SAP's $125M SaaS Attack

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SAP wants more independent software vendors (ISVs) to build applications on NetWeaver. The $125 million venture fund it announced should help lure them in.

The company already has 1,000 ISVs building applications on its proprietary NetWeaver platform, with more than 1,500 such apps already on the market. But SAP is hoping the venture fund will help make it a one-stop software shop.

“We have taken another step forward to extend our lead in cultivating a world-class ecosystem and, ultimately, expanding the options available to customers,” said Shai Agassi, president of SAP’s product and technology group.

The question is whether customers will want to commit to a proprietary, on-premise-based application model if they aren’t already locked in to one.

“It’s great that they’re investing all this money,” said Sheryl Kingstone, director of customer-centric strategies at Yankee Group. “The hard part is it’s still the SAP infrastructure that companies will have to build off.”

According to Kingstone, software-as-a-service (SaaS) is where the market is going. But the trouble, she told internetnews.com, is that SAP doesn’t come in with a huge understanding of SaaS. And SAP, she said, is taking its strategic lead from Salesforce.com, the largest SaaS vendor in the market.

And no surprise, SAP refutes the idea that it would take its lead from Salesforce.com or anyone else.

Salesforce.com uses AppExchange as a platform for vendors of on-demand software. The platform helps Salesforce.com get a bigger cut of overall IT spending, and helps create a sense of ubiquity about the SaaS model of software delivery.

Several companies have received outside venture funding on the strength of the availability of AppExchange as a platform infrastructure and marketing tool, of which the most notable is loan delinquency management solutions provider Remend, based in San Mateo, Calif.

Likewise, SAP is trying to increase the number of companies offering solutions based on NetWeaver. And since most venture dollars are going to SaaS vendors, SAP is seeding this market on its own.

The fund provides SAP with a new opportunity to fund “up-and-coming companies that have committed to building their products on the SAP NetWeaver platform,” the company said in a statement.

Bill Wohl, a spokesman for SAP, added: “We did not create this fund to do anything more than to continue to inpsire people to innovate on this platform.”

Any other interpretation of SAP’s motives, he said, “is a mischaracterization of what we’re doing here.”

In addition to seeding its ecosystem with new vendors, this week SAP also acquired a software vendor, Frictionless Commerce, that reinforces its NetWeaver-centric strategy.

The privately held vendor of supplier relationship management, based in Cambridge, Mass., had already been a certified NetWeaver application.

That “makes this a quick win for our customers,” said Agassi in a statement.

However, Agassi also acknowledged the importance of SaaS, noting that Frictionless Commerce also offers applications in an on-demand environment.

“Sourcing on-demand offers customers a fast and consistent [option],” he said.

This article was first published on ASPNews.com.