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Enterprise Software: SAP's 'Game Changing' Version of SaaS ERP
While SaaS has captured considerable marketshare in industry segments like CRM, other software areas have been slow to follow. Enterprise software segments, like document management and ERP, have been moving on a much slower track towards adoption of an on-Demand model.
SAP is the biggest name in ERP, but their attempts to build a SaaS version of their flagship product have not yet been successful. SAP is now slowly rolling out — now nearly two years late — their SaaS candidate called ‘Business ByDesign’. Early sales of the software are being made in Germany, the US, the UK, France, China and India.
Research analyst Frost and Sullivan is calling SAP’s SaaS product a ‘game changer’. Rather than the large companies that SAP typically goes after, the target customers for Business ByDesign are in the mid-market. Many think that companies struggling to drive out efficiencies in a poor economy combined with the attractive low-cost of entry to SaaS will heat up the market for on-Demand ERP.
SAP’s SaaS version of ERP promises to get customers up and running in weeks or months instead of the many years and many dollars that have become synonymous with ERP rollouts.
While NetSuite has been growing their SaaS ERP offering for several years, SAP will be new to the model but will be able to bring along a more complete and fully-integrated system with industry-specific content.
While this probably bodes well for SAP, it will be anything but a slam dunk. The business model is in direct contrast to the huge multi-million dollar service-heavy contracts that SAP is used to getting. Margins will be considerably smaller. Mid-market customers will be more price conscious and the very nature of SaaS trends towards getting customers up and running quickly via configurations rather than costly customizations will mean that SAP will need to pursue volume in order to be successful.
SAP will also need to worry about canibalization of their existing customer base. Surveys have found that many SAP customers use only about 25 percent of the features and capabilities in their existing system. There are also frequent complaints about SAP’s usability and flexibility — the very features that SAP touts in their on-Demand version. Some of these concerns have no doubt caused SAP to move cautiously into the SaaS market so as not to cause unrest among their existing customer base.
