in SAP. I think we all agree.
But this is only one part of the puzzle of SAP, well it has the rest of the bases covered to constitute the the future of enterprise software. The communities. I think these are the two strong areas for SAP this is going to provide them with long lasting competitive advantage as this is going to hard / challenging to replicate or develop. Of course I think SAP needs to continue their investments in this space.
Why are they important?
The logic is simple when the software can be delivered as a service on demand why not the consulting weather it be business process or development consulting. BPX and SDN or their equivalent for the BBD / AIS product. This provides are ready base of consultants and in extension a market place for these services.
Infact SAO seems to have nicely embraced social media for promoting / selling the solution, Infact there is blogs discussion boards etc - Need to take a deeper look at it. But the concept is sound and I think is an ideal approach for the future. Well of course the other thing to factor is that in SMB's which is where this solution is focused its the CEO or the business leaders that make the buy decisions. So special effort needs to be taken to make it useful for them. This was evident from customer representatives that were up at the announcement event, NO CIO's - Only CEO's or Business Leaders.
1.2 Million Customers that according to SAP is the potential customer base for the solution, which are basically companies with 100-500 employees. which constitutes about 15 Billion $ Market.
But they are trying to minimize that risk but setting a minimum number of license to 25 on BBD.
Currently SAP has 20 odd customer live on the solution which is likely to increase to 40 soon. The expected general availability of the product is at the end of first quarter 2008.
The objective of SAP is to get 10000 customers by 2010.
The starting price for the solution is expected at $149 per month.
Database is based on Max DB
Well looks like finally there is a product in the SAP suite that doesnt end up paying Oracle license fees.
Platform is Netweaver
This is supposed to be the future edition of Netweaver. But I am thinking is Netweaver really built to support a hosted application it was a platform created for the enterprise on premise. And given this I am also concerned about the performance of the application. Its going to be based on blade architecture and looks like a blade will be able to host on 100 users.Demo speed didn't help my worries on performance.
UI - Netweaver Portal
Quick note: The UI needs work, its so Web 1.0 BBD has some good stuff, but I think they could have got a lot of brownie points just getting more done on the UI. There are some serious cool stuff out there that they can leverage it but the good thing is that its based on Netweaver. And services can be used to develop the new interfaces.
I think this is the really cool part that services can be programmed on. Its really cool.I think a lot of cool stuff that is going to get built on this. But I think there is still some stuff that is not clear on how these customization are going to be built and deployed.
Multi lingual, The application has out of the box Unicode support . So it already has some multi language support.
- SAP brings credibility to the SaaS market
- A1s/BBD offers the complete suite of functionality
- Objective is to bring the total cost of services down
- In built training / error tracking and systems management
- SAP as Henning Kaggermann put it plans to flesh out this model carefully. As there are concerns of where the profit margins are going to come from. As he said "We will Learn". Love the professor.
One of the biggest challenges for SAP is figuring out how to make a profit off on-demand software. For example, it hopes to keep sales and marketing costs down by allowing prospective customers to do free trials for days or even weeks online. The firms would be able to enter their own data and run parts of their business on A1S to see whether they liked it. Mr. Kaggermann said such "self-service selling" was the best approach for SAP to win over clients at a reasonable cost.
Zach Nelson, chief executive of NetSuite in San Mateo, California, said SAP may be "underestimating the complexity of the sales cycle." He said NetSuite, which also offers free trials, takes, on average, 60 days to close a deal and might run three to five demonstrations of the program before customers are convinced.
Mr. Kaggermann said SAP would refine the business model to ensure it was profitable as it expanded to thousands of clients.
- Wall Street Journal