SAP Ramps Up Online Software Strategy

SAN FRANCISCO -- Business software developer SAP (SAP) intends to build a line of online software for large businesses.

SAP said Tuesday that it hired Oracle (ORCL) veteran John Wookey to head Large Enterprise On Demand, a new strategy for the dominant supplier of software applications for big business.

Wookey previously led the development of a major Oracle middleware and applications project known as Fusion until October 2007, when he was replaced. Fusion middleware integrates Oracle software with applications from multiple vendors the company has acquired in recent years.

An SAP spokeswoman declined to disclose whether Wookey's contract with Oracle contained a non-compete clause. Wookey will be based in SAP's Palo Alto, Calif., office. The size of his team has yet to be determined. "We're just excited to get him on board," said Lindsey Held Bolton.

SAP has already ventured into online, or on-demand, software for small and medium-sized businesses with a product called Business ByDesign. The introduction of BBD has not gone smoothly, and the rollout was scaled back in early 2008.

And SAP already Web-hosts its customer relationship management software for large business users. But subscriptions accounted for only 3% of SAP's $7.3 billion in software and software-related services revenue so far this year.

The current leader in hosted CRM software, Salesforce.com (CRM) is expected to hit a run rate of $1 billion in revenue for the trailing 12 months ended in October.

Oracle recently become more aggressive at marketing its own CRM On Demand. And Microsoft (MSFT) also sells CRM applications, either as a physical or hosted product, but analysts say the software is far from mature. Microsoft says it intends to roll out hosted versions of all of its business software over the coming year.

SAP executives have described its on-demand strategy as a way of taking costs out of the current lengthy implementation process for upgrading so-called on-premise software, since hosted software can be upgraded simultaneously on SAP's servers for all users.

SAP shares were down $1.87, or 5.2%, to $34.14 in recent trading. The iShares S&P GSTI Software Index (IGV) was also off 3.3%.