Enterprise software major SAP on Wednesday announced the launch of its Business On Demand model in India at the SAP Summit 08, for the small and medium scale enterprises (SMEs) sector. Interestingly, after SAP saw a downfall in its first quarter income by 22% to 242 million euros, the company stated that they will reduce the spending on their Saas (Software as a Service) effort – “Business ByDesign”- in 2008 to 100 million euros, from the earlier planned 175-200 million euros.
But for SAP, the Indian market could be an interesting On Demand application business space. According to Springboard Research, there is a strong growth in adoption levels in India and across Asia for Software as a Service (SaaS). The Indian market is expected to grow to $48 million by 2008, representing the fastest growth in the region. Though, at present, the most popular application available on demand is CRM (customer relationship management) for the SME sector, in the years to come, some of the enterprise companies will start offering all functionalities available in the ERP (Enterprise resource planning) basket, said Pravin Sengar, senior manager with IDC for software service and vertical research.
SAP’s competitor Oracle is already present in the enterprise space in India. Prasad Rai, senior director, Oracle, said, “We have been aggressive in the CRM space in India in the current financial year and have undertaken a significant ramp-up in joint go-to-market activity with key partners; and, a continued focus on delivering greater value to our customers.”
The market seems to be quite bullish for SAP, as other international players like Oracle and Salesforce.com and India-based companies like Sage CRM and Ramco have been in the market for quite some time now. Industry sources say as SAP is late in launching the model in the Indian market, the company will face tough competition in India. SAP is largely targeting mid-market companies ranging from 100-500 employees.
Balaka Baruah Aggarwal, manager-syndicate research, Springboard Research, says, “What these large software companies like Oracle and SAP follow is the isolated tenant mode of architecture that makes it difficult for them to ramp up, so the cost of software service goes up.” However, some industry analysts are not bullish of large software companies entering the On Demand application market.
“The license model puts the risk on the company buying the software. In the software as a services model, the vendor assumes more of that risk. You wonder how vendors wedded to a low-risk business model can wean themselves away,” says Chip Gliedman, VP, Forrester Research.
SAP’s competitors like Oracle and Salesforce.com have a software application delivery model where applications like CRM are developed to run over the internet. Oracle also provides an On Demand model, where its partner – Zensar Technologies, offers Oracle’s ERP through a subscription mode. SAP says its pricing in the European market is $150 per user per month and industry sources says that the pricing in India too could be in the similar range.