September 25, 2007

SAP ByDemand could work a lot better than critics think

As I explained in another post, it’s credible that SAP is very serious about its new ByDemand SaaS (Software as a Service) offering. While I haven’t been briefed on the product (er, service), I’m guessing ByDemand is pretty good, or soon will be. I have three major reasons for this opinion.

  1. SAP sure has a lot of resources to bring to bear – and as previously noted, I think the company is dead serious about this initiative.

  2. On the back end, the business-service granularity SAP has been implementing is well-suited to deal with the unique challenges of SaaS, both the very real (e.g., short upgrade cycles) and the largely imaginary (e.g., multi-tenancy).

  3. SAP recently hired Dan Rosenberg away from Oracle to head its UI efforts, and Release 1 of a Dan Rosenberg user interface is likely to be very good. I know Dennis Howlett has a contrary view, and he’s actually seen the product. Even so, I’m optimistic about SAP’s claims to have designed the UI with an open mind, for maximum ease and simplicity, and validated by many rounds of testing.

As for sales and marketing – that’s a solvable problem. Indeed, SaaS and high-end packaged software can be synergistic businesses. True, a ByDemand salesman will need to earn much lower compensation than a high-end software sales team leader. But that’s a management challenge companies like SAP already know how to meet. Inside salespeople, product specialists, and so on can already tend to be compensated a lot less than the classic account-manager types are.

By the way, I think the assumption SAP needs to sell ByDemand via indirect channels is an erroneous one. (Dennis Howlett seems to be at least partway to recognizing this. He also reports that SAP realizes that this is truly a sales issue.) Hence my stress on SAP’s internal sales management issues.

All this assumes, of course, that SAP’s ethics and organization aren’t as screwed up as I sometimes fear.

Comments

5 Responses to “SAP ByDemand could work a lot better than critics think”

  1. Cornel Schoeman on September 25th, 2007 8:38 am

    SAP has been known to take on unchartered waters – and make a huge success out of it. The criticism from mayor role players could all be relevant or not. From my experience SAP has only launched well thought through products, and Business By Design would be one of these again. It’s all about the customers – if they believe and take up the product, that will be the ultimate success.

    Cornel Schoeman
    Britton Solutions
    http://www.businessone.co.za

  2. Dennis Howlett on September 26th, 2007 7:18 am

    Thanks for the hat tip. Just to be clear, my remarks are based not just on my personal view but those of a clutch of my Irregular colleagues plus our interpretation of what Kagermann, Apotheker and Zencke said to us in our meetings.

    The channel issue is real. Web/telesales alone will not get SAP to where it says it wants to be. There are ongoing concerns by many people that SAP has not figured out how it will deal with channel issues. The answers we received are way too vague at this time and have been for more than 6 months.

    @Cornel: This is SAPs nth attempt at a mid-market offering and BusinessOne can hardly be called a ‘well thought out’ when it was acquired and still has limited traction.

  3. Curt Monash on September 26th, 2007 4:28 pm

    Here’s the thing, Dennis — there’s no logical reason for SAP to rely on indirect sales at all! The classical channel model is to run product sales at what would be a loss if you allocated all sales costs to products, then make your profits on sales of high-margin services.

    But SAP has already suggested ByDemand doesn’t fit that model.

    When I first became a software stock analyst in 1981, a lot of application software salesman were former ADP branch managers. ADP had a great sales machine; they just didn’t pay their guys a lot. SAP, in my opinion, should and probably needs to build something similar.

    CAM

  4. The Monash Report»Blog Archive » I repeat — SaaS is not necessarily an indirect-channels business on March 4th, 2008 8:53 am

    [...] Looking back, I should have quoted that in support when I wrote: By the way, I think the assumption SAP needs to sell ByDemand via indirect channels is an erroneous one. (Dennis Howlett seems to be at least partway to recognizing this. He also reports that SAP realizes that this is truly a sales issue.) Hence my stress on SAP’s internal sales management issues. [...]

  5. DBMS2 — DataBase Management System Services » Blog Archive » Oracle and SAP outline different market strategies on April 25th, 2008 12:09 am

    [...] SAP has famously rewritten its apps for new environments a couple of times, most notably in the R3 release that first took technology to RDBMS-based client/server platforms. And Larry’s gibes notwithstanding, it’s very reasonable to expect that SAP will figure out how to make the SaaS (Software as a Service) business work. [...]

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