SAP shifts plans on hosted

It appears that enterprise software maker SAP has changed its tune on the topic of launching hosted business applications.

While SAP has offered little insight to this point on its strategy around so-call on-demand software, and previously denied that it had immediate plans to launch a set of hosted applications, Chief Executive Henning Kagermann hinted recently that the company may indeed by creating such a product.

In a call with financial analysts last week, Kagermann revealed that SAP is now building a product to be delivered under the "software as a service" model.

"We are in preparation and you will see something soon," Kagermann said of SAP's hosted plans. "These things take some time and we need to make our business models right. From a product standpoint it's not something that's hard to do."

Rumors that SAP had plans to introduce an online offering reached a crescendo prior to the company's Sapphire conference in Boston in May, based on an earlier demonstration of what it called a "slim" online sales-force automation application at a customer conference in Europe in April. But the company never revealed a hosted product at the Boston show, and company executives downplayed the likelihood that the firm would develop a software service designed to rival the Web-based offerings of rivals Salesforce.com and Siebel Systems.

Industry watchers have said that SAP doesn't need to introduce hosted tools in order to grow its market share, but indicated that the company could benefit from demand for such tools from within its existing customer base. SAP has also repeatedly stressed that it would like to increase its presence in the mid-market for enterprise software, where hosted tools have made their biggest mark thus far.

One reason the firm may now be reconsidering its hosted strategy is slowed growth in its customer relationship management (CRM) business. When SAP announced its second quarter 2005 earnings last week the firm reported that despite a 14 percent gain in profits compared to the same period last year, it saw a 3 percent decline in worldwide CRM revenue during the quarter.

Despite revealing that it is trying to play catch up in hosted, where Salesforce.com has led the way in convincing customers to embrace on-demand tools, Kagermann said that the company's success hasn't influenced its decision to introduce an on-demand package.

"(Salesforce.com) is not a CRM offering," Kagermann said. "It's just some functionality out of the complete CRM package. We address different needs with our customers."