23
Mon, Dec
1 New Articles
  1. You are here:  
  2. Home
  3. MORE
  4. Commentary
  5. Analysis of News Events
  6. SAP and Oracle Take Positions on Software as a Service

SAP and Oracle Take Positions on Software as a Service

Analysis of News Events
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

SAP Embraces Software on Demand

On September 19, SAP unveiled an entirely new line of applications that represent the company's first foray into the Software as a Service (SaaS) market. As the world's largest enterprise application vendor, SAP has the potential to take the SaaS market by storm with its latest offering. In this analyst's opinion, however, it will take years of work and a little luck for SAP to become a leading SaaS player.  

The new applications, known as SAP Business ByDesign (or BBD for short), took four years and roughly $400 million for SAP to build from scratch. By starting from a clean slate, SAP was able to design BDD using a "no compromises" service-oriented architecture (SOA). While the applications are new, they run on SAP's existing NetWeaver middleware platform and leverage its support for SOA. Like similar products from Salesforce.com, NetSuite, and other SaaS vendors, BBD is available only as a hosted offering.

The initial release of SAP Business ByDesign covers eight major functional areas: financials, customer relationship management, human resources, supply chain, supplier relations, project management, compliance management, and executive management support. The target market for the applications is companies with 100 to 500 employees. By comparison, SAP targets its Business One product at companies with fewer than 100 employees and its Business All-in-One offerings at firms with 100 to 2,500 employees.

To make Business ByDesign attractive for the smaller companies it is targeting, SAP is pricing the solution at $149 per user per month for a minimum of 25 users. The software giant will sell the product directly and through its partners. At the announcement event, the company said that it has garnered commitments from 20 partners to sell its SaaS offering. At the moment, the software giant is piloting BBD with 40 companies in the United States and Germany. Expansion to other countries will take place during 2008 and 2009. SAP has set a goal to have 10,000 new customers on the applications by 2010.

While any product from SAP stands a good chance of becoming a leader in its category, I believe that Business ByDesign will have to overcome several issues before it can win its laurels. At the moment, BBD lacks many of the functions it will gain from "enhancement packs" that SAP plans for it over the next couple of years. Until those enhancements ship, many companies will adopt a "wait and see" attitude toward the product. Even after those enhancements are in place, BBD will lack support for many vertical industry business processes that competitive alternatives are offering. In addition, BBD's target market overlaps with the lower end of the market for SAP Business All-in-One. That overlap could lead to customer confusion, not to mention channel conflict between SAP and its partners.

Though SAP Business ByDesign faces these and other issues, that does not make the product a non-starter. What it could make it, however, is a slow starter. To read more of what I think about BBD, check out my recent posting about the product at the JD Edwards Advisor, a Web site that I manage for Andrews Consulting Group.

Oracle Books a Blowout Quarter

One day after SAP's coming out party for BBD, Oracle announced financial results for its first fiscal quarter. In what has become something of a tradition, the vendor pointed out that its financial figures once again beat those of SAP. For the first quarter of its fiscal year 2008, the company announced that its net income grew by 25 percent to $840 million. In similar fashion, revenues grew by a strong 26 percent to $4.5 billion. By contrast, SAP grew its net income by 8 percent and revenues by 10 percent in its most recent quarterly report.

One area where Oracle was a big outperformer was in sales of new software licenses. For the quarter, the vendor grew new license revenues by 35 percent to $1.1 billion. By contrast, SAP reported 18 percent license revenue growth in its latest quarter. That said, it should be noted that a sizable chunk of Oracle's growth came from vendors it acquired over the course of the last several months. Sales from these vendors—which include Agile, Hyperion, MetaSolv, and Stellent—did not contribute to Oracle's new license revenue one year ago. By themselves, Agile and Hyperion added $87 million in sales to Oracle's coffers during the last quarter. Those sales made up roughly 10 points of Oracle's 35 percent new license revenue growth. This illustrates how much of Oracle's growth versus SAP's is being fueled by acquisitions.

While Oracle may be obsessed with overtaking SAP as the world's number one application vendor, it has no immediate plans to field a competitor to Business ByDesign. During the conference call with financial analysts, Oracle CEO Larry Ellison noted the high costs of developing such a product and the low margins that would be realized from it. He then stated, "We'll see how SAP does going after small companies [with BBD]. It's interesting...but so far nobody has figured out how to make any money at it."

That's an interesting comment for Ellison to make, as he just so happens to be the majority owner of NetSuite, an SaaS vendor that now faces SAP as a competitor. Obviously, this gives him a reason to downplay the German giant's chances of success. At the same time, Ellison's involvement in this market means that he is speaking from experience when he says how tough it is to make money selling hosted solutions to smaller companies.

In short, it looks like Oracle will let SAP slug it out with the "pure play" SaaS vendors before it decides whether it makes sense to throw its hat into the ring. If SAP Business ByDesign does turn out to be a smashing success, however, all bets are off. Actually, I take that back. If BDD starts stealing prospects from Oracle, my bet is that it buys an SaaS firm. Anyone care to put money on it being NetSuite?

BLOG COMMENTS POWERED BY DISQUS

LATEST COMMENTS

Support MC Press Online

$

Book Reviews

Resource Center

  • SB Profound WC 5536 Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. You can find Part 1 here. In Part 2 of our free Node.js Webinar Series, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Brian will briefly discuss the different tools available, and demonstrate his preferred setup for Node development on IBM i or any platform. Attend this webinar to learn:

  • SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation. Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects. The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the company are not aligned with the current IT environment.

  • SB HelpSystems ROBOT Generic IBM announced the E1080 servers using the latest Power10 processor in September 2021. The most powerful processor from IBM to date, Power10 is designed to handle the demands of doing business in today’s high-tech atmosphere, including running cloud applications, supporting big data, and managing AI workloads. But what does Power10 mean for your data center? In this recorded webinar, IBMers Dan Sundt and Dylan Boday join IBM Power Champion Tom Huntington for a discussion on why Power10 technology is the right strategic investment if you run IBM i, AIX, or Linux. In this action-packed hour, Tom will share trends from the IBM i and AIX user communities while Dan and Dylan dive into the tech specs for key hardware, including:

  • Magic MarkTRY the one package that solves all your document design and printing challenges on all your platforms. Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product. Make sure your data survives when catastrophe hits. Request your trial now!  Request Now.

  • SB HelpSystems ROBOT GenericForms of ransomware has been around for over 30 years, and with more and more organizations suffering attacks each year, it continues to endure. What has made ransomware such a durable threat and what is the best way to combat it? In order to prevent ransomware, organizations must first understand how it works.

  • SB HelpSystems ROBOT GenericIT security is a top priority for businesses around the world, but most IBM i pros don’t know where to begin—and most cybersecurity experts don’t know IBM i. In this session, Robin Tatam explores the business impact of lax IBM i security, the top vulnerabilities putting IBM i at risk, and the steps you can take to protect your organization. If you’re looking to avoid unexpected downtime or corrupted data, you don’t want to miss this session.

  • SB HelpSystems ROBOT GenericCan you trust all of your users all of the time? A typical end user receives 16 malicious emails each month, but only 17 percent of these phishing campaigns are reported to IT. Once an attack is underway, most organizations won’t discover the breach until six months later. A staggering amount of damage can occur in that time. Despite these risks, 93 percent of organizations are leaving their IBM i systems vulnerable to cybercrime. In this on-demand webinar, IBM i security experts Robin Tatam and Sandi Moore will reveal:

  • FORTRA Disaster protection is vital to every business. Yet, it often consists of patched together procedures that are prone to error. From automatic backups to data encryption to media management, Robot automates the routine (yet often complex) tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:

  • FORTRAManaging messages on your IBM i can be more than a full-time job if you have to do it manually. Messages need a response and resources must be monitored—often over multiple systems and across platforms. How can you be sure you won’t miss important system events? Automate your message center with the Robot Message Management Solution. Key features include:

  • FORTRAThe thought of printing, distributing, and storing iSeries reports manually may reduce you to tears. Paper and labor costs associated with report generation can spiral out of control. Mountains of paper threaten to swamp your files. Robot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing. Manage your reports with the Robot Report Management Solution. Key features include:

  • FORTRAFor over 30 years, Robot has been a leader in systems management for IBM i. With batch job creation and scheduling at its core, the Robot Job Scheduling Solution reduces the opportunity for human error and helps you maintain service levels, automating even the biggest, most complex runbooks. Manage your job schedule with the Robot Job Scheduling Solution. Key features include:

  • LANSA Business users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.

  • LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed. Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

  • LANSASupply Chain is becoming increasingly complex and unpredictable. From raw materials for manufacturing to food supply chains, the journey from source to production to delivery to consumers is marred with inefficiencies, manual processes, shortages, recalls, counterfeits, and scandals. In this webinar, we discuss how:

  • The MC Resource Centers bring you the widest selection of white papers, trial software, and on-demand webcasts for you to choose from. >> Review the list of White Papers, Trial Software or On-Demand Webcast at the MC Press Resource Center. >> Add the items to yru Cart and complet he checkout process and submit

  • Profound Logic Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.

  • SB Profound WC 5536Join us for this hour-long webcast that will explore:

  • Fortra IT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators with intimate knowledge of the operating system and the applications that run on it is small. This begs the question: How will you manage the platform that supports such a big part of your business? This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn: