Coghead's technology and its engineers will help SAP tackle Software as a Service (SaaS) integration challenges, among other problems, according to SAP CTO Vishal Sikka.
SAP acquired the intellectual property rights for Redwood City, Calif.-based Coghead, a Platform as a Service provider, on February 13.
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Integration of cloud-based and on-premise applications is a problem that Coghead engineers have paid a lot of attention to, Sikka said in an interview with SearchSAP.com yesterday. With Coghead's technology, SAP can ensure that customers get the benefits of the cloud without sacrificing functionality.
"I think that when you look at the cloud, we have solved some fundamental problems but have not solved others," Sikka said. "So cloud-based service may make problems worse, not better for a CIO. We will solve the integration problem. This team will help us to solve it."
The deal was announced late last week, when Coghead informed customers that it was closing. Coghead chairman Paul McNamara blamed the closure on the difficult economy and challenging fundraising environment, according to a letter on Coghead's website. The company was founded in May 2003, funded in part by SAP Ventures, the vendor's venture capital arm. SAP has acquired startups funded by SAP Ventures before, including Virsa and FactoryLogic in 2006.
SAP won't continue to sell the technology, and Coghead's customers have until April 30 to find a new vendor. The company's engineers will report to Sikka, who as CTO is responsible for bringing innovation to the product roadmap and leading SAP's efforts around emerging technologies.
The acquisition is a sign that SAP is serious about developing SaaS applications, analysts said. SAP offers CRM, as well as some of the Business Objects software, in an on-demand model. But it scaled back the release of its SaaS ERP application, Business ByDesign, in April 2007 and hasn't said when it will be generally available.
"I think it's a good sign that SAP is aggressive enough about it to buy a platform company," said Jim Shepherd, vice president of research at Boston-based AMR Research.
"It's good for SAP to go and make a move," said John Rymer, vice president, principal analyst at Cambridge, Mass.-based Forrester Research. "I think every vendor's really got to get their heads around this trend. It's not easy."
SAP also realized that it was faster and cheaper to buy Coghead's technology, and its people, than to develop the technology itself -- another indication that it's continuing to move away from the tradition of developing everything internally.
"I think they realized that there were things they could learn from this other technology about building and supporting SaaS applications," Shepherd said. "SAP knows there's not much sense in inventing everything themselves."
It also could speed along SAP's development of SaaS applications, he said, to the extent that there were issues around performance and cost to deploy and support applications like Business ByDesign.
Coghead has some impressive technology, analysts agree. The platform is comprehensive, and the development environment is very broad and provides a lot of functionality, Rymer said. It provides a programming model and tools but relies on Amazon, Rackspace Hosting and similar vendors to host computing and storage infrastructure, according to a recent Forrester Research report.
Sikka wouldn't say what the technology may spell for products like Business ByDesign. Nor would he say what it would mean for the development of on-demand applications for large enterprises, an effort launched in the fall with the hiring of John Wookey, Oracle's former head of applications development.
According to Forrester, Platform as a Service is an externally hosted service providing a complete platform to create, run and operate applications, including development tools, administration and management tools, runtime engines, data management engines, security facilities, and user-management services.