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“It's the history of the past ten years: waiting for SAP to innovate.” That was the candid view offered by respected software industry analyst Ray Wang at the SAP UK and Ireland User Group conference in Manchester where he contrasted the increased use of SaaS applications with the "mess" of SAP's Cloud strategy. 

Wang, one of the leading commentators on SAP, advised delegates at the event there was a good deal of innovation going on inside the firm, but that the culture of the company was such that it was likely to go unpublicised. “SAP users perceive that there's lack of innovation coming from SAP,” declared the Altimeter analyst.  “Some of that is a communication issue. One in every five pounds SAP makes goes into R&D. Compare that to a SaaS firm like Salesforce.com where R&D is about 10% of revenue. SAP spent $1.6 billion on R&D in 2008. But SAP is consistently late in product delivery. If you look at the product road map, it just ends. The Cloud strategy is all over the map. It's a mess. It's being worked on, but it's a mess.”

The situation is not helped by a wider set of product issues. “There have been five big failures in the past five year,” said Wang. “What was NetWeaver supposed to do? It was supposed to bring everything together, but most people use something else. How many people use Duet? Business ByDesign is a year and half late and it does't deliver what it's supposed to do. Solutions Manager – how many people use that for enterprise support. And as for Enterprise Support, let's not go there. Let's call it a work in progress...

There's also a shift in the balance of power within organisations, he suggested, which is creating customer demand for Cloud applications and letting SaaS in through the back door. “CIOs are not longer determining technology adoption; the business does,”' he noted. “We have Software as a Service and IT as a utility. Some firms have outsourced their IT altogether. How can we move on so that the CIO role becomes more aligned with the business? We're left with enterprise applications that do a really good job of catching data and automating processes but which are lacking in flexibility and innovation. Our antiquated technology has an impact on the way we handle change management. We can't consume the rate of technology innovation fast enough. Just when we've finished that upgrade, the technology is out of date.

Who let the SaaS in?

“People need solutions right away, they can't wait for IT to deliver. Then IT is left saying 'how did that SaaS application come in here?'. Well, maybe because your business people didn't tell you it was there. People want to use it and want to scale it up. People are going to SaaS because of the need for satisfaction. They've all been waiting for SAP to deliver on SaaS. Then they can have products with the same data model and not have to deal with multiple vendors and issues of integration. We've come full circle back to the 1990s with the best of breed v suite arguments with the new SaaS vendors as best of breed.”

Ironically, SAP could be competing with the newcomes a lot better, suggested Wang. “There's a ton of innovation going on inside SAP, but it's just not being communicated to customers,” he said. “It gets mired down in the bureaucracy of SAP. Customers need to expose that innovation and get to it. Internal politics are keeping SAP from getting stuff to customers”

He cited Salesforce.com's recent announcement of Chatter as a case in point to illustrate how SAP is missing out through inaction. “You have Marc Benioff, one of the great marketers, talking about this thing called Chatter. How many people know that this already existed within SAP? It's called ESME and it was a social media experiment that SAP didn't market. It's a Chatter-like community that's already happening internally and externally. But the people who were volunteered for the ESME project were mired down in intellectual property issues trying to get it out the door. It's a good example of something that just failed to be delivered.”

All of this is relevant because there has never been a more urgent time for customers to get their hands on innovative technology. “Business models are being blown up and there's a general re-assessing of whole areas of the business,” argued Wang. “We're all talking about the pace of technology adoption. We're not thinking in terms of 3 year cycles anymore. Things that we used to talk about just don't exist anymore. B2B and B2C don't exist, we now talk about relationship marketing. The traditional models of how we do business have gone away.“