Leo Apotheker next week becomes the sole CEO of German software powerhouse SAP. He takes over at an interesting (for which read challenging) time for the entire industry. Not only is the wider world in economic meltdown and impacting on the firm's revenues, customers are demanding new ways of interfacing with software systems that are seemingly a million miles away from the type of on premise enterprise offerings upon which SAP has built its success.
“The baby boomers are retiring, the new workforce was born in digital age. The way they want to interface with software is markedly different,” admits Apotheker. “Software has a bright future and we want to play in it. Enterprise software has to be utterly robust. We want to have all the nice ideas in social networking that links back into the business suite in a seamless way. One of our big beliefs is in hybrid software. All our offerings will be available on demand, in The Cloud or on premise.
Ah yes, Cloud Computing. When you listen to the rest of the software industry, the common perception is that SAP is not a believer in The Cloud and has made only the most grudging steps towards delivering a SaaS version of its product set. On the contrary, says Apotheker, SAP is a believer – sort of! “I'm not a big believer in buzzwords,” he says. “Cloud Computing is a very important technological evolution. Virtualisation and the availabilty of cheaper ways of accessing software are going to continue. We will provide software over The Cloud. We are big believers in the hybrid model that includes Cloud and SaaS and on premise models. You can now have a private Cloud now at roughly the same competitive rates as using a Cloud provider. We will see more and more business models emerging where people mix these things together.
“We offer on demand solutions and subscription-based solutions already. We have been in on demand for many years. We offer solutions to customers in such a way that they don't pay a licence, but pay a subscription fee. We offer customers the freedom to move from one solution to another. The real decision about what is good for a customer should not be made by a vendor. There are customers where the best decision has been to invest in software; in other cases, the best decision hasn't been that. But it's up to the customer to decide.”
Business ByDesign
What the customers will be asked to decide upon is SAP's self-styled Salesforce.com killer, Business ByDesign. But not too many of them need worry about wrestling with this decision for a while yet as SAP has yet to get the offering into mass circulation. It's this laggardly pace that has prompted sceptics and rivals alike to speculate that the firm is not entirely committed to a product that represents a completely different deployment and revenue model for a company that needs also to think of the financial impact on a legacy base that contributes recurring revenues in excess of 50% of the whole.
Not a bit of it, insists Apotheker. “Business ByDesign is a great product that we are very proud of,” he declares. “Business ByDemand is going to the world's first and only complete integrated business suite available on demand. If you don't believe that, take a look at some of the other offerings around.” (That's a claim that clearly the likes of NetSuite might be keen to challenge, of course.)
“We are working with more than 80 clients at the moment. We will start to increase volume as wel go along. We will demo it at the Sapphire user conference [in Orlando] this week. There will be workstations all over the show and people can work with it and play with it. Maybe some people from Salesforce.com can come and try it and get some real software in their hands!”
Nonetheless Apotheker has to concede that there are business model concerns. “We have said all along that Business ByDesign is not just a new product, it's a new business model,” he says. “We have a few things to iron out on the business model, but you will hear more and more about Business ByDesign as we enter the second part of the year. I have a high degree of confidence that we do have a valid business model, but it's too soon to tall how big a role it will play in SAP.”
Who is the audience?
Indeed there is the question of who Business By Design is actually going to be pitched at? Where does it fit and how hard will SAP be pushing it? While Cloud vendors such as Salesforce.com and SuccessFactors notch up enterprise wins with with their offerings. SAP is unlikely to want its existing large customers to make a shift in that direction, although Apotheker is quick to not that despite popular perceptions SAP's installed base is not all about mega-enterprise implementations. “SAP has 86,000 customers,” he says. “Do you believe that there are 86,000 very large companies in the world. I wish it was true, but it's not. Some 70% of our customers are mid-sized companies of 500 employees or less.”
That's the sweet spot for the new SaaS offering, reckons Apotheker. “Business ByDesign is more oriented towards the mid-sized customer,” he says. “Whoever wants it can use it, but the product is earmarked for the mid-market. That's the current level of functionality. I don't believe that every mid-market customer who wants to use SAP will use Business ByDesign. If you need deeper functionality then you will go with All In One.”
So for now, the existing 80 or so clients that are working with SAP on Business ByDesign will remain a relatively exclusive club, although Apotheker makes no apologies for the seemingly slow pace of delivery to the wider market. “Business ByDesign is going to be a service so we want to make sure that we can deliver it globally, in a localised form, 24/7 and 365 days a year” he says. “That's easier said than done. There isn't broadband coverage everywhere. There are legal issues. You can't say to customers that you can use this if you're in London or Frankfurt, but not if you're in some other places. We operate on a global basis.”
But he can't help adding: “ If this was a normal on premise product, it would have been out on the market a long time ago!” Whether or not anything can or should be read into the use of the term 'normal' (as opposed to the abnormal idea of The Cloud?) remains to be seen...
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