Better model for who?

Nick Carr has a lot vested in making sure his vision of utility computing comes true. So he cannot wait to say "aha!" as he hears Henning Kagermann of SAP say SaaS is "the better model".

Read it closer, Nick. He means better model for SAP. It would be travesty for buyers if SAP and partners can continue to rack up the TCO companies have spent on enterprise applications for the last two decades. And merely change the total from Capex to Opex.

Read it even closer. Henning specifically talks about small customers. And he means horizontal, commoditized ERP functionality, not his vertical engines which make those on the A380 look cheap. His mainstream large customers would continue to pay what his lieutenant Shai calls a large "tax"

Nick, you may say "aha". I say "SSDD" - little has changed, till I see the kind of breakthrough economics I wrote about here.

Comments

[Dennis Howlett]

I'm wondering if you're jumping the gun here Vinnie. Investors are concerned because SAP has already signalled a profit hit. It has to to remain honest about what it takes to build out SaaS capability and deliver it as a rental model.

We know nothing about pricing or functionality and Nick's article doesn't provide links to SAP material that provide any further clues. i've searched and there's little to suggest how they'll price up. Another interpretation might be that it's good for SAP because it gives them a replacement revenue stream for one that's slowly drying up.

[vinnie mirchandani]

Dennis, investors do not understand - and therefore do not like SaaS investments. MS found that out last year when it annoucned a large Capex investment in response to Google SaaS.

But, that's for Jason Wood and other financial analysts to worry about. I care about buyers. SAP and related hw, services, staff reflect a huge chunk of many IT budgets. I am not convinced SAP has caught religion yet to make it a compelling business model for them going forward. Like I said SSDD till I see breakthrough economics.