SAP is in a dilemma. It is trying to adapt to an evolving market, but there are signs that in doing so this once highly focused firm is losing its clarity of purpose.

SAP knows it has limited growth opportunities in selling to large businesses and that there is a huge market opportunity in selling enterprise resource planning (ERP) systems to smaller firms, but building software suitable for those organisations is not one of its core skills. Already there are signs SAP is struggling with this, the most telling being its recent decision to slow down the rollout of its on-demand Business ByDesign product.

So what to make of SAP’s decision to offer its large customers on-demand bolt-ons for their core ERP systems? It seems perverse to start offering incomplete products to its core customers.

To date, enterprise deployment of on-demand software has been limited to discrete projects. This is because few IT leaders are yet prepared to bet their business on software hosted on someone else’s premises.

That may change, but most of SAP’s core customers are still steering a course towards a service-oriented architecture. Here SAP once had a compelling story to tell, with its NetWeaver strategy promising a clear path towards a service-oriented future.

The value of that strategy has not diminished for large enterprises, and SAP might be well advised to refocus on supporting existing customers, rather than chasing the market lower down the chain.