SAP jumps into on-demand ERP market

It has unveiled a midmarket subscription offering

In an apparent about-face, SAP AG will roll out a full set of on-demand business applications specifically geared toward midsize companies looking for the benefits of ERP software without the hassle of installing it in-house.

SAP historically has pushed companies to install and run SAP software within their own four walls. Responding to market pressure from smaller, more agile start-ups such as Inc., SAP just last year offered its first on-demand product, a CRM application. Last week, SAP CEO Henning Kagermann said his company will offer a complete set of hosted and on-demand applications for mid-market customers that want to get applications up and running quickly with very little customization.

Customers will be able to set up and test the software on their own before making a purchase, using what Kagermann called a "try, run and adapt" model. "We assume customers will set up their own test system and play around with their own data," he said. "We want to eliminate risk altogether."

Although the exact details remain unclear, SAP's move could be a market-changing decision, said Rodney Masney, president of the Americas' SAP Users' Group (ASUG). "This will change the industry and support SAP's midmarket play," he said.

Masney, who is also global director of IT infrastructure at Owens-Illinois Inc., a Toledo, Ohio-based maker of packaging materials, said SAP made its strategic decision partly at the urging of ASUG. "The idea of providing the platform to the midmarket without paying the infrastructure costs or deployment costs with a rapid implementation certainly will play with midmarket customers," he said.

Masney said Owens-Illinois will be among the ASUG members looking into the on-demand offering when it becomes available.

While Owens-Illinois overall is committed to its existing mySAP ERP 2004 applications backbone, it has some small business units where an on-demand offering would make sense, he said.

"SAP is finally becoming an on-demand company," David Dobrin, an analyst at B2B Analysts Inc., said in a note. "But it appears that they've learned a few things from What they want the on-demand product to do is find a market that would never have bought the old product. Unlike most on-demand companies, they are exceptionally well funded. And though the product is still in its very early stages, it appears so far to be a very good and interesting piece of engineering."

An SAP spokesman said the on-demand applications will complement existing hosted CRM applications. More information on availability will be made public before the end of the quarter, and customers will be able to access the applications on a paid-subscription basis, he said.

James Niccolai, of the IDG News Service, contributed to this article.

Copyright © 2007 IDG Communications, Inc.

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