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SAP could expand on-demand with mySAP All-in-one suite

SAP CEO Henning Kagermann said the company could transform its All-in-one software for midmarket customers into an on-demand offering.

SAP plans to expand beyond CRM in the on-demand market, transforming its midmarket All-in-one software into what could be the start of an on-demand ERP offering by the end of the year.

SAP CEO Henning Kagermann told financial analysts Thursday that on-demand software can be applicable beyond CRM in the lower end of the midmarket.

"For the midmarket it makes a lot of sense to start with [All-in-one]," Kagermann said.

SAP All-in-one has components based on the mySAP Business Suite and is the first product targeted to be completely services-enabled. The software is aimed at small and midsize businesses with larger budgets, requiring greater functionality than the low-end Business One suite. Enterprises can use predefined wizards to tailor All in one to their specific industries.

Kagermann said SAP would start with "a few functions" and then move the entire suite to the on-demand model. SAP has been also working on building additional industry specific business processes into the All-in-one suite. Kagermann didn't say whether SAP would rewrite the code of All-in-one to turn it into a true on-demand product that could compete with on-demand vendor NetSuite Inc. SAP already offers a hosted version of All-in-one.

SAP jumped into the Software as a Service market in February with its own subscription-based CRM application for large and upper midmarket customers. The first release is composed of sales force automation (SFA) features including lead and pipeline performance management. Marketing and on-demand call center functionality with a service offering will be issued in quarterly releases later this year.

Analysts have been asking SAP whether it intends to expand its on-demand offering beyond CRM. Until now, SAP has been tight lipped about its plans.

For the midmarket it makes a lot of sense to start with [All in one].

Henning Kagermann, CEO, SAP AG

"It would likely take a multiyear plan to turn over a complete business suite that would compete with NetSuite," said Sheryl Kingstone, CRM program manager at the Yankee Group. "You've got to make a big architectural shift to truly make it on-demand."

Meanwhile, SAP said that continued strong sales in the United States, coupled with Safe Passage wins and midmarket gains, helped produce more revenue growth and higher net income in the first quarter.

SAP reported its fourteenth quarter of double-digit growth Thursday, with first quarter revenue at $2.46 billion, up 18% over the same period last year. Kagermann pointed to 40 additional wins under SAP's Safe Passage program and continued increases in the midmarket under the company's new hybrid sales approach as signs of continued growth in the United States.

"We continue to successfully grow channel partners … and small and midsized customers," Kagermann said.

Software license sales increased 22% in the first quarter, and Kagermann said SAP continued to gain market share from rival Oracle Corp. In recent months, the two companies have been trying to outmaneuver each other in the banking and retail industries, as well as the midmarket.

SAP is also focusing on expanding industry-specific functionality and positioning the company to grow revenue through the sale of composite applications built on the NetWeaver platform, Kagermann said, adding that the company is expanding the number of its independent software vendor partners, which could translate to increased development license fees on NetWeaver.

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