We recently held a discussion with SAP ( 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 ( CRM ), Oracle and Microsoft ( MSFT ).
We also discussed the prospects of in-memory technology and its potential advantages over traditional relational database technology, like competitor Oracle's ( ORCL ) Exadata machines.
We currently maintain a $64.85 price estimate for SAP stock , a roughly 10% premium to market price.
SAP Upbeat Regarding On-Demand Market Growth Prospects
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 On-Demand
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 management ( CRM ), 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 market.