SAP declares that SaaS will not work

The CEO of SAP, Bill McDermott, predicts that Software as a Service will never be a viable platform for large companies. He cites several common-sense reasons as the basis for this opinion, including the need for control of proprietary information, as well as the challenge of integrating data across multiple platforms.

Stripping away the dramatic use of the word "never", McDermott stakes out a fairly reasonable position on the future of SaaS. The largest global organizations already run their operations in a kind of SaaS environment.

How so?
Think about a centrally located enterprise SAP or Oracle implementation that serves users across multiple locations and P/L centers. The firm doesn't have an individual installation for each business unit; all the business units share a single, large instance of the software. Presumably the costs associated with the software are spread across the business units. Doesn't that sound a lot like a SaaS model? The only difference is that the centralized IT organization typically does not get actual money from the user community the way that Salesforce.com does.

So it stands to reason that a SaaS model does not currently make sense for large enterprises.

But, "never" is long, long time. And the economics that justify proprietary investments in enterprise software are certainly subject to change. The SaaS cost-structure does not necessarily work so well for the customers that expect to increase their number of users significantly. However, the in-house installation model does not work so well for firms that expect to decrease their user base in the coming years.

I believe that the Software as a Service is a viable path for small and mid-sized firms. If they grow into large firms, then the ongoing subscription expense will be the impetus for re-examining that strategy. Until then, however, the avoidance of the upfront investment -- in cash -- presents a compelling case for taking advantage of the SaaS offerings.

SAP AG: SAP (NYSE)
Oracle Corporate: ORCL (NASDAQ)
Salesforce.com: CRM (NYSE)
InformationWeek Article: SAP CEO: SaaS Won't Work As A Core Platform

Missing the boat on BI

An article on today's CRM Daily brings into focus the startling misconceptions about Business Intelligence. The author declares that the "greatest challenge has been how to integrate data on different systems accumulated from different vendors over many years."

Without minimizing the inherent difficulties associated with bringing together data from disparate sources, doesn't this completely ignore the larger, more intractable problem of defining the scope of a BI solution? BI projects often represent significant investments of time, money and energy. They can be intense and draining. And yet, for all the effort, the first 12-18 months often yield little more than what can be capture on a sophisticated spreadsheet.

Tool makers, like SAP, Oracle and Microsoft, understandably focus on the technology aspects. And their sales demo's gloss over the integration challenges that consume much of the projects' budgets. But the reason that momentum fades during these initiatives is that substantive value is rarely accomplished in the short term. Executive patience is a rare commodity, especially in publicly traded companies. And today's economic conditions mean there is very little appetite for projects with 2-year benefit horizons.

As business technologists, we must tighten our planning windows in order to bring rapid benefit to the organizations. Our focus must be on positive cash flow initiatives.

Link to the CRM Daily article: The Challenges of Business Intelligence by Peter Simons.

Seeking SAP Skills??

As an interesting follow-on to one of my posts last week, it seems that people who have SAP expertise are in increasingly high demand. An article published at CIO.com notes that even non-certified talent is seeing big jumps in pay over the past six months.

Other technologies are in high demand as well, but Exchange skills are not as attractive as they once were. I attribute this to several factors. First, Exchange is now far easier to administer than it once was. Furthermore, it has become something of a commodity product. And finally, there are several competing email server applications in the open-source market that have rendered Exchange a bit irrelevant.

But on the SAP side, I believe that there a few primary factors at work. First and foremost, SAP has done an excellent job of expanding marketshare over the past 24-36 months... especially in to the mid-cap space. These companies have likely gotten all they can out of an out-of-the-box implementation, and are seeing the value of customizations. This will represent an increase in demand for people who can execute those customizations, and I believe that the change in demand will hold for at least the next 3 years. Second, the larger organizations - being affected by this increase in demand - are having to up their offers in order to entice the talent they need. This will continue as the business leadership continues to expect more and more adaptation of the systems to their changing requirements. Like the mid-sized players, this reflects an increasing sophistication on the part of business leaders, and can be expected to continue.

Link to the CIO.com article: Demand for SAP skills keeps rising