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SAP preaching Cloud evolution, not revolution

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21st Jul 2010
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On the back of a new poll of its customers, SAP is preaching a gospel of steady evolution, not a headlong rush to the Cloud. But will it change its model?
The typical SAP customer over the next five years will gradually shift towards a mixture of running their applications on-demand, on-device and on-premise.
That was the principal finding of a snap poll of SAP customers which leads the enterprise applications market leader to preach a gospel of steady evolution, not a headlong rush to the Cloud. Though some 71% of organisations say they are currently using on-demand applications, set to rise to 76% inside a year, 53% of respondents still cite security concerns this as their biggest barrier to adopting on-demand and a third say they remain unconvinced about benefits of Cloud as yet.
"From this research it’s clear that over the next five years we are going to see British companies favouring a hybrid approach to software," commented the firm's Managing Director at SAP United Kingdom & Ireland, former Gartner analyst Tim Noble. "On-premise will still play a key role, but we will see rapid growth in on-demand and on-device solutions."
Indeed, on-premise looks set to continue to be the primary software model, the company claims, with 61% of new software investments required to be delivered that way by CIOs over the next 12 months, as user organisations are said to still prefer total control it provides - but as companies gain confidence in Cloud and users push for greater flexibility, investment in on-device and on-demand models will increase, says the software giant.
The survey covered CIOs in 250 UK PLCs with 1,000 employees or more. Other notable findings included financial applications, HR, CRM and procurement applications being reported by respondents as their most commonly run on-demand applications and that 62% believed scalability to be the main benefit of on-demand, followed by speed of deployment (58%) and cost saving (52%). Only 22% believe ROI to be one of the main benefits and 31% see environmental benefits as key.
Doing business
 
SAP's most notable Cloud push to date has been its Business ByDesign offering, firmly pitched as a mid-range offering that a customer can start using the system for as little as £97 a month, with 'starter packs' tailored for CRM, ERP or Professional Services functions. The CRM version is being sold for a fixed price of £9,900 for a three-week go-live for a 10-20 user scenario, while the ERP version comes in at £24,900 and twice that long to implement. Finally, the top-end Professional Services version has a fixed price implementation fee of £34,900.
ByDesign is being marketed as 'for midsize companies [of 100 to 500 employees] seeking a complete solution, with limited IT resources and budget' in contrast to SAP's 'One' package (which is held to address smaller firms of up to 100 staff) and its 'All-In-One,' which is being targeted for midsize firms (up to 2,500 employees) with complex industry-specific needs and sufficient IT experience'.
(SAP does say larger corporates can use it as a departmental or remote office solution but as yet it is still working on a bridge between it and regular SAP LE ('larger enterprise') systems and no date has yet been given for when that might be released.)
But one of the earliest users of the emerging SAP Cloud solution, SAP Business ByDesign, says the business software giant will need to change its sales model to reap the full rewards of the system. "SAP has to learn to move from a direct sales to a channel model here and I think it may go through an uncomfortable phase while it does that," Jonathan Gurney, VP Finance and IT at printer firm Dascom. "In many ways it's starting to compete with itself here and there will be some dislocation as it learns how to make the best of its new opportunity. Even the contracts are still based in the past, in the on-premise world."
Nonetheless Gurney is a very happy SAP customer, it must be immediately added. He says moving to ByDesign promises huge benefits for his company, a smaller firm of only 75 staff but one that he says has "all the complexity and ambition" of a larger enterprise. "In our market there are some big elephants and we're just a mouse and will hit maybe 180 staff in five years. But just because we're small doesn't mean we're not an enterprise and need enterprise-level solutions," he points out.
His firm, Dascom Europe GmbH, a supplier of industrial printing solutions covering leading printing technologies, is in effect a new start up backed by a major Chinese printer player, Dascom. The latter bought up a number of established German brands like TallyGenicom so as to create a new firm and launch itself on to the global market.
Gurney and his very small IT team were thus tasked with creating an integrated ERP system from scratch for the supplier when it bought our the former TallyGenicom European operations last year. "Our first job was to extract all of our company data from a hosted Oracle system, but for cost and infrastructure reasons we couldn't go with Oracle anyway," he said.
Luckily he had an in-house expert familiar with SAP who was able to port the 1,500 table-strong customer database to an old server running SA R/3 – something that Gurney said was only ever going to be an interim solution. As a result, the company spent September until December last year researching the market and decided ByDesign was its best option. The firm will go live with a global integrated system based on the Cloud-based package in September, he says. "No one was pushing ByDesign so it was a bit of a lucky accident we came across it," he added.
But Gurney is convinced such features as easy localisation, flexibility and scalability means it's the best solution for his budget and will allow the firm to grow to meet his growth targets for 2018. "We will have proper BI here because we will all have consistent and accurate information to draw on across the whole group," he added.
Gurney says the ease of implementation has also been a major plus point. As for its Cloud aspects, Gurney says security and stability of the supplier were big considerations in the purchase. "We went so far as to ask SAP to specify what data structures we could have to get our data back off the system if we ever decided to pull out," he says.
He also says he has very firm benchmarking metrics in place to track the positive contribution of the system to Dascom's growth. All in all, he says, "SAP has something here that will really revolutionise the entire SME software market, but it needs to start learning how to work with the channel and other things it's not really done before."
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