Dominant ERP vendors struggle with making SaaS work

Here's an interesting article in InformationWeek covering an interview with SAP America's CEO Bill McDermott on the business prospects for SAP going forward and a few broader trends.  Outside of a rather somber outlook for enterprise software spending, he does take an interesting stance around software as a service and that the whole notion of on-demand computing (and its Business ByDesign product initiative) is incompatible with their business realities (my words, not his).

"It's not that SAP doesn't support the trend toward cloud computing -- it just doesn't see how it can operate a so-called cloud and bring good returns to shareholders."

Not as blunt as Lawson Software's Harry Debes' comments about perpetual software licensing being like cocaine but along the same lines.

Meanwhile, Aravo Solution's recent announcement about being selected by GE to provide a supplier information system for 500,000 suppliers across 100 countries illustrates the other side of the equation where a newer, more agile SaaS company is able to land a significant enterprise deal.  Here's THINKStrategies' Jeff Kaplan on that announcement.

SaaS/on-demand/cloud models are tough to swallow if you are use to doing business on a perpetual license /capital expenditure basis.  Regardless, I still believe that delivering software on-demand is a better deal for the end enterprise customer although not necessarily for the industry incumbents that have built their businesses on licensed and installed software.