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SAP's next challenge: The ROI of composite apps |
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By Joshua Greenbaum
09 Jan 2006 | SearchSAP.com
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As SAP accelerates the rate of development of xApps and other composite applications, it's interesting how much the company's efforts more resemble those of a two-geeks-in-a-garage startup than the world's largest enterprise software vendor. So it's not that surprising that the one thing missing from the SAP's xApp and composite app initiative world is hard-and-fast ROI data, just like virtually every start-up I've ever worked with.
Recent conversations with SAP customers now using xApps and composites all stopped short when I asked them to describe the ROI on their new functionality.
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Recent conversations with SAP customers now using xApps and composites all stopped short when I asked them to describe the ROI on their new functionality.
Joshua Greenbaum,
principal consultant, Enterprise Applications Consulting
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To a man and woman they swore that their new applications were hugely successful, and played key roles in new business development, cost-avoidance, overall efficiency, and user satisfaction. But real ROI figures, including concise measurements of the "before" and "after" situation, were lacking.
This lack of ROI data isn't a matter for too much immediate concern, but without good data on ROI and value, it's going to be hard to define, and defend, how xApps are to priced. I'm not challenging the currently available xApps and their pricing as much as the coming future of composite applications that SAP is now avidly talking about.
This is a world in which most innovation will be defined as an xApp or composite app, and in which the current pricing paradigm for applications and suites is basically no longer valid.
There are some insights into the value that SAP can already offer, and they provide interesting fuel for the pricing question.
When Shai Agassi was asked at SAP's recent Analyst Summit about how fast composite applications run in the much more distributed world of SAP's enterprise services architecture, Agassi responded by noting that one customer had replaced a number of complex screens from a number of complex applications with a single screen from a single composite application. System throughput, Agassi rightly argued, was almost moot compared to the relative gain in usability: Going from switching between multiple screens to a single composite application screen is much faster and therefore more valuable than the alternative.
I'm told that SAP is now gearing up to capture ROI data both to solve the pricing problem as well as to bolster its marketing efforts. It's an amazing opportunity to show in some detail how service architectures and composite applications will dramatically lower costs and improve innovation. Agassi's throughput response gives us some insight into the complexity of the ROI equation SAP has to build, but it's going to be worth every cent SAP spends to find out.
Joshua Greenbaum is a market research analyst and consultant at Enterprise Applications Consulting. He has more than 15 years of experience in the industry as a computer programmer, systems analyst, author, and consultant. Prior to starting his own firm, Enterprise Applications Consulting, he was the founding director of the Packaged Software Strategies Service for Hurwitz Group, which focused on technology, infrastructure and business issues in the enterprise applications market.
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