SAP's hosted conundrum
Published: 05 Jul 2005 11:15 BST
Though SAP already offers its customers the option of having their CRM applications hosted and managed off-site, the company has yet to introduce a ground-up rewrite of its enterprise software applications specifically for hosted use.
Market watchers have said it is almost inevitable that SAP will move more aggressively into the hosted arena. The company has also repeatedly pledged to increase its focus on winning deals in the SME space, the very market where Salesforce has won the majority of its deals.
Marc Benioff, chief executive of Salesforce, said it's inevitable that SAP will want to compete more closely against his company as Salesforce adds users and lures some of its rivals' customers.
"We have added over 100,000 new subscribers in the last year. I am sure SAP asks, why are those not our users?" Benioff said. "The reality is that we have not met that many happy SAP (sales-force automation) or CRM users. We believe that is because we have superior technology."
Turn up the volume
SAP has itself fuelled speculation over its plans by demonstrating what it called a "slim" online sales-force automation application at a customer conference in Europe in April. The product closely resembled the online applications marketed by Salesforce.
On-demand applications, or software hosted away from an organisation's physical premises by a vendor who maintains the data and programs, can offer a number of advantages over traditional enterprise software, proponents say. Those benefits include faster installation, lower overall costs and increased ease of use.
In addition, hosted-applications companies such as Salesforce offer their customers the ability to pay for a subscription to their "software as services" for a monthly fee not unlike rent, rather than pay upfront for software licenses that usually stretch for several years.
The approach has proved to be popular with many customers. In mid-May, Salesforce reported revenue of $64.2m for its first quarter, an 84 percent gain over the same period last year.
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