SAP’s early forays into cloud computing technology, such as the first version of SAP CRM on-demand and the original SAP Business ByDesign, did not meet with much success. SAP was unable to turn a profit from these early on-demand applications and for a while did not do much with them.
In fact, Jon Reed, SAP Mentor and analyst, noted that the initial selection of cloud applications for SAP was very limited. “They don’t have enough options yet. I think they’d be the first to admit that,” he said.
Since then, SAP has been adding to its on-demand offerings. For example, it released the SAP Business ByDesign software development kit (SDK) to make development easier for the platform. SAP also rolled out SAP Business ByDesign to more countries in an effort to increase interest in cloud technology.
“I’m actually pleased to see SAP kind of really start to take the gloves off of this product, and open it up for more markets, more people to sell it and implement it,” said Brian Sommer, an analyst and founder of TechVentive.
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Considerations for using SAP in the cloud
Cloud computing is typically considered a less expensive option and as SAP releases additional on-demand applications, companies might be more likely to consider SAP for their application needs. However, cloud applications may not necessarily be cheaper.
"I think this is very much up in the air," said Joshua Greenbaum of Enterprise Applications Consulting. "There's a high probability that the long-term costs are going to be comparable to on-premise."
That said, Software as a Service (SaaS) applications tend to be easier to use and quicker to deploy than many on-premises applications, according to Forrester Research Inc. Forrester also said companies that move to SaaS technology see a significant reduction in support needs.
Furthermore, with cloud computing software it’s important to negotiate the service-level agreement (SLA) so that the SaaS application is properly integrated into the SAP ERP system. The SLA should also include escalation clauses for when the application has technical issues.
“The biggest mistake is forgetting that this is a service relationship -- as opposed to the product procurement process,” said Jeff Kaplan, managing director of ThinkStrategies.
The future of SAP Business ByDesign
Since committing more fully to the cloud platform, SAP has provided a number of updates for SAP Business ByDesign. For example, SAP Business ByDesign now includes mashups with Google, MapQuest and BusinessWire. In addition, SAP Business ByDesign can integrate with SAP BusinessObjects Crystal Reports and Xcelsius, enabling companies to do their own ad hoc reporting and analysis.
Several companies cite these improvements as the reason they included SAP Business ByDesign on their lists of potential cloud software vendors when they considered moving to cloud computing. For example, when WL Plastics, a polyethylene pipe manufacturer, outgrew QuickBooks, it switched to SAP Business ByDesign. As a result, instead of taking 10 to 15 days to close the books, the company is now able to do it in three.
“Moving to ByDesign really allowed us to standardize our approach to the customer so that the product is consistent across all the plants,” said Neil Briggs, chief financial officer at WL Plastics. “The product and vendor master files are now consistent among all of the plants, and that’s really helped us provide a solid front to the customer.”
The San Jose Sharks are another organization using SAP Business ByDesign. SAP is working with the Sharks’ parent company, Silicon Valley Sports & Entertainment, to create a sports and entertainment management version of SAP Business ByDesign. A specific version for real estate is also in the works.
Although the user base is small for SAP Business ByDesign, SAP plans to keep developing the platform and offering more cloud computing features. For example, SAP Business ByDesign users can access a mobile version on the iPhone that includes about 20% of what’s accessible in the desktop version. That 20% includes most of the basic tasks users need, such as key CRM functionality (activity and opportunity management). Going forward, BlackBerry, Android and Windows Phone 7 users should also have access to the SAP Business ByDesign app.
Options for SAP shops considering cloud computing technology
Traditionally, SAP Business ByDesign is thought of as a cloud computing option mainly for small- and medium-sized businesses that might not need (or want) everything offered in the on-premises SAP applications.
However, companies with global plants are increasingly considering a two-tier SAP ERP option, in which the parent company has the on-premises SAP ERP system and satellite offices use SAP Business ByDesign. Other companies have found that using a cloud computing option like SAP Business ByDesign allows them to bring in newly acquired companies faster.
"ByDesign is appropriate for companies new to ERP looking for a soup-to-nuts apps suite on which to run their businesses," explained China Martens, an ERP analyst for Forrester Research Inc. "It’s also suitable for companies looking to move to SaaS from an aging on-premise ERP suite."
Alternatively, companies may opt to run on-premises SAP ERP, but selectively use SaaS applications with it. For example, some companies opt to use SAP Sales OnDemand for the field staff, but the data is housed in the on-premises ERP system. “Now people think about hosting in a much more incremental way. They host certain activities,” said Jim Shepherd, senior vice president of research with AMR Research.
In addition, the emergence of cloud-based services -- such as Amazon Elastic Compute Cloud (EC2) and Microsoft Windows Azure -- offers businesses the opportunity to save on hardware by using cloud providers for their infrastructure. In fact, SAP runs SAP Carbon Impact OnDemand, which helps companies with their green IT initiatives, on Amazon EC2.
So where to start?
"Transitioning a traditional data center to a cloud infrastructure capable of delivering infrastructure on-demand is a daunting task," said Chris Wolf, a research vice president for Gartner’s IT Professionals service.
Companies need to first be sure they fully understand the business drivers for moving to cloud computing environments. Then they must carefully evaluate the risks involved, from security and compliance issues to service quality and support.
“There are a lot of software companies using Amazon as essentially their test bed for their cloud applications,” he said. “[They] put something in a cloud, run it and see how it works and what customers think about it,” said Josh Greenbaum, principal of Enterprise Applications Consulting.
SAP cloud computing news and trends
Interest continues to grow among SAP shops in cloud computing software and SaaS applications. In a 2010 SAP survey from the U.K. and Ireland SAP User Group, 50% said they would consider using SAP’s SaaS applications, although 75% felt that SAP is moving too slow when it comes to cloud computing.
That said, SAP has recently paid more attention to its cloud computing adoption endeavors. "I think the whole on-demand is a top priority for them," said Patti Charlton, chief financial officer of ResearchPoint. Charlton has been involved in a SAP Business ByDesign implementation and has been impressed with how SAP has responded to her feedback. "It really made us realize they were listening to the users and made us even more confident going forward that our voices would be heard," Charlton said.
In a 2011 survey from SearchCloudComputing.com, 70% of the respondents said their companies are considering cloud computing, so the market is certainly there. SAP continues to focus on cloud computing, so expect to see more offerings. For example, in August 2011, SAP introduced the SAP Store for SAP Business ByDesign, which allows organizations to purchase add-ons and apps for their SAP Business ByDesign systems. Before an app is purchased, the SAP Store performs a compatibility check to ensure that the app works with the version of SAP Business ByDesign the company has.
In addition, SAP has introduce SAP StreamWork, a SaaS collaboration application provides groups (even those not running SAP systems) an online workspace in which group members can share documents, agendas and polls. The enterprise version integrates with other SAP applications, so groups can, for example, incorporate a StreamWork activity feed into SAP CRM.
Here is a list of key terms in cloud computing technology and SAP systems. Also worth reading is the Enterprise Cloud Computing FAQ.