Wednesday, November 29, 2006

Major ERP vendors battle for SaaS mindshare

eWeek has a good overview of the ongoing battle between the major traditional vendors of enterprise applications and for the hearts and minds of enterprise system buyers., of course, has put all its eggs in the software-as-a-service (SaaS) basket, going so far as to proclaim "the end of software." While Oracle defends the value of its on-premise offerings, it continues to build up its on-demand offerings, which range from simple hosting of its E-Business Suite to the multi-tenant CRM on-demand offering that it inherited from Siebel.
"You'll see us ramp up quite a bit—more advertising, more marketing, more sales," [Juergen Rottler, Oracle's executive vice president of Oracle On Demand and Oracle Support Services]. said. "We've incorporated Siebel CRM OnDemand and [developed] three new releases. We've rearchitected our entire underlying architecture to scale the business a lot faster. We've made core investments … that require a pretty heavy investment in R&D and services that a lot of niche players can't really make."
This leads, of course, to the argument over who has more customers and users:
On the heels of's announcement of its $500,000 revenue mark in November, Oracle released a statement that it has surpassed a milestone of more than 1.7 million on-demand users, representing more than 2,200 customers buying Oracle's subscription-based solutions, managed applications or software managed services (compared with's 27,100 customers and 556,000 users).
Another battleground is over ease of integration. Major vendors such as Oracle and SAP contend that on-demand offerings do not easily integrate with on-premise applications, such as ERP. It's still a strong argument in favor of on-premise software, but is firing back with its ApexConnect offering, a set of tools that allow interfaces to be built with third-party applications, including pre-built interfaces for Oracle and SAP.

As with many trends in information technology, there is no one right answer to the on-demand vs. on-premise argument. Organizations will need to evaluate their needs along with the advantages and drawbacks of each approach. My own view is that the economics of the on-demand model are too strong for it not to succeed. It may not be suitable for many applications within many organizations today, but the barriers -- such as the integration challenge -- are slowly breaking down. Although on-demand applications are unlikely to completely replace on-premise offerings, over time they will increase their share of the enterprise applications market. The only question is how much.

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