German applications-maker SAP has announced that the release of its first software-as-a-service (SaaS) offering, Business ByDesign, originally slated for the second half of 2008, will be delayed by at least a year.

The announcement follows a weak set of quarterly financial results from the company. Although first-quarter revenues grew 14% year on year to reach €2.46 billion (£1.94 billion), operating income fell 18% compared to the year-ago period, down to €359 million.

To improve its profit margins, the company has taken the decision to spend €100 million less on developing Business ByDesign than it had originally planned, therefore delaying its release.

“We are disappointed about the negative outlook for the new mid-market product, Business ByDesign,” wrote Oliver Finger, an analyst for German investment bank DZ Bank. “Although we do not assume that this will have a major impact on the projected figures, it creates a very bad sentiment for this important product.”

Business ByDesign will be SAP’s first foray into on-demand software delivery, and the company hopes it will open a new market for its applications – those companies that cannot afford its high-end applications, but which require more sophisticated software than its small business offerings.

The company had hoped to attract 10,000 users and $1 billion (£500,000) in revenue with Business ByDesign by 2010. But SAP CEO Henning Kagermann told investors this week that it was now unlikely to hit that target.

Further reading

SAP rethinks software SAP’s on-demand applications offering, Business ByDesign, may turn the company into a mass-market vendor

On-demand economics Now the case for software-as-a-service is proven, best practices are needed to ensure the potential becomes reality

Find more stories in the Business Applications Briefing Room