SAP Snaps Up Coghead

Posted on February 22nd, by thinkstrategies in Uncategorized. 3 comments

Among my predictions for 2009, was that the on-demand services industry will experience a shakeout and consolidation.

I also suggested in a recent post that platform and cloud computing companies which don’t offer a combination of solid enabling technologies plus attractive channels to customers won’t survive the shakeout.

Sure enough, the rumors about the demise of Coghead have come true, and it is among the early entrants to the platform/cloud computing market who are now making an equally early departure.

Coghead may have had terrific technological capabilities, but it lacked a sufficient revenue model to stay afloat in an increasingly competitive market. As a result, investors were unwilling to continue to fund the company and it had to discontinue operations.

The primary reason Coghead couldn’t generate sufficient revenue to stay alive was that it didn’t offer enough value to attract adequate customers. It was a classic ‘Catch 22’ situation — not enough customers bought into Coghead’s value proposition and as a result not enough customers were willing to buy its solutions.

However, it didn’t take long for SAP to capitalize on the situation and acquire Coghead’s assets and a handful of its engineers for a fraction of its paid-in valuation.

The asset sale gives SAP much needed insight into the engineering requirements to play in the Software-as-a-Service (SaaS) and broader cloud computing market.

It comes at a time when SAP openly admits that its internal efforts to develop and deliver a viable SaaS solution are being retooled.

The acquisition of the Coghead technology and engineering team alone will not rectify SAP’s SaaS struggles. But, if this is the first  in a series of acquisitions and alliances, which I referred to as the ‘tugboat strategy’in 2007, it could begin to give SAP the new perspective and skills the company desperately needs to get its SaaS and cloud computing efforts turned around and back on track.

The best indication of whether SAP is serious about its intentions in the SaaS and cloud computing market is if it makes more of these opportunistic acquisitions in the months to come.

The Latest from THINK IT Services Blog

THINK IT Services Blog examines the business implications of the latest developments in the technology services market ranging from Cloud Computing and Software-as-a-Service (SaaS) to Managed Services and other forms of 'On-Demand' services.

Reshaping the Software and Services Marketplace – A Guest Commentary in E-Commerce Times

In the old information technology (IT) world, systems integration and consulting companies flourished, helping enterprises of all sizes across nearly every industry pull together...

Catalant Profile and Perspectives Regarding Cloud and SaaS

Over the past year, I’ve had the privilege of becoming affiliated with the rapidly growing Catalant expert network which has enabled me to extend...

Yooz Wins Best of SaaS Showplace (BoSS) Award
Cloud Service Intelligently Streamlines the Accounts Payable (AP) Workflow Process

THINKstrategies announced today that Yooz has been named a winner of the Best of SaaS...