SAP customers want to buy SAP Software as a Service (SaaS) products and think their vendor has been slow to start selling them, according to a survey by the U.K. and Ireland User Group.
More than half of the 100 members surveyed said they could envision their organization using SAP’s SaaS products in the future. But 75% said they thought SAP was slow to market with the offerings, and 16% actually ended up using another vendor’s software to meet their needs because of it. The user group has a total of 420 corporate members.
There is a silver lining for SAP. Most customers are still reluctant to deploy mission-critical applications in the cloud now but indicated more willingness to do so in the next 12 to 18 months. A chief driver was that many find it difficult to establish and meet service-level agreements (SLAs) with on-premise applications and think the cloud provides an easier alternative. They hope that in taking its time, SAP will come to market with a robust product.
“It didn’t surprise us that our members thought that SAP’s been slow,” said Craig Dale, chief executive of the U.K. and Ireland User Group. “But they looked at it realistically -- that [the delay] should result in a more robust offering. What they are bringing now – with the hybrid [on-premise/on-demand] approach – seems to reflect what our members want.”
The demand for SaaS is increasing, according to a recent Gartner research note. Gartner said worldwide SaaS revenue increased 14% in 2009 and will make up one-fifth of the enterprise software market by 2014.
“Greater market competition and increased focus by the mega-vendors reinforces the legitimacy of on-demand, mitigating initial objections about security and availability for many, as acceptance of SaaS as a viable model for enterprise computing services grows,” the press release states.
SAP’s on-demand strategy is twofold. On Friday, SAP and its partners will start selling SAP Business ByDesign, releasing the long-awaited SaaS suite geared toward small and medium-sized businesses into general availability. The release, Feature Pack 2.5, has been re-architected in multi-tenant architecture and has a user interface built on Microsoft SilverLight. It uses the Trex in-memory capability for analytics, instead of SAP BW, according to Gartner. There are about eight or nine Business ByDesign users in the U.K., Dale said.
SAP’s John Wookey is also leading an effort to develop on-demand, line of business applications for large enterprises, driven by the idea that customers will keep certain applications on-premise and innovate via on-demand extensions. Business ByDesign will be used as the platform to develop these applications.
SAP said it didn’t believe it has been late to market with Business ByDesign.
"We truly believe we came to the marketplace early enough with SAP Business ByDesign,” Tim Noble, managing director of SAP U.K. and Ireland, said in a press release. “Innovation is more than just having great ideas and developing nice software. Innovation is only innovation when it is also implemented at the customer and being used productively.”
SAP called the forthcoming release “a category killer.”
“As soon as SAP came out with a suite that was good enough, no longer did the customer want to have best-of-breed that may have been best for the features and functions, but they didn’t really breed,” SAP CEO Bill McDermott said in a recent interview “Therefore, you had the disconnected enterprises, with business processes that weren’t harmonized, with data that didn’t make any sense.”
SAP customers are looking to the cloud, predictably, for reduced costs and quicker deployment time.
But they named their biggest barriers to the cloud as compliance/data protection fears (34%), lack of control (26%), lack of customization (20%) and risk of network/server outages(20%).
“The biggest barrier to customers adopting SaaS is security concerns,” Dale said, “and vendors have to get over and educate potential customers about that.”