Friday, August 29, 2008

Business ByDesign: so what’s up with this? (Part 4 of 4)

In my final view point on the SAP SME business, I come to SAP Business ByDesign; which was met with a lot of hoopla during it’s launch, but has moved ahead slowly, given that it is a SaaS solution, which represents not only a technology shift, but also a major business model shift for SAP. The company continues to state that the ERP SaaS solution is meant for companies with 150 users or less; while SAP CRM On-Demand, which is not part of the SME business unit, is meant for large enterprises. In any case, PAC has not heard anything about SAP CRM On-Demand since its launch, and expects either a new version as part of Business ByDesign, or a quiet sunset. While that's the company line, I do find it odd that SAP is stating that the less complex SaaS solution (SAP CRM On-Demand) is for large customers, when the majority of users of similar SaaS solutions are in fact SMBs.

As for SAP Business ByDesign, PAC had the chance to see yet another demo of the solution, and while it is intentionally kept simple visually (in order have the best page view performance over the web), the solution looks impressive in terms of the functional coverage and process orchestration that it offers. Even though today SAP is starting with small customers, with time PAC believes that it will be scaled to larger and larger customers.

As for potential partner involvement, SAP stated that 47 partners are currently shadowing early deployments and that eventually the servicing around Business ByDesign will need to be scaled in order for SAP to reach a profitable business model. From the statements of several Business ByDesign customers, it seems that SAP is leveraging a lot of resources to make sure that any problems or issues of the customer are quickly taken care of... obviously this kind of hand-holding cannot go on forever!

Given that SAP Business ByDesign is running under a SaaS model, the skills provided by IT services firms will be quite different compared to on-premise implementations, and based on early feedback from customers, there seems to be a strong need for:
• project management skills
• process definition
• change management consulting
• data migration/ETL and cleansing

While project services opportunities surrounding a SaaS solution are typically smaller than for a comparable on-premise solution; given the complexity, functionality and processes that Business ByDesign can support, PAC believes that the SAP solution will offer a greater opportunity around process consulting and change management, in comparison to the more common SaaS SFA/CRM solutions of today.

However, the far bigger opportunity for large IT services companies may come in the form of hosting opportunities. Unlike SaaS vendors such as Salesforce.com or Netsuite, SAP has mentioned that while right now they’re providing the hosting for Business ByDesign, at some point they will look into opening it up.

PAC believes this is a direction SAP must go, since the company has deliberately slowed-down the expansion of the SAP Business ByDesign customer base due to performance and profitability issues. By spreading out the infrastructure/hosting costs to IT services partners (who are structured to be profitable in such a business!), SAP will relieve itself of some of the costs that go into scaling such a solution. While at the same time, it can make the SAP SaaS solution more interesting than others on the market, since it would also allow for the inclusion of customers who would require a partner to host a SaaS solution, such as the Federal government or many retailers, banks, etc. For example, under the Federal Lines of Business initiative, it is foreseeable that a SaaS ERP solution could be hosted by an approved IT contractor, while delivering the multi-tenant scale and benefits of SaaS across multiple agencies.

At the same time, while infrastructure costs are a key issue for SAP on margins, it is also the service deliver and processes within the SaaS model (how to efficiently do updates, optimize performance, etc.) that has led SAP to take a more conservative approach in the launch of Business ByDesign.

So for today, I don’t see a place for large enterprise SAP services partners around Business ByDesign; however, when (and if) the hosting business is opened up to the ecosystem, it will become a lot more interesting!


Want more insights?
I hope that you enjoyed our in-depth view of the SAP SME business... of course PAC is covering this topic and many, many others concerning the SAP Services market across the globe, with local insights from a team of consultants in the US, Europe, Asia and Latin America.

If you'd like to learn more about our off-the-shelf research around SAP Services, email me at [email protected] or check out our mini-site at: www.pac-online.com/sap to view our new reports!