SAP crossing the chasm by the end of 2007
Following SAP CEO Henning Kagermann's presentation at SAP fourth annual analyst summit, Shai Agassi, president of the Product & Technology Group, laid out the company's technical vision. He believes that SAP is in position to lead the chasm crossing …
Context & Ripple Effects
SAP spent 2006 edging toward hosted software: February's on-demand CRM push marked its first tentative entry into the subscription market Salesforce.com built. At the fourth annual analyst summit, CEO Henning Kagermann set the strategic frame, and Shai Agassi — president of the Product & Technology Group — followed with the technical vision, arguing SAP is positioned to lead the chasm crossing by end of 2007.
The significance is sequencing, not novelty: the company that owns the installed enterprise base is publicly putting a date on moving from licensed suites to on-demand delivery, which converts a defensive CRM experiment into an architecture-level commitment.
First-order effects
- Agassi's end-of-2007 deadline puts the Product & Technology Group on record with a dated technical roadmap, turning analyst-summit rhetoric into a measurable commitment for SAP's engineering organization.
- Salesforce.com, whose market SAP entered with its February on-demand move, now faces the licensed-software incumbent shipping a deliberate on-demand strategy rather than a token response.
Second-order effects
- If SAP validates on-demand delivery at enterprise scale, its large installed base gains bargaining power to push subscription terms in renewals, compressing the license-revenue model that still funds the company.
- Rivals selling subscription software lose the 'incumbents can't do this' argument, forcing competitive responses on product breadth and integration rather than delivery model alone.
Third-order effects
- A dated chasm-crossing claim from the category leader points toward enterprise applications restructuring around subscription economics, where the binding constraint becomes organizational transition inside the vendor — sales incentives, revenue recognition, product architecture — rather than customer willingness to buy hosted software.
The trend: Enterprise application vendors are transitioning from perpetual licenses toward on-demand delivery, with incumbent-set deadlines like SAP's shaping how fast the subscription model absorbs the installed base.