SAP is expected to unveil more plans to attract mid-market customers to a hosted enterprise applications service when the Sapphire user conference kicks off this week.

An Atlanta, Georgia conference starting 22 April will be followed by an equivalent event for European users in Vienna from 14 May. At both events, the German giant is expected to discuss details of a product codenamed A1S that is currently in testing.

A1S is SAP’s big push to accommodate companies in the 100-1,000-seat sector and is expected to offer traditional back-office applications such as accounting, sales force automation (SFA), customer relationship management (CRM), human-resources and supply-chain capabilities. The release is at the heart of ambitious plans by SAP to almost triple its customer roster by 2010, and will compete against smaller rivals that focus on a narrower set of capabilities, such as on-demand pioneer Salesforce.com, which specialises in SFA and CRM.

“SAP is going to announce a new offering for small and medium-sized enterprises that sits between All-In-One and Business One,” said Derek Prior, research director at analyst firm AMR Research.

“All-In-One is old technology based on R/3 and preconfigured to hide complexity but SAP has been talking about having a SOA-based product for years and haven’t done anything about it –- it’s been marketing-ware. A1S is also likely to be hosted but it remains to be seen whether it is truly SOA and whether they make it work in an on-demand model.”

Prior also suggested that SAP could forge links with Indian service providers to help with the project and answer scalability demands in particular.

SAP is staying relatively quiet about A1S for now but rivals are already circling.
“I don’t think they’ll call it on-demand because they don’t want to position it in that way,” said Clarence So, Salesforce.com European chief marketing officer.

“It’s not dissimilar to the Microsoft strategy where you have code that sits on hardware behind the firewall and there’s a hybrid approach [combining traditional client/server and on-demand]. They’ll pooh-pooh on-demand because they know the growth is there and that it’s cannibalistic to SAP’s main business. They’re politically fractured and they can’t get the full wood behind the arrow.”

SAP will be under pressure to present a solid plan that will counter questions surrounding its strategy and divert attention from other recent issues.

At the end of March, Shai Agassi, an executive widely assumed to be the firm’s next chief executive, surprised observers by announcing his intention to leave the company. Agassi had been leading the German giant’s Netweaver plans to make its software a platform for other software developers.

Agassi’s resignation followed on the heels of an Oracle lawsuit alleging that SAP staff had illegally accessed software and documentation.

SAP has also twice in the last year issued warnings of below-par financials and has been under pressure to make more decisive moves into on-demand software.
However, SAP is renowned for its pragmatic approach to the market and is unlikely to be railroaded by recent events.

“If our competition believes that this has crippled SAP, then they are in for a surprise,” wrote Thomas Otter, a solution architect in a recent blog entry.
“There is a steely resolution and determination here.”