SAP CEO on SaaS - a dirty word?

SAP CEO Henning Kagermann has further fleshed out his company's move into new markets, addressing smaller companies - and at the same time talked about his aversion to the phrase 'software as a service' as well as why he thinks good open source ERP software just won't happen.

Since the start of the year there has been much speculation about SAP's A1S software, some commentators calling it a move towards small businesses.

In a briefing yesterday, the boss of the German giant called A1S the vendor's "second step into the volume business" after Business One. He said it is for the mid-market, which SAP defines as organisations with between 100 and 2,500 employees.

He said: "We are trying to cover with [A1S] from 100 to 1,000 employees, which is a $15bn market. It's a pretty large market."

He denied slow progress for Business One so far, citing 13,000 to 14,000 customers, adding more than 6,000 last year.

When asked about the launch of A1S, Kagermann told silicon.com: "It is different to a traditional product launch because it's not just a product". Notably, he didn't go as far as to call the new play 'on-demand software' or 'software as a service' (SaaS), an area where upstarts such as NetSuite, RightNow and salesforce.com have prospered and where even the likes of older rivals such as Microsoft and Oracle are moving.

Kagermann said: "I have not dismissed it. I am saying that software as a service is not solving everything and I am still on this page. What we have seen so far [with SaaS] is more or less only pieces of what you need in a company.

"It's not been running the business, just a piece of it."

He added SAP considers that "a hybrid mode is the right one", saying SaaS should be about more than hosting applications off-premises and charging on a pay-as-you-go basis.

And while many traditional software companies have been hit by the open source movement, from operating systems to desktop apps to databases, Kagermann didn't see it as a threat to SAP's mainstay, enterprise resource planning (ERP), which looks after core functions such as payroll, financials and HR and systems for areas such as manufacturing.

He said legal requirements around applications work in his company's favour. The way something like Ingres was open-sourced by CA and then spun off couldn't happen to an old ERP offering in the same way.

He said: "That was a database not an application and that makes a difference."

He said that it's easy to imagine developers tinkering with something like a database and making improvements which they can boast about. Altering software to allow for Sarbanes-Oxley or Basel II just doesn't hold the same appeal, he said.

He said: "I've never seen anyone who likes doing that. That's business, not fun. The boring bits are a strength of SAP's."

The interview took place several hours before SAP was served papers by arch-rival Oracle, which claims the German company hacked into its customer support centre to get hold of software code.