SAP Provides Details on New Hosted Apps

SAP AG continued to build expectations for its hosted suite of midmarket applications, saying Thursday that it will release the product's official name in September and present some initial customers that have gone live with the service.

Known presently by a code name, A1S, the service will be a broad suite of hosted business applications for the midmarket, which SAP defines as companies with under 2,500 employees or less than US$1 billion in annual revenue.

SAP insists the product will be a first of its kind, addressing all the core needs of a medium-sized business, including sales, financials and procurement, with a service that can be set up quickly and managed remotely by SAP.

"It's not just for sales force support, it's an entire suite," SAPCEO Henning Kagermann said on Thursday, in apparent swipe at established hosted CRM (customer relationship management) player Salesforce.com Inc.

The service marks a new business model for SAP, however, and Kagermann was clear about the challenges the company will face in bringing it to market successfully.

"We should have in mind that we have never done a launch like this in our history," he said, during a conference call to discuss SAP's quarterly earnings. "It's not a product launch, and you should not compare it to a launch like a new CRM product."

SAP will be hosting the applications in its own data centers to begin with, enlisting partners later on. The vendor is also having to create Web-based sales channels to support a high-volume business and new support centers -- or what Kagermann called "service factories" -- to provide 24-hour telephone support.

The rollout will be a phased one, and the service is not expected to be widely available in September. Instead, SAP is working to get some reference customers in production with the software, "to show you this is real and not just a nice demo," Kagermann said.

"The next phase is the entire operational set up, which lasts through the end of the year. Then beginning next year we will see how fast we can achieve volume, how fast we can ramp this up," he said.

The plan is to offer the service widely to customers in the first quarter of 2008, said SAP spokeswoman Astrid Pvlchen.

A1S will be delivered primarily as a service, but SAP will also offer an "appliance" that companies can install on site if they think that will make their data more secure, Kagermann said. "They could cut the line if they want and run it locally," he said.

The service will benefit SAP's enterprise clients too, according to Kagermann. "They see an option to have alternative offerings from the same vendor for their small subsidiaries, and they see a huge opportunity to integrate suppliers of a smaller size, or customers of a smaller size, in an automated way, because is service-enabled for B-to-B (business-to-business) communication," he said.

SAP will compete with several hosted applications vendors, including Salesforce.com, NetSuite Inc. and even Microsoft Corp., which will start to roll out its Dynamics Live CRM service before the end of the year.

SAP hasn't said yet exactly how it will deal with the specific industry needs of customers without requiring them to customize A1S, although SAP cofounder Hasso Plattner offered some clues in a speech in May at the Software 2007 conference.

"There is a physical separation between the UI (user interface) and the application, to the extent that we can have multiple UIs for the same application," Plattner said. "We found that, in order to cover every industry ... from selling books to selling aircraft, that this is so different that you cannot do it with one front end."

"In this new idea, we will have multiple front-ends for very specific user needs," he added.

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