Cloud Computing

Managing disruption: SAP and Business by Design

SAP is finally releasing Business by Design in July, reports Reuters.  The web-based ERP suite, which targets small and mid-sized firms, has been in development for six long years. 

Business by Design would be reportedly available as a hosted solution in the United States, Germany, UK, France, India and China.

The delay in the release Business by Design shows the dilemma of on-premise vendors such as SAP in managing the changing IT landscape.

On premise packaged software vendors are feeling heat from cloud and SaaS. Apps threaten to move to cloud and become available through subscription, and disrupt revenue of traditional vendors.

But they have been wary of releasing SaaS versions of their on-premise software, which they fear may cannibalise existing revenue.

Many analysts have said SAP has let the Business by Design project drag. For quite sometime now, SAP has maintained that it is testing Business by Design worldwide with ‘less than 100 customers in a controlled environment’.

This reporter had interacted with SAP CTO Vishal Sikka and Singh Mecker, SAP head of Global Ecosystem and Partner Group, during a SAP event in November 2009.

Explaining the delay Mr Sikka had pointed at three complexities SAP faced in Business by Design – to develop a new architecture, new delivery model and new business model. 

SAP acknowledges that Cloud and SaaS would eventually change the way enterprises consume software.

Mr Sikka said mission critical applications would to stay on-premise, while other apps may move to the cloud. He expected this situation to hold for next five years.

SAP expects that even in the long run, a hybrid of public-private clouds would continue to run enterprise apps. Mr Sikka said cloud apps would split between public and private clouds and enterprises would have to address a new complexity of managing software with many moving parts.

SAP customers now pay the company to purchase license and then pay system integrators to customise and implement the software. As software becomes easier to consume, would SAP still need its army of integrators?

Mr Mecker said, the 'traditional paradigm'' - the present way of customising and implementing software - would not hold on for ever. But there would be a continued role for SIs in helping enterprises manage the moving parts, he pointed out.

Arun Mysore

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