In an interview with ComputerWorld Vishal Sikka the Chief Software Architect of SAP has some very interesting comments:

He also talked about one of the company's first on-demand offerings, its software-as-a-service philosophy, below are some excerpts from the same:

What is so different about designing an on-demand product, such as your new CRM offering?
There are a few things that are fundamentally interesting. One is the better economics you can offer by hosting. This is more a function of how much you can leverage the underlying stack technologies -- the different hardware -- below the application layer. Another aspect is the time to get up and running. This a matter of how closely you can get the software to reflect the way customers do their business. A CRM on-demand solution for an insurance company in the U.S. is very different from a CRM on-demand solution for a company in Thailand.

What specifically is so different in the design of an on-demand product? The level of prefiguration, number of functions, ease of use?
Exactly. What you see in our CRM on-demand offering is a significantly easier product to use through ways such as preconfiguration, fewer functions and taking massive advantage of underlying infrastructure. You'll see us do things that go far beyond Salesforce.com. You'll see us starting to work with some of the "cloud" platforms like Amazon and Google. We haven't yet announced any relationships, but you'll start to see us doing things of this sort.

What role will the software-as-service model play in SAP software across the board?
We look at it as another deployment option. When you look at SAP, the breadth of functionalities that we offer across our customers, industries and nationalities is very vast. One size doesn't fit all. We're using a wide variety of deployment options. For a certain class of processes, it is advantageous to offer that software as a service. For other processes, it may be better to offer our software as an on-premise model.

Are there any limitations in designing software-as-a-service products?
You have to look at the trade-off between the ability to customize and share data.

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Prashanth Rai