Software Licensing & Master Service Agreements : Chicago Software Licensing Lawyer & Attorney : Sam Conforti Law Firm : Master Service Agreements, Negotiations, Outsourcing : Cook County, Illinois

It appears the tide is turning for the ERP giant. Initially Business ByDesign, the SAP SaaS offering, was targeted to the SMB marketplace. John Wookey, SAP’s new chief of on-demand software applications for Large Enterprises (“LE”) and former head of application development for Oracle, announced at the OnDemand Europe Conference in Amsterdam that SAP will allow online integration with core on-premise or hosted ERP platforms. This is a major switch in their strategy. SAP is determined to avoid the problems of data sharing and integration with this type of approach. Mike Simmons reports for ComputerWorld in his article SAP in SaaS U-turn:

“Wookey will initially promote the LE on-demand offering entirely at SAP's established customer base. Until now the company had been reluctant to sell SaaS products to its installed base, for fear of cannibalizing license and maintenance revenues”

Mary Hayes Weier of InformationWeek reports on her interview with John Wookey in her article SAP unveils SaaS Strategy. SAP will provide “function-specific software applications, available by subscription, that plug into customers' on-site SAP Business Suite systems, and that SAP will host for customers using a multitenant architecture”. 

Weier provides us with a good definition of Multitenancy and how SAP will provide it:

“Multitenancy -- in which groups of customers share the same instance of a software application, even though their data is kept separate -- helps software companies keep costs down for the hardware, software, and energy they use to host customers' applications. In turn, that allows them to offer competitive subscription prices. Wookey describes Frictionless' technology, which will be the foundation of SAP's on-demand platform, as "Java-based with a true multitenant architecture”

Development groups will bring on-demand applications to the market. SAP’s CRM already in the market, although not a multitenant architecture yet, will be a seamless upgrade soon. The other two on-demand products also in the market, e-sourcing and carbon emissions management are a result of earlier acquisitions. SAP’s acquisition of Sky Data will be able to provide a mobile component to their on-demand offerings.

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Alex Goldman writing for InternetNews.com in his article Does SAP's Performance Fall Short reports on a survey conducted at SAP’s annual conference for SAP Professionals, SAP Sapphire ’09, held in Orlando, Florida. The study on SAP’s performance was sponsored by Precise Software, a transaction performance management (TPM) provider and was conducted by Dimensional Research. Dimensional Research based its findings from 695 SAP Professionals. The respondents were attendees at SAP’s Sapphire conference and answered questions at the Precise Software booth.   Some of the findings are as follows:

·         62% unhappy with the resolution of performance issues

·         8% reported daily problems

·         68% reported 1 to 5 incidents per month

As to the resolution and/or response times:

·         46% reported resolution in hours

·         22% reported resolution in minutes

·         30% reported resolution in days or weeks

·         2% reported resolution in seconds

Tracking of database transactions through the database and the application servers and into storage can be done for the SAP ERP software. Precise Software is now offering such tracking for SAP’s BI software as well. Zohar Gilad, executive vice president of Precise Software says:

“Traditionally in BI, companies take data from the production ERP system, extract it and scrub it, and load it into their data warehouse.  This can disrupt the production system, companies can fail to move the data in time, and it's tough to access.”

Precise Software is not the only TPM vendor involved in resolving these issues. Attivio and Fiorano are two other TPM vendors using different methods. SAP is also looking for a way to improve its BI and announced it is offering a new search engine to do just that.

SAP had no comment regarding the survey stating that they did not know how the data was gathered nor had they seen the survey.

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Stephanie Overby has written an article for CIO.com entitled “The Truth About Obama’s “Tax on Outsourcing” in an attempt to clear up all the questions that were raised when the President attacked the Tax Code for creating loopholes if a company creates a job overseas. Overby freely admits that she can’t clear up all the mistaken beliefs because the White House may not have been as clear about its objectives as was needed. In addition to identifying the five (5) misconceptions that are circulating, she also provides some necessary definitions of terms which help the reader to better understand the issues and the real targets of any proposed legislation. Those five areas in question are as follows:

        I.            Is “Outsourcing” the same as “Offshoring”?

a.       Outsourcing means contracting to any third party. This could be to a third party within the US.

b.      Offshoring means a NON-US location.

c.       The distinction to be made is: work being done at the US company’s own foreign facility called a “Captive Center”, versus offshore work being done by a third party, in essence offshore outsourcing.

      II.            Will the tax apply to “Offshore Outsourcing”?

a.       This was the point that was not made clear initially by the administration. Overby helps us out and states that the Obama plan will only apply to US companies with “Captive Centers”.

b.      So this will affect the IT Vendors such as IBM Global Services and Accenture AND ALSO Non-IT Vendor companies that maintain a presence abroad.

    III.            Will India’s IT Services Industry suffer the most from the proposed taxation?

a.       No. IT Vendors such as Wipro and Tata will not be affected. The tax is aimed at US Multi-National companies conducting operations in foreign lands.

    IV.            Will this taxation create more US jobs?

a.       Unlikely.

b.      There has been no indication that US companies would lessen their foreign presence due to the tax. In fact “most multi-nationals set up shop overseas to access cheaper labor or new markets”.

c.       Such a tax could cause MORE offshoring to offset any increase in taxation. In fact US IT Vendors may chose to relocate entirely overseas.

      V.            Is this protectionist tax policy certain to pass into law?

a.      Daniel Masur, an outsourcing attorney and partner in the Washington, D.C. office of Mayer Brown states, "It would be viewed by the rest of the world as protectionist and would trigger a wave of retaliatory legislation, and it would be bad for American business."

b.      Masur continues and states, “However, given Congress's propensity in recent months to write major legislation over a weekend and Congress's preoccupation with populist sound bites, such a provision could be buried in the next stimulus or budget bill".

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