When a company like SAP unveils a new software service it is usually big news. This was the case today when SAP announced SAP Business ByDesign, a full suite of business solutions delivered and based on the SaaS [Software as a Service] model. Technology aside, I was wondering how SAP, a traditional client/server company, will handle what amounts to an entirely different business model, i.e., a different method o When a company like SAP unveils a new software service it is usually big news. This was the case today when SAP announced SAP Business ByDesign, a full suite of business solutions delivered and based on the SaaS [Software as a Service] model. Technology aside, I was wondering how SAP, a traditional client/server company, will handle what amounts to an entirely different business model, i.e., a different method of generating revenues. Under the old model, a customer paid all the money up front. Under the new model it is pay over time. In the old model revenues were created around licensing fees and maintenance. Billed monthly, SaaS creates a different sales and billing process and a different way of delivering customer service.From a financial reporting standpoint, SaaS affects cash flow and sales compensation. Even the financial statement must be changed to include a line item for subscriptions.“In the old model, you got your money and ran,” Greg Gianforte told me. I spoke with Gianforte over the phone so I couldn’t tell if he was smiling when he said that, but he probably was since he is the CEO of RightNow, a SaaS provider to the enterprise for customer service.Gianforte says with packaged applications there was never the sense that you were delivering a service. After all, that’s what SIs [System Integrators] were for. An annuity business is a different animal, Gianforte claims, and the kind of meat eating, blood thirsty account managers that sometimes exist in the traditional client server world won’t be as successful when they try to manage an annuity business. Because service was typically handled by someone else–th SI–the packaged application vendor never felt responsible for the customer’s success. Under the new model, if the vendor doesn’t deliver success, they will probably be gone in a few months or less. Gianforte cites by way of warning that as soon as Siebel introduced what he calls a “viable on demand solution” their license revenue dropped off a cliff. While Paul Hamerman, a senior analyst with Forrester, doesn’t believe that a SaaS offering from SAP will cannibalize SAP’s enterprise business, Gianforte strongly disagrees saying, “why are large customers not interested in faster deployment and lower cost of ownership?” Why indeed. Technology Industry