Enterprise-size customers will be able to buy on-demand, line-of-business applications that will integrate with and augment functionality in Business Suite deployments, John Wookey, SAP's head of on-demand strategy for enterprises, said today.
SAP's latest on-demand strategy for large companies marks two big changes over its earlier attempts with on-demand products.
First, these applications are intended only for Business Suite customers, who will use them to add functionality in, for instance, their main SAP ERP or SCM systems. Customers would pay for the add-ons on a subscription basis. The on-demand applications will run with versions of the Business Suite back to R/3 4.6c, up to the most current release.
Moreover, SAP will host the applications using a multi-tenant architecture, moving away from the isolated tenant model it's still trying to make work for Business ByDesign, its on-demand ERP. This model will enable SAP to sell the new on-demand software at a reasonable price to customers, while still making a profit, Wookey said.
"On-demand is a very significant trend in this industry. It really is the next architecture for building and delivering applications," he said. "The thing that makes us different is we're building it with a central focus around the SAP installed base."
In November, SAP hired Wookey to head up development of on-demand applications for large companies. Wookey was Oracle's head of applications development until he left the company in 2007.
SAP currently sells e-sourcing, carbon management and CRM applications via the on-demand model. SAP's on-demand ERP for small and medium-sized businesses, Business ByDesign, was debuted two years ago but hasn't yet been fully released to the market.
Wookey doesn't envision selling on-demand ERP or SCM suites to large companies, unlike Business ByDesign. He said he thinks that in general when large companies are looking at Software as a Service, they're trying to solve a specific problem.
Integration, cited as one of the biggest challenges for those deploying on-demand applications, is also a big driver of SAP's plans. When customers deploy a typical on-demand service, they have to re-invent a lot of the work that's already in the central system.
In contrast, SAP's on-demand applications will plug into the Business Suite, ensuring that business processes automatically flow from the Business Suite to the on-demand applications.
"The thing we're doing is eliminating that integration step," Wookey said. "We're integrating on-demand services into the Business Suite."
Wookey raised such integration concerns when asked about this week's announcement that Siemens, a large SAP customer, is deploying SuccessFactors' on-demand talent management software for 420,000 users.
"I think the challenge Siemens is going to have with SuccessFactors is that they now have an [SAP] HCM deployment they'll constantly be reconciling with a SuccessFactors deployment," he said. "It becomes an ongoing cost for customers to deal with."
That said, "The deal with Siemens validates what we're doing," he said.
The on-demand applications will be hosted in a multi-tenant architecture, meaning one instance of the application will be accessed by all customers. In contrast, Business ByDesign and SAP CRM On-Demand were both developed with the isolated tenancy model, in which each customer has its own instance of the application, with SAP executives extolling the advantages of the model.
Multi-tenancy enables SAP to operate the software at a much lower cost, keeping the cost of the software low and competitive, while still enabling the company to make a profit, he said. One of the reasons Business ByDesign has been delayed, according to analysts, is that SAP can't figure out how to propagate software updates across individual customer instances in an affordable manner.
"Multi-tenancy offers us an ability to deliver in a single deployment model the solution for many customers and keep the business processes segregated and secure," Wookey said.
To that end, over the next year, SAP CRM On-Demand will be moved to a multi-tenant architecture, without noticeable disruption to current customers, he said. The move will mean a lower operating cost for customers.
However, Business ByDesign is a very different application, Wookey said. Business ByDesign customers will want to have control over their own deployments for many reasons -- first and foremost, to control the upgrade cycles more directly, he said.
SAP will debut its on-demand strategy with the small set of applications to make sure they can do everything sufficiently, he said. This means that new applications which Wookey is envisioning, like expense management, probably won't be available until the middle of next year.
Wookey said customers will see products go to market quickly, however, because SAP is using an agile development process.
Technologies from companies SAP has acquired are central to the development of its on-demand applications. It's using the platform from Frictionless Commerce to build on-demand services.
In turn, recently acquired SkyData, which builds mobile social CRM applications, will help SAP fufill its next phase of innovation for integrating social applications. Wookey sees social applications being important in project management, for instance.
"One of the things that [will] be important in on-demand is the ability to build systems that easily integrate with those kinds of systems," he said.
Clear Standards, an on-demand carbon-usage management application SAP acquired around the time of its Sapphire conference, will be folded into the on-demand portfolio.
Wookey is confident that his team, which he described as akin to a startup company within SAP and which includes engineers from Salesforce.com and Frictionless Commerce, will make SAP's on-demand vision successful.
"I've got a bunch of on-demand veterans as key parts of the management team," he said. "I'm feeling we're on the right track."