Remarks by SAP chairman and co-founder Hasso Plattner last week caused a bit of a kerfuffle back at SAP headquarters in Walldorf, Germany.

Speaking last Tuesday at his own Hasso Plattner Institute in Potsdam, Plattner (pictured) said that “delivering software over the Internet would present a critical challenge to traditional business models used by software makers such as SAP who mainly install software for their customers at their premises,” according to Reuters.

“This model will compete with our current model, and 99 percent of our installations are on site,” Plattner said.

But by Friday, Plattner was backpedaling rapidly to explain that, while the SaaS model might make inroads into SAP’s licensed software base, SAP’s own SaaS offering A1S won’t partake in the carnage. In a statement optimistically described by SAP as a ‘clarification’, he explained thus:

“At no point in my speech did I mention the project code name ‘A1S’ nor did I make a statement that our new software … will cannibalise our existing customer base or our established products or that it will compete with our current business model …”

“Drawing this conclusion from my speech is wrong and totally misleading. I am in full agreement with the SAP management and I fully support SAP’s current business strategy, in particular our SME strategy.”

So that’s clear, then. Plattner believes that SaaS represents a major challenge to the conventional licensed software business model that SAP currently relies on. But the A1S project, which Plattner has personally championed to ensure that SAP has an on-demand offering to compete in the SME market against the likes of NetSuite, Salesforce.com, Intacct and others, presents no such threat.

No wonder A1S, which is already being tested with customers, isn’t due to launch until early next year. This next-generation product is rumored to be a landmark achievement in software engineering. But working out the internal politics of bringing it to market within SAP remains its biggest challenge of all.