We recently held a discussion with SAP (
) about the company's growth prospects, highlighting opportunities
in on-premise, on-demand and enterprise mobile software markets
(on-device). On-demand is a fast growth market, in which SAP
competes with players like Salesforce.com (
), Oracle and Microsoft (
We also discussed the prospects of in-memory technology and its
potential advantages over traditional relational database
technology, like competitor Oracle's (
) Exadata machines.
We currently maintain a
$64.85 price estimate for SAP stock
, a roughly 10% premium to market price.
See our full analysis and $64.85 price estimate
SAP Upbeat Regarding On-Demand Market Growth
On-premise and on-demand represent two distinct modes of product
implementation. In on-premise product implementation, the software
is installed onsite; comparatively, in on-demand, or software as a
service (SaaS), the software is installed remotely on third-party
servers (or the cloud).
The on-demand market has shown potential for rapid growth in the
years ahead. We believe that players like Salesforce.com, Oracle
and Microsoft have enjoyed an edge in this market because they
jumped on board the on-demand train a bit sooner than SAP.
Only recently has SAP started to gain traction in its Business
ByDesign on-demand software. The company has more than doubled the
number of customers, from fewer than 100 to about 250, since
launching the software in mid-2010. SAP aims to increase this
customer total towards 1,000 by the end of 2011.
SAP Sees Opportunity to Establish Itself in
SAP noted that on-demand is still just a fraction of the overall
enterprise application software market, and that on-premise is
still the preferred mode of installation for enterprises. Still,
on-demand does represent a key growth area for SAP going forward.
The company believes that Business ByDesign enterprise software
solution features a few advantages over products offered by
competitors, as other players typically provide a piecemeal
solution while SAP's offering is an integrated solution. For
example, SAP provides an enterprise application software suite,
including enterprise resource planning (ERP), customer relationship
), business intelligence (BI), supply chain management (SCM), etc.,
while competitor Salesforce.com specifically specializes in
on-demand CRM software.
Stay tuned for further analysis regarding SAP's views on the
prospects of in-memory technology as well as the on-device