The hype machines will be in full throat this year as several new software offerings hit the market with one major point in common: Their functionality will be delivered on demand. The question is no longer whether you will implement on-demand software, but, rather, which products make sense for your company to implement on demand and which will need to remain firmly inside the corporate firewall.
The problem with this question is that a simple rationale — cost — traditionally has driven on-demand acceptance in most companies. But two new offerings, though poised to save customers money, will not conform to the cost equations that have been used to justify most on-demand implementations to date.
The problem is that existing cost models for on-demand delivery are based on the short-term (under five years) value of moving a discrete function, such as sales force automation, to an on-demand provider. But it’s hardly a given that on-demand sales force automation or any other discrete function makes sense over a longer time period, especially when it comes to integrating on-demand functionality with enterprise-wide processes. It’s worth noting, for example, that Microsoft CRM On-demand is priced to be cost-effective in a five-year time window, but the pricing model favors on-premise for anything longer.
In 2010, two on-demand offerings will debut that are very different than what the on-demand pioneers have offered: Oracle’s Fusion Applications and SAP’s Business ByDesign (ByDesign is actually a relaunch). Both potentially will change the cost equation for on-demand products in a significant way.