Is the CEO of SAP out of touch?

In an excerpt from a blog printed in the Wall Street Journal yesterday SAP CEO Henning Kagermann sees no threat to current information technology from new online software. However this view is out of date in that the problem with traditional business software is that its strength is also its weakness. Current business enterprise software requires a large investment and is vibrant and balances both a rigid structure with adaptability. This means that for a new technology to compete it must offer a reward in excess of the cost of switching. None of the software on the market offers that. However this new Internet software has led to development of new niche architectures some of which can compete. It is not the content produced by the new offerings, but how it is being produced. In the past it took five or ten years for what is in the lab to make it to the consumer. Current enterprise software faces a major problem in about twenty four months. Perhaps Kagermann does see it coming. SAP works more like a rental store than a retailer. A new architecture means new software and is great for a retailer, like switching from VHS to DVD. But as a rental store SAP must unload their VHS stock. So SAP may be trying to keep the market strong for VHS tapes while internally adjusting to DVD. Google announced this week they are going to offer web statistics. Some think Google acting as both advisor and seller is a conflict of interest. So SAP finds itself in a conflict of interest. Once the new enterprise solutions make it to market the price difference is significant enough to make the old solutions completely obsolete. That window may be months or years, but once it closes it will happen rapidly. Given the statements in the blog maybe the viability of the current information technology is even shorter than it appears.