SAP is making a u-turn in its approach to software-as-a-service (SaaS) applications and is set to launch its Large Enterprise on Demand initiative to improve integration of hosted products with existing SAP offerings.

Speaking at the On Demand conference in Amsterdam, John Wookey, SAP's vice president said that the aim was to allow end user organisations to integrate SAP's online offerings with their core, on-premises or hosted ERP platforms.

SAP's LE on-demand applications will run on the Java-based Frictionless platform that the company acquired in May 2006.

SAP has struggled with its software as a service offerings, particularly with its BusinessByDesign product, which is targeted at small and mid-sized organisations, so Wookey used his keynote speech to spell out the company's commitment to SaaS.

"On-demand is the next stage in applications development, the next stage in technology - and I think it is important to hear SAP say that the future of the company is tied to successfully develop and market on-demand. SAP believes in on-demand and so does the SAP board," he said.

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 cannibalising licence and maintenance revenues.

An indication of SAP's failure to get its SaaS offering right is that Wookey is now leading a small team that, the company says, "is acting like a small start up within SAP".

A former Oracle executive, Wookey was responsible for the strategic direction and development of JD Edwards, PeopleSoft, Oracle and Siebel applications, and Oracle's next-generation Fusion applications, before joining SAP last November.

He has recruited on-demand experts from Salesforce, Oracle and Siebel.

Commenting on the move, Paul Daugherty, Accenture's Chief Technology Architect, said, "Our research shows that 50 percent of high-performing organizations are using SaaS in some fashion, and SAP's announcement is an important step in addressing the increasing desire for customers to take advantage of Cloud and SaaS products.

"SaaS sales are projected to grow at over 25 percent CAGR. This news from SAP will add to the growing legitimacy of the SaaS model which encourages the development of company-wide processes, making it easier for a company to focus on what differentiates it from the competition."