Too Little, Too Late

By John Pallatto  |  Posted 2006-02-02 Print this article Print

Pombriant said he isnt yet convinced of SAPs commitment to on-demand computing. Instead, he said, he suspects the company is getting into the market "only because their customers are demanding it, and in some regards they really dont want to do it."

Its also possible that SAP is concerned that if on-demand CRM takes off it will cannibalize its on-premises business, he said, adding, "but the question is going to be whether its SAP or SAPs competition" that does the cannibalizing.

While SAPs on-demand competitors welcomed SAP to the fold, they also suggested that the company faced an uphill battle to become a major player since it was so late in making the transition.

Click here to read about SAPs ambitious plans to quadruple earnings and to "industrialize" its software development efforts.

SAP is "just five years too late" in attempting to make the transition to on-demand application services, said Greg Gianforte, CEO of RightNow Technologies, a hosted CRM service provider based in Bozeman, Mont.

"They ignored this tectonic shift to the on-demand model for too long," Gianforte said. He contended that no on-premises software vendor has succeeded in launching an on-demand application business. Like Pombriant, he said he is convinced that the on-demand business will end up cannibalizing its core on-premises revenue stream.

On-demand revenue cant grow fast enough to replace declining on-premises revenue, and this will weaken SAP to the point where it becomes an inviting new target for Oracle, he said.

Read more here about SAPs on-demand and BPA (business process automation) strategy.

SAP hasnt had enough time to develop a real on-demand product, and as a result, the online product would likely prove to be little more than the SAP on-premises edition with a jury-rigged Web browser interface, Gianforte said. "That doesnt make it an on-demand application. They are just pouring perfume on the pig," he said.

Zach Nelson, CEO of NetSuite, a vendor of on-demand ERP (enterprise resource planning) applications, said SAP is making a mistake by only offering an on-demand CRM service.

"Just as in the client-server market, the application that will ultimately win the next-generation application battle will be an integrated suite of applications designed to run the core business processes of a company," Nelson said in a statement.

It would be smarter for SAP to start with on-demand ERP and back-office applications and then branch out into CRM, he said.

"Im fine with SAP not addressing the back office, because they will be leaving the fastest growing segment of the on-demand market—the ERP market—to NetSuite," Nelsons statement said.

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John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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