Sightings in SaaS

I just read Larry Dignan’s post over on ZDnet about the tipping point for on-demand ERP, and my first reaction is that Larry is correct: There will come a time when on-demand ERP loses that new kid on the block look and becomes the enterprise’s first selection when picking teams. My second reaction is that that there is only 1.5 players right now and unless that changes there will not be a tipping point, not anytime soon. Let me explain.

As Larry clearly delineates in the article there are really only 2 players in the on-demand ERP market at present: NetSuite and SAP’s BusinessByDesign. But SAP has had an awful time trying to bring ByDesign to market and their current strategy leaves one scratching one’s head vigorously. SAP’s biggest issue is that they have not been able to scale the ByDesign applications for new customers, and now they are baking in business intelligence, making the product even more difficult to scale. You wonder if they are killing ByDesign with kindness. At any rate, BBD is not generally available and the current thinking is that it won’t be until some time in 2010.

So where does that leave us? We have NetSuite with a full ERP less manufacturing - though partner RootStock is taking care of that – and a fully integrated CRM and E-commerce engine as well. There is Intaact, very strong on the finance side but less interesting when it comes to operations. Then there is Coda2Go, a financial app built on the SalesForce platform with an interface to the SF CRM apps. But that’s it. There are a few other offerings of simple accounting applications, and some even simpler invoicing applications, on demand. 

But there are not enough competitors out there to create a strong team. My sense is that software buyers, whether they are the business owner or the CIO or whatever, like to look at several strong players before making a choice. Right now, that means looking at a couple of on-demand players lined up alongside of several on-premise players. 

This is NetSuite’s unique dilemma: They are first to market, far out in front of everyone else, so much so that they have not yet been challenged. It must make tech buyers wonder why the field is so sparsely populated? 

Larry commits to a tipping point 2 or 3 years out for on-demand ERP, and that’s probably within reason. But the quicker NetSuite finds some other players in this market, the quicker the tipping point will happen. On-premise ERP really got going when buyers saw Oracle, SAP, Peoplesoft, Lawson and dozens of others in the market. Vendor exuberance for an idea, like integrated enterprise resource planning applications, created excitement in the buyer community and furthered their acceptance of integration over best of breed. In my opinion we will need to see a couple of strong new players in on-demand before buyers sense the excitement of this new idea.