SAPPHIRE 2006, Day One — Morcheeba’s last LP (Part of the Process) must have been playing on Henning Kagermann’s iPod lately, for his keynote was all about business processes today. I expect to learn more about SAP’s long-awaited Business Process Platform (BPP) when I meet Kaj Van de Loo tomorrow, but here is what Henning had to say about BPM, eventhough he made no mention of the acronym during his speech.

“Systems of the future are model based. Models of the future are active models. They control the execution of processes. […] Configuring models is much faster than recoding. […] This is a big step forward in terms of compliance, productivity, and speed.” I could not have said it better.

Later at the press briefing, Henning indicated:

“We want to be the leader in Business Process Platforms. […] Five time faster implementation. Cut TCO in half. Support changes ten times faster.” I like these numbers, for they are on par with what Intalio’s customers have been experiencing when using Intalio|BPMS. SAP definitely gets the vision.

Listening to Shai Agassi’s presentation at the press briefing, it also seems that Compliance has been picked by SAP as the killer application for BPM and the upcoming BPP, which has been released in 2005 according to one slide, will be available in 2006 according to another, and should become available sometime in 2007 according to a third. All jokes aside, the recent acquisition of Virsa by SAP provides a good starting point for this. Congratulations to Martina Jecker at SAP Ventures for a very smart investment and follow-on acquisition.

In the past, some BPM vendors have tried to use the Sarbanes-Oxley act of 2002 and the Revised International Capital Framework, also known as Basel II, as compeling events for the acquisition of BPM technology. Nevertheless, results have been mixed at best, mainly because of the complexity of the work involved. Having SAP tackling this challenge should help large organizations better understand how they can use BPM technologies to address their needs for compliance, thereby creating opportunities for other BPM vendors as well.

Later on, Bill McDermott took shots at Salesforce.com, presenting it as nothing more than a glorified contact manager, and decrying the multitenant model as one that cannot provide the level of reliability that large organizations need to run their business. I must agree that Salesforce.com’s offering is too limited from a functional standpoint for it to become a complete platform. In that respect, NetSuite is much further along, and I must hope that Marc Benioff will make an acquisition in the ERP space that would allow Salesforce.com to move beyond CRM and provide a complete suite of applications. AppExchange is not enough.

Where I beg to differ is on the view that a multitenant model cannot be relied upon. Eventhough Salesforce.com’s technical problems are real and well documented, this type of FUD can only hurt the Service as a Service (SaaS) model today and SAP’s SaaS business tomorrow. Mutitenancy is a requirement for small and midsize businesses, for a host of business and technical reasons. Saying that SAP’s SaaS offering is better than Salesforce.com’s because it is based on a single-tenant model is just another way of saying that the multitenant version is not available yet. I look forward to my meeting with Gary Fromer this afternoon to learn more on the subject.

Shai Agassi’s keynote this afternoon was very nicely done. The groundbreaking Enterprise Services Architecture (ESA) seems to be coming together nicely. Not very many details on BPP, but that was to be expected. What really impressed me was the quality of the demonstrations and the clarity of the presentation given by Shai. He certainly learned a trick or two from Steve Jobs, even adopting the same black turtleneck. The new user interface, called Muse, is stunningly beautiful and borrowed the cool brushed aluminum look that is now a standard with any Mac OS X application. Only faux-pas: the initial demonstration, given from a Tablet PC, did not seem to be directly controled by Shai, but by an operator in the background. Quite frankly, the demo was impressive in and by itself, and did not really need the extra touch, especially if it was dubbed.

Following the keynote, we got to spend an hour with Shai Agassi for a very interesting Q&A session. I finally managed to get a straight answer regarding BPP: officially, it’s not available yet, eventhough Shai believes that yesterday’s release of mySAP ERP 2005, which includes ESA but no process execution engine, marks BPP’s first release. The full release with BPEL support is scheduled for 2007, as was originally promised in 2003. Good things take time, and SAP is making a point of not being late. In the meantime, customers will have to look for alternative solutions, Intalio|BPMS Powered by NetWeaver being one of them.

And to make things crystal clear, SAP is 100% committed to supporting BPEL.

After that, I got to meet with Gary Fromer, Senior Vice President, SAP Managed Services. This gave me the opportunity to better understand SAP’s strategy regarding Software as a Service (SaaS). To start, Gary is not a big fan of the SaaS denomination, and prefers to talk about business services that are delivered over the web. When asked to define them, he points to three main characteristics: First, they are made available as online services, eventhough this should only be one option, others being on-premise deployment or complete business process outsourcing (BPO). Second, they address relatively standard needs that are viewed as non-strategic, payrol being a perfect example for it. Third, they are sold through subscriptions rather than perpetual licenses, therefore can be recorded as expenses rather than capital expenditures. I tend to agree with Gary’s definition, eventhough I like to believe that online applications should be able to support strategic business processes as well, especially when they get powered by a good BPMS that is made available as a service. So, all we disagree on is the way to call this thing, and I do not have any strong preference one way or another. Let’s find a name that will work for most parties and move on!

Currently, all applications offered by SAP are available as hosted services, with a single-tenant model very similar to what Corio started offering five or six years ago. Even mySAP CRM has a single-tenant architecture, but the ability to get the same business functionality offered as a packaged application deployed on premise, or as an online service sold by the drink looks like a very interesting differentiation to me. That being said, I remain convinced that Software as a Service is a very attractive model to small and midsize businesses, and SAP should embrace it more broadly if it really wants to go after the SMB market, which is were growth will have to come from for the company anyway.

Therefore, my advice to Gary was the following: take SAP Business One, implement multitenancy for it — either natively or through server virtualization — and market the hell out of it while the competition does not have a full suite yet (Salesforce.com), or has limited execution capabilities from a sales and marketing standpoint (NetSuite). This window of opportunity if wide open, so go for it!

And that’s it for today!