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SAP All-in-One model sees licensing change

Licensing change makes it easier for partners to offer All-in-One subscriptions.

SAP All-in-One licensing changes will make it easier for partners to offer their ERP and CRM applications on a subscription basis.

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Many say it's about time. SAP is definitely late to this SaaS party, having watched Salesforce.com blaze the trail for hosted CRM for years. And Microsoft has offered CRM in partner-hosted, on-premises and now even Microsoft-hosted iterations for some time as well. And, when SAP finally entered the fray with Business ByDesign two years ago, customers were underwhelmed and partners were irate because SAP at first appeared to cut them out of the equation. SAP also launched a SaaS CRM product four years ago but soon stopped talking about it.

"It's taken large companies like SAP a long time to figure out how they can avoid cannibalizing revenue. It looks like they realize the train has left. The genie's out of the bottle -- [they] might as well get on board now," said analyst Ray Wang of the Altimeter Group via email.

A handful of partners -- CIBER, itelligence, Optimal Solutions Integration and RunE2E -- have signed onto the new SAP All-in-One licensing option. Other SAP partners wanting to participate must join the company's fast-start program and qualify as a hosting partner, a spokeswoman said.

RunE2E LLC already hosts All-in-One CRM applications for customers but had work within the old license model and so welcomed this news.

"Prior to this announcement, we bought a perpetual license from SAP and would figure out billing over 36 months for the client. What this does is take those lumps out of the equation," said Mark Alexander, CEO of the Alpharetta, Ga., company.

Cincinnati-based itelligence Inc., another longtime SAP All-in-One partner, already hosted vertical applications -- in wholesale distribution, consumer packaged goods, food and bakery processing -- —but none of those customers were yet paying by subscription. CEO Steve Niesman expects that to change now.

SAP All-in-One gets partner friendlier

Over the past few years, many customers have embraced the cloud in part because it freed them from big one-off license sales that qualified as capital expenditures. They preferred the predictable, more incremental subscription payout that shows up as operational expense. Niesman and Alexander agreed that that preference will continue even when the economy recovers.

"This is a natural evolution in the software market to 'cloud computing' and natural direction software. [It will give] customers the option of on or off premise, license sale or subscription," Niesman said.

Late or not, this is a good move because customers have been asking partners for subscription-based pricing, Wang said. Even aside from the capex versus opex discussion, the [audience] for CRM and increasingly for ERP is used to for SaaS pricing models.

Wang also downplayed a suggestion that this deal might impact Business ByDesign, perhaps siphoning off prospective customers. "You have to remember that [All-in-One] is deeper in vertical functionality. [ByDesign] is still more a horizontal-based offering. However, it sets up SAP customers and shareholders for the expectations of subscription-based pricing," Wang said.

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