I spent a few minutes with Zach Nelson, CEO of NetSuite at the Sandhill conference earlier this week. He gave an impressive and humorous (and risky) live demo on the hotel's WI-FI network. We talked briefly about pricing - it roughly lists at $ 100 per user a month for core functionality, plus increments for vertical extensions such as the revenue recognition functionality for software vendor customers. His comment as he walked away "We have so much headroom" (to increase prices compared to SAP, Oracle, Microsoft).
I then read Peter Graf's (of SAP) statement about salesforce.com's recent announcement about Apex, but broadly a swipe on SaaS:
"Do I want to be dependent on a developer from another organization? The single-biggest concern to people running multi-tenancy anyway is that you can still run in to outages caused by other customers?"
Has Peter checked how many "developers from another organization" make up the traffic on SAP's SDN? Does he realize how many "fractional" Basis staff at outsourcers tune multiple customer's SAP environment - a different kind of multi-tenancy? Does he realize how many offshore vendors support different SAP customer environments on different floors of their buildings - yet another form of multi-tenancy? Or how many of his customers have been doing "shared services" for a while now? That he has his own version of multi-tenancy - a common developer pool - which unleashes bugs that each of its thousands of customer has to individually patch.
Peter and SAP and its partners should be far more worried about the headroom Zach is talking about. SAP could not begin to price license and maintenance at $ 100 a user. To throw in hosting, customer specific tuning, upgrades at anywhere near that price is a going to take a revolution. The large premium for on-premise is increasingly unjustifiable. Especially, since it has "multi-tenant" characteristics of its own.
I'm also not sure how accurate these SAP arguments are since CRM-On-Demand is SAP's effort to get into the SaaS business.
Posted by: Jack Jones | October 15, 2006 at 09:36 PM
Jack, in fairness SAP claims its differentiation as offering its on-Demand as a makeshift arrangement for companies headed towards on-premise versions of its s/w...
Posted by: vinnie mirchandani | October 15, 2006 at 09:48 PM
Vinnie-
I tend to agree that Saas is the next "Blue Ocean" for enterprise software. Transition to this vision has many barriers only one of which is the reluctance of on-premise vendors to move to a lower price model. The internal application portfolio proliferation and architecture mess at most enterprises need to be cleaned up somehow in order for them to be able to move any critical applications to on-demand. It is doable but will take time. I think smaller businesses, greenfield operations and self-contained divisions of large companies will be great early adopters.
Posted by: Tamas Hevizi | October 16, 2006 at 08:34 AM
Peter can't have been reading Henning's recent script notes then where he specifically talked about supporting on-demand.
He's also ignoring the 'behind the firewall' appliance alternative from SFdC
Posted by: Dennis Howlett | October 17, 2006 at 03:11 AM